This is a copy of a hand written note, followed by a type written
letter that I received two days ago. Keeping in mind that I did
not originate any of the following material nor do I necessarily
concur with its content, I am posting it for the purpose of some
enlighten discussion on the part of this thread. I would be
interested to hear from both the longs and the shorts with any
critical comments (whether they are in agreement or otherwise) on
its contents.
HAND WRITTEN NOTE:
Hey Shorts,
Got this letter the other day from who I consider the only
person who understands Krusos' jargon.
So I thought you clowns might want to read it and understand
one thing - When Krusos stops his psychological war on his
shareholders and puts his wrath on you guys - your(sic) dead
meat!
P.S. Next week I'll show you a letter that convinced me of,
software - with J.V. through Gates and hardware through Apple and
both need Copy to do it. Sounds like a good book.
END OF HAND WRITTEN NOTE:
PRINTED LETTER ATTACHED:
August 23, 1997
More thoughts on Copytele if I may.
Timing & Strategies
Going public: Copytele is beginning its first public relations
effort in September '97. The Company is going to Wall Street.
Why was this precise point in time selected to open up the
Company? Denis appeared an answer to that question with the
closing remarks of his address to the shareholders at the AGM...
"We did not figure we were ready to market Copytele to Wall
Street until we were ready to market Magicom. We fell we are
ready now." So, that's the reason... Well, not entirely. Denis
was not going to go public until he could market Magicom and
until he had color. After 15 years of R&D, there was no way
Denis would stand up and present the Telecommunications Industry,
Wall Street, or anyone else with a technology limited to a two-
tone color capability.. a performance shortcoming that's 20 years
out of date. A two-tone Magicom screen may be OK but what would
be the next big move? Would Copytele appear as a one-product
company having a grey-scale technology? Makes no difference what
the screen's performance capabilities were, the short sellers
would laugh them all the way home, If color then makes Copytele
competitive, video-speed makes it clearly superior to any state
of the art display in the market. And that's the reason why
Denis is going public now with his technology. Because with
color & video-speed, Copytele is clearly superior in every
measure of performance. All three ... Magicom, color, and video-
speed had to arrive at the starting gate at the same time.
Integrated Monolithic Plug-In/Solid State/Optical FPD: As I
have mentioned before, this is the key to the Company's overall
strategies. It is the focal point around which all other
activities are scheduled. It will be the workhorse that takes
color & video to market. The first we heard any serious details
about this project was in the 1996 10K. Then, a bit more in 1996
Annual Report and then a lot more at the AGM. Usually, Copytele
does not start discussing a development until after its
completion, or at least, until after its completion is assured,
So, where do we stand with this #2 FPD.
1. Color: Status - Demonstrated, patent filed, patent approved.
At least in test production.
2. Video-speed: Status - Demonstrated, patent filed, patent
approved. At least in test production.
3. 240 lines per inch: Status - Demonstrated, patent filed,
patent approved. At least in test production.
4. Operating control system: Status - Completed and delivered
by Russia.
5. Unified substrate screen: Status - At least in test
production.
There is a public statement made by Copytele that is one of the
most enlightening and informative that has been issued this year.
It is from the 1996 10K issued in late January 1997 and in the
paragraph headed Color and Video. It reads:
"The Company is now in the process of fabricating flat panels
incorporating this technology [digital video & color] having a
resolution of approximately 240 lines per inch in both horizontal
and vertical direction." January 1997
From the 1996 Annual Report, Denis states:
"Using this technology [solid state/optical], the Company is now
in the process of fabricating flat panels having a resolution of
240 lines per inch in both the vertical and horizontal
directions. As part of the fabrication process, the Company has
entered into arrangements with several organizations. Under
these arrangement, these organizations are using their current
production and development facilities and technologies to develop
and fabricate portions of the solid state and optical displays in
accordance with the Company's proprietary design and
specification" May 1997
Another very important statement made by Denis at the '97 AGM:
"What you want is a fully integrated process [unified substrate
production] that makes the whole display
integrated/monolithic/plug-in], and all you need is a cable that
attaches to the display and you can join the console. This
technology involves... we have six companies involved to do this.
Three of them are three additional universities and we have made
arrangements with those whereby they are doing certain of the
processes and the other three [corporations] are related to the
fabrication of the panel itself." July 1997
{note: Does anyone really [k]now what Denis means by his
repeated use of the term "fabrication". It certainly is more
than "prototype development", but is it less than "test
production". Or, is it simply another word for "test production"
without giving away the fact that we are at a production level.
It can't be more than "test production", for that would be "mass
production" and that would have to be publicly announced.
Confusing. And that's what it was intended to be. To me,
fabrication means test production. Which means we have been in
test production of the solid state/optical screen #2 for at least
one year ... probably more.}
What Do We Know and What Might We Assume: There is a lot,
especially if you start to piece together the various Company
statements made at different times throughout 1997.
