To All,
Since there hasn't been a posting here in about a week, I thought that this may wake up some sleeping bulls and bears out there. However, please re-read the very thoughtful disclaimers available at their home page, that they have written for your helpful understanding and for your use of this thread.
Here is a copy of a letter that I received from a fellow Copytele
investor. Just as I have done on other letters that I have
posted here on this thread, I first must reiterate that I did not
author this letter. Second, I took some liberty to edit it's
content for clarity. Third, although I did not author the
letter, I do agree with most of it's content. Fourth, anyone
reading this letter should form their OWN opinion as to the risk
of any investment in this or any other company. I hope this
satifies the concern that some disgruntled shorts on this thread
have had about the ability of the Copytele investors to form
their own reasonable conclusions about the Company. They seem to
think that we "need" their unsolicited counseling and protection
from ourselves. I present this information for discussion
purposes only. It is not my intent to represent the contents of
this letter as personally verified facts.
START OF LETTER
Lets get back to the basics. Lets look at this Company and its
technology from a strictly comparative and competitive point of
view. The best way would be to breakdown the video display
function into its component physical characteristics &
performance specifications. This is how the Company and its
technology should be judged. All of us close to the Company tend
to spend too much time on the "when" and not enough time on the
"what". Here is my effort to define and specify the "what". For
investors, its an exercise which can be very reassuring. Here
are the categories to be judged.
Video Speed
Resolution
Color Capability and Quality
Refresh Rate
Size & Weight
Power Consumption
Durability
Cost
VIDEO SPEED
The CRT: Call it a cathode ray tube, a picture tube, desktop PC
monitor, a display terminal. Call it anything you want. It
simply is a big heavy box which creates an image by projecting a
cathode ray over a given distance by way of a tube. The
projection distance is the reason why the CRT box can be over 2
ft. deep. The tube, not the electronics, is the reason for its
heavy weight. Since the invention of the CRT back in the 1930's,
no other imaging technology has been able to achieve acceptable
video speed {speed of image change}.
The LCD: Liquid crystal display technology has been around since
the early 70's. Anyone out there own a liquid crystal TV set?
Correct. And very simply because liquid crystal display
technology is incapable of achieving video speed up to today's
standard. Thanks to Copytele, tomorrow's standard will be even
higher. So here it is:
For the past 60 years, the CRT has been the only video
technology with the capability of achieving acceptable video
speed...until now.
Read carefully an excerpt from Copytele's 1996 Annual Report,
page 10:
During 1996...the Company increased its efforts to develop
digital video and color capability... In an effort to
achieve these goals, the Company expanded its technical
staff with leading scientists in this field and acquired new
facilities and equipment.
The "acquired new facilities" would appear to be those referenced
in the same report on page 14 and this is where the development
work on video speed & color was finalized:
In October 1996, the Company entered into a lease...for
approximately 2,000 square feet of office and laboratory
space near its principal offices.
Now back to the Copytele 1996 10K issued in January '97 and also
repeated in the '96 Annual Report:
The Company already has fabricated feasibility models and
has demonstrated the capability of its technology in
achieving the required video response time, contrast, color,
and resolution. The Company believes that this technology
{digital video & color} has the fastest known response time
for any type of display, including CRT's and LCD's.
#1 COPYTELE HAS ACHIEVED THE FASTEST VIDEO SPEED IN THE WORLD
TODAY.
COLOR
As noted in the above excerpt from the '96 10K and '96 Annual
Report, the Company has successfully demonstrated color
capability. In the past, color development was described as
based upon Copytele's proprietary holographic technology. In any
case, the color is said to be superior and without the need of a
color filter upon which LCD's are dependent. The color filter
limits the clarity and contrast of the image.
#2 COPYTELE HAS DEVELOPED A PROPRIETARY COLOR TECHNOLOGY
PROVIDING A COLOR CAPABILITY FOR ITS FPDS WHICH APPEARS SUPERIOR
TO ANYTHING ON THE MARKET TODAY.
RESOLUTION
Resolution is short for the n;umber of vertical and horizontal
lines of resolution per inch. In Copytele's case, one of their
best known display characteristics. Again from the '96 10K and
the '96 Annual Report.
The Company is now in the process of fabricating flat panels
incorporating the technology {color & video speed} having a
resolution of approximately 240 lines per inch in both
horizontal and vertical directions.
