Microvision Announces Q3 2010 Operating Results

On Monday, November 1st, Microvision (NASDAQ: MVIS) announced their Q3 2010 operating results.  You can read the press release HERE.

 

Revenues were a paltry $1.3 million, due to delays in the “high-end media player” launch timing.  The still yet-to-be named OEM was blamed for the delay due to “a longer-than-expected product development cycle”.  During the conference call, it was revealed that the OEM decided to abandon the Windows operating system in favor of Android.  The current backlog stands at $18 million.

 

As we all know, Corning has completely abandoned the synthetic green laser business.  Perhaps they will pursue a direct green laser program, but that isn’t useful to discuss here, as it wouldn’t be meaningful to Microvision’s business until at least 2012.  Mr. Tokman commented that this decision wouldn’t affect the business in 2010 and that Osram can produce 150-200k lasers for Microvision in 2011.  This is less than half of the volumes I had expected for 2011.  So, this news is a big deal.  Revenue growth for 2011 will be limited by the green laser, once again.  We don’t expect the solid-state green laser to provide much additional volume for 2011 at this point.

 

Microvision emphasized the progress made on the direct-emitting green laser front, citing the development of demonstrator units using lasers from two suppliers.  They re-affirmed their guidance for having direct-emitting green lasers available in production quantities in late-2011.  Mr. Tokman specifically cited companies in the U.S., Germany, and Japan for targeting the introduction of production quantities of solid-state green lasers in the next 12-18 months.  The front-runners (in my mind) are probably Osram, Nichia, and Kaai.  But feel free to disagree with me using the comments section below.

 

To mitigate the impact (to some extent) of these latest negative events, Microvision plans to release a new accessory device that they describe as being “an extension of ShowWX™”.  Basically, they detail a 15 lumen projector with “better connectivity” (HDMI, USB, etc.?).  We’ll hear more about this in 2-4 weeks, apparently.

 

Some good news included follow-on military contracts for $1 million for advanced see-through eyewear and an enhanced laser projection display.  In addition, Microvision provided heads-up display (HUD) demonstrators to two auto makers and the PicoP® engine to a third customer to incorporate into their own HUD system (is this the Pioneer collaboration?).  In any event, it is good to see confirmation of the perceived traction in the auto sector that we detailed in articles HERE.

 

On the financial front, they indicated they had $21.3 million of cash on hand; enough to last through April 2011, according to the company.  So, we will likely see them go back to Azimuth for more money within 2 months, in my opinion.  They indicated that this financing was their preferred method of raising cash, because Microvision dictates when and how much is raised.  While that argument has some merit, I’d like to see them get some other source of funding until the stock price is higher (presumably in mid-2011), at which time they can go to Azimuth for funds at higher stock prices.

 

On a side note, I was disappointed to hear Mr. Tokman’s response to a question regarding Motorola.  He indicated that Motorola’s business is changing in response to the re-alignment going on at Motorola and that Microvision is accommodating them.  It pretty much sounds like Motorola isn’t making any progress and will likely not get involved in a PicoP-based product until direct-emitting lasers are in full swing (2012 products at the earliest).

 

So, all in all, this conference call was pretty awful.  The potential of the company is still intact and they are making due with what they have.  Again, I’d like to see them pursue some other type of funding for early-2011.  I just don’t understand why a company wouldn’t want to buy, say, 20-25% of Microvision for $40 million or so.  Technology companies have hoards of cash right now.  An IP-savvy company like Qualcomm would be a great fit, in my opinion.

 

 

So, let’s see what this extension product is in 2-4 weeks.  While I’m not ecstatic about it, at least it is *something* other than ShowWX™.  Competing companies continue to innovate and release new products at lower prices.  It is about time Microvision did as well.

 

 

Until next time,

 

 

Paul

 

Disclosure: as of this writing, the author was long shares of Microvision

Archived Comments....