1. We know that Copytele has been fabricating [producing?] the
#2 technology flat panels since, at least 1996. Now, since the
unified substrate screen production process is used for this
panel, we have to assume that this process has also been in a
test environment for at least one year.
2. Regarding the fully integrated unified substrate production
process [integrated/monolithic/plug-in], we know that three
universities are working on the processes and three corporations
are working on the fabrication of the panel itself. We can
assume then that the fully integrated unified substrate
production process has been filed under patent. Otherwise Denis
would not let it out of house.
3. We know that these three corporations are using their current
productions and development facilities and technologies to
develop and fabricate portions of the solid state/optical
displays [#2] in accordance with Copytele's proprietary design
and specifications. Hoya's name has never come up in relation to
this #2 screen. We can assume that Hoya has no involvement in
this project. Hoya is Magicom. Hoya will only be Magicom.
Otherwise, too many eggs in one basket. Denis in not that
trusting.
4. We know that the #2 FPD is a plug-in stand alone screen. Of
course, all future products that will have this solid
state/optical FPD will have to assemble it into a product design.
{i.e. If it is used as a TV or HDTV screen, it will have to be
assembled into a finished television product.} There is one
exception, and that is what I assume is the primary use of the
integrated monolithic plug-in FPD, and the next money-maker for
Copytele. That is the computer monitor. It is the only
application where the screen, as Denis has described it , could
be used independently as a product. Immediately interchangeable
and replaceable with the computer monitor. If this is true, then
the lead-in time to complete the finished product [the
color/video FPD] would be considerably less than Magicom since
the finished product will be the screen only. Keep in mind, we
appear to have been test producing this screen for over a year.
If we are not ready to go with it, we must be pretty close.
5. We know that Denis has said in the past that when we go
public, we will be known world-wide overnight. Magicom did not
have that effect, but then again, it was not intended to.
Copytele did not publicly display or promote its first product.
We have been producing Magicom for almost a year now. And,
outside of the '97 AGM, Copytele has never publicly demonstrated
the product within the United States. On the surface, very
strange. But it isn't if you realize this is jest part of the
ongoing strategy. So, we can assume that Magicom was never
intended to be the "big gun". It was meant to be proof positive,
to anyone who would question this new technology, that the
technology performs as specified. Magicom is the backdrop on the
stage, its not the headline show. That big show should happen on
or before the September meeting with Wall Street and the filing
of the revenue bearing 10Q. To show Magicom to Wall Street would
be and impressive demonstration. That would make us known world-
wide overnight. If the #2 FPD is ready to go, what better
captive audience could you hope for. At what will make it even
more eventful would be an announcement, on or before the Wall
Street presentation, naming the US relationship[s]. Why show the
Wall Street a black & white picture when you can show them a
color video? It certainly is a possibility.
After 15 years of R&D, isn't it interesting that the posting of
revenues for the first product, the completion of the first
color/video speed FPD ever developed, and the first public
demonstration of Copytele's technology to Wall Street all appear
to be happening at the exact same point in time on the calendar,
if not the same week, Add to this:
...the immediate doubling of the stock in the Spring '96 for no
apparent reason and then following immediately by a stock-split.
...the rather strange trading pattern of the stock in the face of
a succession of positive events by the Company over the past
year. An adjusted post-split price of over $10. And over one
year later, after initial production, after $317 million in
orders, after the completion of the first quarter with revenues,
and after the announced breakthrough of a 2nd and 3rd FPD
technology with an unprecedented single-step production process,
the stock traded last week at $4.12! A loss of 60% of the stocks
value from the time of the split when there was literally no
positive news public. Why? Because, the Company's progress,
combined with a steadily increasing value for the stock would
scare the short-sellers away. With the stock losing over half of
its value during the Company's period of positive developments,
the low share price was enough to offset these Corporate
developments and keep the short sellers "in the game". They have
got to be there. After all, they are the ones who are the target
of Copytele's "big guns".
...the doubling again of the shares authorized at the AGM '97.
Stock for partners and/or another stock-split? But the stock
can't be split at $4.75.
...if we have indeed completed FPD#2, Copytele cannot take one
step further without announcing who those relationships are. Big
corporate names for the big gun?
...Now, here is an interesting thought. I can understand Denis'
trip to Cleveland after New York. Millions of shares of Copytele
reside in the Cleveland area. If major announcements by mid-
September were to quickly move the share price, Denis may wish to
encourage major holders to maintain their position and not make
them available to the market, or the short-sellers. But why San
Francisco? There may be a number of reasons {Silicon Valley is
the suburbs}, but I would guess the primary reason is that San
Francisco is Michael Murphy's home town. Figuratively, Denis is
going to his front door and he is going rub his nose in it. The
question is, what is "it"? And, "it" has got to be more than
just Magicom.
Timing and Strategies ... they all come together in September '97
Regards
END OF PRINTED LETTER
Again, these are not my remarks nor are they intended to
represent my position. Hopefully, the letter will not raise the
significant ire of either side of the argument, but rather act
only as springboard for thought or discussion.
Good investing, Ken
|