From the September '97 addition of PC Magazine, an article on the
A-List of computer hardware. The paragraph headed, "What to Look
for in Monitors"
For flicker free viewing, make sure a 19-inch monitor is
capable of 1,280 by 1,024 resolution at a 75hz refresh rate.
Those dimensions equate to 85 lines of resolution in both
horizontal and vertical directions. Now for the state-of-the-art
in LCD laptop. The following is from a marketing brochure for
Toshiba's Satellite 220CDS laptop.
The new Satellite 220CDS offers a fast 133 Pentium
processor, a brilliant 12.1 inch diagonal display with
800x600 resolution.
Those dimensions equate to approximately 83 lines of resolution
in both horizontal and vertical directions.
REFRESH RATE
This is a Copytele FPD performance characteristic that should be
the subject of more frequent discussion. Often times, refresh
rate {image retention} and the rate of image change {video speed}
are confused with each other. Refreshing a video image is simply
image repetition. It is a constant electronic pulsing at as
quick a rate as a given video technology will allow in order to
maintain the image. That glare coming back at you while on your
computer screen or watching TV is caused by the image being
repeated hundreds of times over seconds. Of course, unplug your
TV and there is no power. No power and there is no electronic
repetition, this leads to the obvious. The faster the refresh
rate...the more stable the image, the less glare from the image,
and the less flicker from the image. And, there is competition
in the market on this performance factor. All are trying to
increase the speed of their refresh rate. A superior rate is
indeed a marketing factor. Copytele's FPD is a charged particle
display. Once an image or character is formed, it is retained
without being refreshed. Referring to page 9 of the '96 Annual
Report:
The Company is continuing to enhance the characteristics of
its...charged particle flat panel display. The plat panel
possess a combination of features which are not presently
available in other display screens, such as...,image
retention without refreshing {eliminating the need for image
repetition with resulting flicker and operator fatigue}, and
image retention with minimal power consumption.
Since image is automatically maintained under Copytele's
technology, there is no refresh rate. Or, if you would like to
put it in competitive terms, the refresh rate is perfect...100%.
#4 COPYTELE'S CHARGED PARTICLE DISPLAY TECHNOLOGY REQUIRES NO
REFRESHING TO MAINTAIN ITS IMAGE. IN THIS CATEGORY OF
PERFORMANCE, ONCE AGAIN, COPYTELE IS SUPERIOR TO ALL.
DEPTH & WEIGHT, POWER CONSUMPTION, DURABILITY
DEPTH & WEIGHT: 1/8" or less. Unless I'm mistaken, the Magicom
2000 FPD weight was measured in ounces. Desktop monitors use the
same weight measurement that Arnold Swartzenager uses for
bodybuilding... that's lbs., in increments of 10.
POWER CONSUMPTION: This is the Achilles heal of laptops. Here
you have this portable computer, packed with the largest power
cells it can physically take, and it will only last a few hours
away from an electrical outlet. Somewhat defeats the purpose of
the term "portable", doesn't it? If you were flying from New
York to L.A., your LCD screen would go blank somewhere over
Missouri. This rapid power drain originates mainly from the
retention of image on the screen. Now, given the font size used
for {this letter as written in the original}, I can easily fill a
single page with 6,000 characters. If I unplug it, my IBM laptop
will start to quickly drain its charged battery to maintain the
image of those 6,000 characters. Left unplugged, the power cells
will run dry in about 1.75 hours. However, if my IBM had a
Copytele FPD, the only power required by the screen would be to
add or change the current character. The other thousands of
characters, already typed, display on their own without being
refreshed. The image exists and maintains by arrangement of
coated charged particles, not by electric impulse.
DURABILITY: From repeated comments by the Company over the past
years, their FPD is very resistant to vibration and very stable
under the extremes of temperature...conditions to which LCD's are
both susceptible.
#5 UNDER THE ABOVE MEASUREMENTS OF PERFORMANCE, COPYTELE AGAIN
LEADS THE COMPETITION
COST: Cost is a subject that Copytele keeps very close to the
vest. However, there is a constant theme which the Chairman
willingly, declares. From his address to the stockholders at the
'97 AGM:
"We are keeping our fixed expenses close. We have very good
margins here. We do not need much volume to get profit."
