Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Kopin Corp. (KOPN) -- Ignore unavailable to you. Want to Upgrade?

To: kinkblot who wrote (1112)	2/13/2000 2:52:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 1820

Profits, At Last Forward-Thinking Chipmaker Waits For Market To Catch Up By Steve Watkins Investors Business Daily John Fan finally is reaping what he began sowing a quarter century ago. Fan, chief executive of Taunton, Mass.-based Kopin Corp., began developing electronics products in the mid-1970s with a few other Massachusetts Institute of Technology graduate students. Only now is the company he and his cohorts founded beginning to turn a profit. Kopin makes a transistor wafer product using material known as gallium arsenide. It allows customers to make integrated circuits that help wireless phones offer longer battery life, reduced size and better signal quality. The company's flat-panel display product is used mostly in camcorders and digital cameras. It allows viewers to see an image on a tiny panel from five feet away as if it were on a 20-inch monitor. Playing Catch-up The trouble has been that both products were somewhat ahead of their time, Fan says. "Digital phones are just coming into the U.S.," he said. "That explains our recent growth. Finally, the market is catching up with our technology." Fan also expects the market for small flat-panel displays to take off. "The biggest killer application right now is digital phones," Fan said. "We believe fiber-optic transmission of data will be the second killer application. That's 15% of our revenue now; a year ago it was practically zero." Kopin got its start a decade after Fan and friends were convinced in 1984 by venture capitalists to form their own company. By the late 1980s, Kopin began creating products, the first of which were aimed at portable computers and phones. In the mid-1990s, the company developed a use for its wafer-engineering technology on circuits found in digital phones. More recently, the same technology was used for tiny flat-panel displays of optical images. 1 Billion Users The potential market is huge. The number of wireless phone subscribers is rising at 40% a year, Fan says. He expects the number of that kind of phone to reach 1 billion by 2005. Kopin makes 40 to 80 cents per phone on its chips. Sales of camcorders and digital cameras also are growing rapidly. And Kopin's Cyber-Display miniscreen will see higher demand as wireless phones evolve. Fan says Kopin can make $15-$20 each on providing flat-panel displays on phones. "A couple of their markets are real buzzwords right now," said Robert Kippes, senior portfolio manager at AIM Management Group Inc. in Houston. "The whole optical space is really smoking." Fan says the technology can do much more than those two platforms. Kopin's emergence in the wireless phone business has helped the company reach profitability and caused investors to take notice. Kopin lost 2 cents a share in the third quarter ended Oct. 2, after earning 3 cents in the year-ago quarter. But it turned a profit in three of the prior four quarters after losing money throughout its existence. Kopin's third-quarter sales totaled $9.7 million, up 24% from the year-ago $7.8 milion. Analysts expect Kopin to post break-even numbers when 1999 results are announced, according to First Call. Profit is expected to rise to 40 cents a share in 2000 and to 93 cents in 2001. The stock trades as KOPN around 94. Too Fast? The company's market value has risen 150% in the past month. But it may have risen too far, too fast, analysts say. "In my opinion, the stock is ahead of itself," said Rob Cummisford, portfolio manager of the Kent Small Company Growth Fund, which owns about 80,000 Kopin shares. "I'm not anti-this stock. It's a great company in a great sector, and they have a good outlook. But reality has to set in at some point. There are many tech, biotech and Internet names that are getting ahead of themselves. Earnings have to matter at some point." Kopin's biggest transistor-wafer competitor is RF Micro Devices Inc. It makes transistor wafers strictly for use on its own integrated circuits. Flat-panel display competitors include Sharp, Sony and Hitachi. Kopin accounts for half the world's production of its type of transistor wafer, says Joel Pitt, analyst at Credit Suisse First Boston in New York. Pitt figures RF Micro accounts for another 35% or so. "If there are other guys making it, they're not making very much," Pitt said. "At least for now, they are by far the leader. They are the gorilla of the sector." Meeting Demand After working for years on cutting-edge technology, Kopin also is shifting its focus to making the chips and meeting demand. "Our major challenge now is mass production: maintaining quality and cost structure," Fan said. Part of that challenge involves finding additional production sites. Elan Danon, analyst at LaSalle Street Securities LLC in Chicago, names production as one of the two key challenges facing Kopin. "Demand is there, but they're still in the first couple innings as far as executing and getting production in place," Danon said. "The next couple quarters will pretty much tell the story." Kopin's top customers for its transistor wafers include Conexant Systems Inc. --- which represents half of Kopin's sales --- Hewlett-Packard Co. and Nortel Networks Inc. It's flat-panel display customers include JVC and Panasonic. Acquisitions are a potential growth source, Fan says. Kopin raised $73 million through a secondary stock offering in October.