Xybernaut Hires IBM to Make 24,000 Wearable Computes (Update2)
By David Evans
Fairfax, Virginia, Nov. 14 (Bloomberg) -- Xybernaut Corp. hired International Business Machines Corp. to manufacture 24,000 of its new wearable computers over the next 18 months. The shares added 42 percent, their biggest gain in more than a year.
Xybernaut agreed to pay about $50 million for the strap-on MA- V, said Edward Newman, Xybernaut's chief executive, in an interview at the company's booth at the Comdex trade show in Las Vegas. He said IBM will also sell the devices, which will retail for $4,000 to $5,500. IBM had no immediate comment. Xybernaut will pay IBM as much as $4 million if fewer units are built.
The Fairfax, Virginia-based company needs a hit with the latest version of its Mobile Assistant line. Xybernaut has reported losses every quarter since selling shares to the public in July 1996. Since it was founded in 1990, the company has lost about $95 million.
Xybernaut shares rose 85 cents to $2.89 in trading of 5.6 million shares, more than 15 times its average daily volume. The stock had its biggest gain in more than a year after PC World's Web site reported that security at major U.S. airports will adopt the wearable computers in three months. Dewayne Williams, Xybernaut's chief strategy officer, who was interviewed for the story, said his comments were misinterpreted.
``We have no contract,'' said Williams. ``We talked about ideal applications for the wearable computer for security. We talked about various possibilities.''
Sales
Newman said the company has already sold more than 500 of the MA-V devices in the fourth quarter, including 300 to Bell Canada, which is providing the computers to field technicians. He said the new model, introduced in June, shipped few units in the third quarter.
Worn on a belt, the MA-V weighs about two pounds and comes with a 500-megahertz Celeron processor by Intel Corp. The user views data through a head-mounted display and enters information through a tiny keyboard worn on the wrist.
Newman said its $1,500 consumer wearable computer, the Poma, manufactured by Hitachi, will not be shipped in time for Christmas, as the two companies announced in July. He said the company staff is overwhelmed with the release of the MA-V.
``We just don't have the manpower,'' said Newman. ``We pushed that off to the end of the first quarter.''
Losses, Declining Cash
On Monday, Xybernaut said its third-quarter loss widened to $8 million, or 15 cents a share, from $5.9 million, or 15 cents, in the year-earlier period. Revenue increased to $2.3 million from $2 million. Shares outstanding increased 35 percent to 52.3 million.
Cash fell to $2 million on Sept. 30 from $8.2 million on June 30, said John Moynahan, chief financial officer. He said Xybernaut recently raised cash by selling shares at a discount to market price in a private placement.
Xybernaut sold 1.3 million shares on July 31 to Eva Holdings Ltd., based in the Turks & Caicos Islands in the British West Indies, at $3.02 a share, a 21 percent discount to the market price that day, according to company filings with the Securities and Exchange Commission.
Xybernaut, which last month filed a registration statement to make the shares freely tradable, said the discount to market price was 10 percent when the sale was negotiated. Eva Holdings also received 119,880 warrants to buy Xybernaut stock at $6.25.
``We go back to the same guys on a fairly regular basis,'' said Moynahan. He wouldn't say who owns Eva Holdings.
Newman said he expects the company to turn profitable in late 2002 or early 2003. That gave him the confidence to spend about $400,000 on this week's trade show in Las Vegas, where 40 employees wooed prospective customers in a 2,000-square-foot booth.
He predicted wearable computing will become a $1 billion industry worldwide by 2003, with Xybernaut either selling or collecting patent royalties on most of that business.
``We think we own this industry,'' said Newman
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