Zebra - The only InFocus company I know of is based in Wilsonville, Oregon and profitably growing at 25-30 percent.
For a quick SI overview, here's John Stichnoth's Gorilla & King thread Project Hunt Report from last Spring and some followup comments.
My wife & I have been a shareholders for many years. Regarding their place in the Telecosom, INFS provides more Bandwith to the Eyes - by rapidly increasing both the connectivity and networking of their products so they can become a seamless part of both the Internet and Corporate/Educational/Governmental Intranets. For instance, fast growing PLCM sells their projectors as part of a 'cyber-meeting' solution.
Each quarter, more and more of INFS' products are being sold with HDTV connectivity and they are working with TFS to create/produce 'Rear Projection Engines' for home HDTV sets.
Message 13307427
Since that report, the merger has gone extremely well, revenues & earnings are way up, and the company licensed patented IP to Texas Instruments. Under the agreement, Texas Instruments will embed InFocus’ proprietary Kestral auto-sync technology in its Digital Light Processing (DLP) solutions. InFocus will receive milestone based lump-sum payments and ongoing, per device, royalties that we estimate will result in $3M to $5M in additional annual pre-tax earnings to InFocus beginning in late 2001.
It has been and continues to be quite a story with their current 'lightest' projector weighing only 3 pounds!
Alan Mitchell
InFocus systems (INFS) Project Hunt Report
1. Overview
INFS makes lightweight, portable projectors. These have been coming down in price and getting smaller, making them attractive for greater portions of the market. INFS has agreed to merge with its largest independent competitor, Proxima. Together they should have 35% of the market, and a larger share of the ultra-portable portion of the market. This will give them more than twice the market share of the largest competitor, and thus status as King.
2. Revenues
With the purchase of its largest independent competitor, InFocus should record close to $900MM in revenues this year.
Infocus alone:
YEAR--Revs.----EPS
1996--$258.5MM---0.59
1997--$315.8MM--0.90
1998--$306.7MM--(0.02) (Loss)
1998--390.7MM--$1.11
For the December quarter, consensus was 32 cents. They recorded 47 cents. (Substantially beating estimates is a characteristic of tornadoes).
Important to me is that their P/E is 32.
3. Management
The company's web site includes management biographies. Harker, the ceo, has had a number of on-TV interviews, which are provided for replay on the site. My take is that they absolutely know what they're doing. They are making money, and winning in the "king" competition while taking steps to compete effectively in adjoining areas. They seem to have it together both tactically and strategically.
4. G/K Characteristics
A. Is there a discontinuous innovation?
Yes. Lighweight, portable computer-linked projectors are displacing other forms of presentation equipment, including flip charts, opaque projectors, transparent projectors and slide projectors. I can easily see computer-compliant, ultra-portable projectors becoming ubiquitous in offices and schools.
A1. Is there proprietary open architecture?
No, but . . . INFS has a number of patents which do give it some protection. I am proposing INFS as a King, not a Gorilla. They offer a product, not an enabling technology. The product includes a number of "high-tech" innovations, but is essentially designed to project images onto a screen. Additionally, there are indications that they will be able to translate some of their patents into valuable, income producing streams
B. Are there high barriers to entry and high switching costs?
No. The game is a strict comparison of product costs and features. The bte's are limited to the ability to develop cheap, bright lighting at a low cost. There are no switching costs.
C. Have value chains developed?
Yes, in the sense that INFS is able to provide a "whole product", fully compatible with laptops and presentation software.
D. Have they crossed the chasm?
Yes. They keep knocking down bowling pins as product prices continues to come down, allowing new "pins" to be entered.
E. Existence of Hypergrowth?
Yes, in a portion of its market. The ultra-portable segment, which they by far lead, is doubling each year. MSDW projects 40%-plus growth for the the broader market, for the foreseeable future, for the market and for INFS. I should note that the consensus 5-year estimate is lower, at 20+%. The company expects sales of $900MM for Y2000 (on a consolidated basis).
5. Competition
INFS just bought Proxima, the second-largest player in the sector. Potentially, a number of larger companies are serious competition, including NEC, Epson, Sharp and Sony. To date, INFS has absolutely held its own against all comers.
6. References
Home Page: store.infocus.com
MSDW research
Patents: 128.109.179.23
A link to Yahoo's/Marketguide's profile page: biz.yahoo.com
Zach's consensus estimates: biz.yahoo.com
7. Disclosure
I just bought an entry position in INFS.
8. Summary
Contrary to some on this board, I believe it IS possible to pay too much for a Gorilla or King. Valuation still should play a part in our decision to buy. For Gorilla/King investors interested in getting into companies at "reasonable" P/S and P/E ratios, INFS may fit the bill. It has a legitimate claim on Kingship in a fast growing market, with some interesting patents in several areas of applied optics, both in their "kingdom" and in related areas. The related area patents have the potential to generate additional substantial revenues. On the strength of the growth in their sector alone, the current price appears very reasonable.
To: john99walsh who wrote (21742)
From: John Stichnoth
Wednesday, Mar 29, 2000 11:53 PM ET
Reply # of 21864
Hi, john99--A couple of points I didn't make--
1. INFS has a fairly broad lineup of projectors, suitable to boardroom and auditorium use, as well as personal. Also, they've made some steps towards integrating the product into the web.
2. INFS only partially satisfies the King label, I believe, because the product (at this point) doesn't satisfy the "mass market" criterion. Prices have got to fall another 50% or so, I believe, before that can happen.
3. INFS is a prime Peter Lynch "Growth at a Reasonable Price" target. With the huge run-up in tech prices, and the shift to a P/V ratio somehow defining value, I've come in recent weeks to conclude we're reaching too far on some of our Gorilla-candidates. I frankly cannot distinguish "P/V stocks" from "Story stocks"--and the latter has in my eyes been thoroughly discredited--from personal experience :o(.
Best,
John
To: FLSTF97 who wrote (21754)
From: John Stichnoth Mar 30, 2000 10:00 AM
Respond to Post # 21768 of 21864
INFS--
Hi, FB-- Are any of their patents fundamentally enabling in regards to lowering the weight, or increasing the brightness?
Not the patents I was able to scan. My understanding is that none of their projector-related patents are obstructive to others who want to work in the market. The patent search I did revealed a focus on camera focusing systems, rather than things I would think of as projector-related--although projectors have lenses, of course. Worse, if you want to argue for Gorilla status, is that INFS is dependent on another company (TI) for a key part for much of their product line. I am not proposing INFS as a Gorilla. This is a royalty play.
The patent search site I referenced only shows 21 patents, but the 10K reports 40 US patents and "numerous" patents pending, so I haven't been able to review all of the abstracts. The MSDW analysts note one patent for "low-cost active-addressing technology" being licensed to wireless phone and PDA makers. These supposedly use less power. I cannot confirm this, since I can't find the patent. There is reference in the 10K to 5 licenses issued, through INFS's joint venture with Motorola. This is not presently material to INFS's activities, but may provide a nice upside surprise sometime.
I can confirm that INFS has a reputation for providing the lightest-weight, brightest projectors. When I told my wife, who has spent some time coordinating training at her company, of the purchase, she immediately voiced approval of their product.
Some of INFS's sales are OEM--under IBM, Kodak, Toshiba, Boxlight and PictureTel brands.
Also, INFS's lightest projector is the LP330, weighing in at 4.8 lbs, in a form factor that would fit in a laptop case.
Best,
John |