Paul.  I thought your review was very fair and balanced.  I appreciate the work you've put into the development of this site and the posts you've written.

 

I've been following Microvision since 1999 and invested since 2003.  I've seen many ups and downs.  I think 2005 was truly Microvision's lowest point when Tokman took over and began retooling Microvision.  Leading up to the yesterday, I was very optimistic looking to see increased revenue and higher backlog.  Truly yesterday was a 'Holy S....' moment when I had to rethink why I'm invested in this company.  Looking back at 2005 when PicoP was just an idea to see the ShowWx in production with more products with PicoP on the way...the company has come a long way.  No doubt I would have liked more transparency on the GL supply issue.  Perhaps AT was providing some insight into the issue with Corning a few months back.  So I'm going to look at the positives:

 

1.  ShowWx is still in production (although limited quantities)

2.  Brother or cousin of ShowWx will be arriving shortly (wonder why AT never mentioned this in previous CCs)

3.  Gaming gun (this will be huge)

4.  There are other companies working with Microvison.

5.  Color eyewear is somewhere in development (this is what got me interested in Microvision)

 

All the best

 

-Atlas

 

Thanks.  It appears that 2011 will be - by far - the most important year in the history of the company.  There is no room for error and the company needs to rally together to execute, execute, execute.

 

Thanks again for the feedback.

 

Paul

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com

 

Alex has to go before everything is squandered IBy removing AT, investors will see that the BOD has their best interests in mind and move back in we get a reset and investors will give the new CEO 6-12 months. Its what has to be done and soon

While things haven't been perfect, I think Mr. Tokman has done a good job.  Think of where the company was just 4 years ago.  Are there things that could have been done differently?  In hindsight, sure.  But, I think he's turned things around since becoming CEO.  The alternative scenario, where Mr. Tokman did not take over as CEO, is scary.

 

It appears that the company is really positioning itself to take charge of its destiny as best they can.  It's painful to watch the share price at these levels.  I've given back an unbelievable amount of money (shame on me for not selling more above $5).

 

At the end of the day, 2011 and beyond have a lot to offer.  For now, I am still on board.

 

 

Paul

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com

 