Well, we know from the AGM that the price of Magicom 2000 to the
end-user will be in the area of $2,000. It is probably safe to
say that the profit to Copytele USA, for the per unit resale from
SCE to the distributor, will be in the $700-$800 range, give or
take $100. The production cost per unit may be in the area of
$600-$750. On this subject, I willingly admit that there is more
educated guess involved in these estimates than there is factual
deduction. But, with Copytele USA balance sheet expenses running
at only $5-$6 million per year, the affect of being somewhat off
on these estimates may be of minor importance. I remember years
ago, at an AGM, asking about the estimated production cost of the
screen. The Copytele officer just smiled. he did mention,
however,"...the most expensive part of the prototype is the chip,
there are six of them, and they cost about 10 cents a piece". No
doubt today's upgraded chips cost more but it was the principle
of the remark that made it memorable. A few weeks ago I had a
brief conversation with one of the Company officers. I tried
again to get more detail on the subjects of margin, profit and
cost. As expected, no specific response. Although, this
individual did relay to me an inside joke going around the
office. "At full capacity production in the Shanghai Plant on
the first day of the fiscal year, the optimist says that Copy
will break-even in 2 days...the pessimist says it will take 3."
In any case, I feel comfortable with the accuracy of #6
#6 COPYTELE HAS THE LOWEST PRODUCTION LINE REJECTION RATE AND THE
LOWEST COST OF ANY FPD ON THE MARKET TODAY.
From the review above, you will recognize that I am not offering
my opinion. I am simply quoting from statements repeatedly made
be Copytele, Inc. in corporate news releases., Fed. filings {10Q,
10K}, and Annual Reports. It is all a matter of record. And
what a record it is.
#1 Copytele has achieved the fastest video speed in the world
today.
#2 Copytele has developed a proprietary technology providing a
color capability for its FPDS which appears superior to any
other.
#3 Copytele's 240 lines of resolution is nearly a 300%
improvement over todays state-of-the-art CRT and LCD.
#4 Copytele's charged particle display technology requires no
refreshing to maintain its image, a feature not available
through any other display.
#5 Under the measurements of depth & weight, power consumption,
and durability, Copytele leads all competition.
#6 Copytele has the lowest production line rejection rate and
the lowest production cost of any FPD on the market.
Copytele's technology has clear superiority over today's
technologies. It is unchallenged in any category of performance
or specification. And, it will likely remain unchallenged for
decades to come, since each category of performance is the result
of proprietary breakthroughs in video technology. A total of 140
international patents as of July '97 and counting. And its not
as though one could work their way around these patents and
achieve the same results from a different approach or a different
direction. The access road through this technology is very
narrow. And Copytele, Inc. owns the video display
industry...lock, stock and barrel.
For those who maintain a short position in this stock. I am
trying to imagine what they are thinking. For years, they have
argued that every claim made by the Company was a lie. They said
the technology wouldn't work. When first prototype was
demonstrated, the short sellers said it couldn't be produced.
When production started, they said the performance was inferior.
When performance was proved superior, they claimed that nobody
would buy it...etc., etc. I can understand after 14 years of
shorting a stock, how difficult it must be to say "whoops!". But
everybody makes mistakes. Admit it and move on. Otherwise, you
will certainly be nominated for The O.J. Simpson *I'm Living My
Life In Denial* Award. Of course, if you wish to continue
shorting this Company, be my guest. Being long, it will be to my
benefit.
By the way, if you think this is all a lie, then Copytele has
lied in no less than several dozen corporate filings with the
Securities Exchange Commission... Then, the Company has lied in
no less than a dozen stockholder's meetings... Then the Company
has lied in more than a dozen corporate news releases...Then the
corporate lawyers {the renowned Wall Street firm of Weil, Gotshal
& Manges} must have also lied on each of the above noted
occasions since nothing is released from Copytele without their
review and approval.
Still not convinced? Then please refer to page F-8 of the
Copytele, Inc. Annual Report, the Copytele Statement of Cash
Flow, half-way down the page and under the heading: Proceeds from
the Exercise of Stock Options and Warrants for the year ended
October 31, 1996, and answer the question.
If its all a lie, why did the Officers of Copytele, members
of their family, and key employees, pay out of their own pockets
a sum close to $19 Million to exercise stock options and
warrants?
Hello?...Anybody there?
END OF LETTER
Take your best shot...
Good Investing, Ken |
