Patriot Scientific - A Completely Unknown Company with Cutting Edge
Microprocessor Technology
Computers are taking over to an even greater extent than most people
realize. By now many folks know that a microprocessor controls many
functions in their car - but not many know that current cars can
contain a half-dozen or more processors. Simple microprocessors
(computers on a chip) are now in microwave ovens, washing machines,
even toasters.
That's just the beginning. Eventually, these tiny computers will not only run machinery and appliances but communicate, perhaps over the
internet. Trouble with the appliances could be diagnosed automatically by a service company.
That's in the future, but there are obviously applications right now
in manufacturing, transportation, and communications. It happens that
a tiny company has a big lead in microprocessors that work with the
Java language, making them ideal for communications and some other
applications.
Patriot Scientific is a very small company with a potentially big
product. This is a speculation, but some of the hardest work has
already been done. Now it's mainly a matter of gaining market acceptance. The most important product is the PSC1000 family of
32-bit RISC processors. RISC (reduced instruction set) processing
and other features keep the chip small, simple, and cheap.
But the big thing is that it runs the Java language "natively". That
is, there's no need for the chip to translate another operating
language into Java. This also adds to speed and simplicity and makes
the chip ideal for certain applications - Java being the burgeoning
language of the Internet and other communications apps.
Management says it is six months to a year ahead of all the others
working on Java microprocessors. Even when competing chips are ready,
the company believes its version will remain the cheapest and simplest by the nature of its design. (The Patriot chips are
expected to sell for $10 in quantity). Other chips may eventually
have more capacity, but Patriot is aiming at market niches where it
can be the leader.
The PSC1000 is meant for embedded system applications - all those
appliances plus communications devices including cell phones. The
market is expected to reach $27 billion by next year.
The microprocessor line represents the future of the company but
Patriot has a couple of other products. Providing small but steady
(and potentially growing) cash flow is a line of networking "cards"
for computers.
Patriot is in transition from an R&D company to an operating firm.
Cash has always been tight and still is. Management intends to raise
some money, but at higher stock prices. Meanwhile cash flow from
current sales should be enough to fund operations.
Sales for the fiscal year ended May 1998 were $1.9 million. Management projects a jump this year to as much as $10 million, and
double that next year. That's just on the basis of business
currently in sight. New contracts could produce much larger numbers
(and profits) for fiscal 2000.
The stock is a true speculation but it's selling at only a quarter
of this year's high and it's even further below last years peak.
Any substantial order for the microprocessor should put PTSC alot
higher. The stock trades actively, but not always in large volume,
and there is more of a spread than we like to see between the bid
and the asked prices. Use limit orders and pay no more than 3/16
(spread).
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