this was posted on yahoo MVIS message boards - seems to capture the sentiment of what was left of the Longs ------------------------------------------------------------ Up until now I’ve been long MVIS and the truth be told, I'm more than disappointed. Here are some recommendations, so pay attention. 1)Be truthful and earnest. Since when is shipping a demo unit to auto manufacturer an indication of progress? I do that every day and trust me, there are plenty of tire kickers out there ready to waste your time. To suggest to us investors that shipping two demo units to auto companies constitutes progress is insane and frankly disrespectful. If there is nothing material to report, just say you are ramping up sales efforts towards automotive market as interest seems to be rebounding, but remind us that the sales cycle is counted in years, not months. We don’t need more smoke blown up our back side. Give color on what they want and how close you are to supplying those specs. If it’s not a near term opportunity doesn’t mention it. 2) Show us strong and capable stewards of our investments . First take a course on professional speaking. You sound terrible. You don’t speak with authority, you sound apologetic and that incessant coughing makes you sound feeble. Admit your mistakes, don’t mask them over - you will be respected for doing so. 3) Get "laser Focused" Did you ever consider that you picked too many markets to go after initially? You are suffering from the delusion you can grab 4 markets at the same time. All you have proven is what everyone already knows, is that you can’t . I’m sure you read ‘inside the tornado” - if not, buy it and study it . We’ll have a test tomorrow. 4) Show us you have a plan Outline a “get well plan”. Stop trying to assure us that everything is OK , that progress is being made and please don’t attempt to offset the negative with shallow progress. Tell us you are not satisfied with the results and going to kick butt to right the ship. And never, ever be willing to accept failure as an outcome. 5) Be truthful about the gaming gun . We all know you will never attempt to make that a product. The last thing you need is yet another distraction. License it maybe, but don’t use a concept as a way of propping up the PPS. Some guys may be gullible, but most are not. Your credibility is on the line. You don’t need more failures at this time 6) Get all your wood behind one arrow. Prove you can execute and secure one beach head – right now you look like your desperate dabbling in HUD, dabbling in automotive, gaming guns. It looks ridiculous for a company bleeding out its war chest, and continue to waste money 7) Don’t ever assume funding sources are unlimited. What you will learn is you don’t get money when you need it. You only get it when you don’t. 8) Under promise and over deliver You are constantly trying to paint the near term as rosey. Investors wil be patient if they trust you. As of right now you have lost our trust and that my friend is reflected in the PPS .
Having to take financing from Azimuth in the next two months or so is ever frustrating. I was hoping for a couple quarters of positive rev growth and the release of the EOM product to provide a nice bump in the PPS before MVIS had to go back to them.
The current action by the Fed is geared to coax investors into the 'risky high tech sector'. At least,that is the perceived result according to wall street chatter.All that money is still sitting on the sidelines... The right spark from something like this add-on product in time for Xmas season could ???? I KNOW Dreaming is NOT an investment strategy, but with MVIS no one ever seems to stop.
There is really nothing positive to take away from this last set of results. The company is now where it was at in mid 2007. A year out from someone inventing a commercially viable Green Laser. The one difference now is that they have spent over $60 million dollars getting absolutely nowhere and diluted shareholders by around 25%. Contrary to what Jeff Wilson was saying yesterday they do NOT have $45 million left on the Azimuth financing. At current levels that will be very lucky to achieve half that. There is a very real danger now that Microvision isn't going to make it. The technology will but if Microvision is still around to participate in the market in two years it will only do so by diluting shareholders massivly from here. The decission to develop their technology in isolation has come back to haunt the company. That they didn't coordinate the development efforts with manufacturers capabilities is horrendously naive. Now the company is still on a hiring spree that is increasing the cash burn rates when any logic would say there is a need to conserve cash for the next few quarters. The company is being run into the ground by an inexperienced management team who are clearly flailing around for solutions.

It still mystifies me why they didn't develop a product with red & blue lasers and a green LED, for example.  Or, all LEDs.  Okay, you wouldn't have infinite focuse, but you'd still have lower power consumption and smaller form factor as compared to DLP & LCoS.  Also, the module cost would already be lower than DLP.

 

Too late now though.

 

Paul

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com

 

I'm at a loss as to why Corning chose to stop production of the Synthetic lasers completely. Surely knowing they had at least another 6-9 months of sales with Microvision, maintaining production even at present levels would have been the logical thing to do? My suspicion is, that Direct green lasers are MUCH closer to fruition than anybody is letting on. My view is that Direct laser development will come in leaps and bounds. I think we will see big things in 2011. Tokman also mentioned that companies are working on devices that will host the new direct laser now, in preparation for its release. It seems that everybody is ready to strike, the minute the DLs come online in volume. Now considering that the Dls are coming sooner than we thought, this is only a good thing. Direct lasers are closer than we think.

Based on previous history, I find this scenario hard to believe.  Believe me, I would love to see DGLs in Q2 2011, but I am not expecting that.  Once bitten, twice shy.

 


Paul

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com

 

Their credibility has sank to new levels
...an extension of ShowWX™”, basically, they detail a 15 lumen projector with “better connectivity” Would be cool if this is a iPhone add-on, think of a Mophie case with PicoP built-in (check my Twitter babble with them) http://twitter.com/#!/mophielovesyou/status/29111759083

Will do.

 

Paul

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com

 

your a fucking liar
It's not "your" it's "you're". Very constructive post by the way, I think it's cute that your mommy let you use the computer, but she wouldn't be too impressed that "you're" spelling curse words.

Thanks for the feedback :)

Paul Marganski

Co-founder and Contributor

Email: paul@picopros.com

Twitter @pmarganski

www.picopros.com