Investment Idea: Why I like MVIS Microvision PicoProjector

Newsletter Recommendation: MVIS 20-Jan-09 02:12 pm This message is an update on the recommendation to buy Microvision, issued last week. If you did not receive

To summarize the opportunity, Microvision has devoted the last 12 years to developing the world’s smallest, full-color laser projector. The device is small enough and power-efficient enough to be embedded in cell phones, not to mention a wide variety of other consumer electronics devices, including iPods, laptops, video cameras, game devices and much more.

To give you an idea of the potential for these devices, consider that cell phones alone represent an available market of one billion units per annually.

To the right, you can see the company’s latest projector engine compared to a penny. It might not seem like much, but this highly advanced device can project an image with DVD quality resolution up to 100 inches across in a dark room. In a dimly lit room, the image is brilliant at around five feet diagonal. And under normal to bright indoor lighting you can produce a crisp, colorful image about 20 inches diagonal – larger than the monitor on most laptops.

And all of this coming from a device the size of your cell phone.

The Dues Have Been Paid… Now It’s Time to Collect

Microvision’s technological achievements are phenomenal. And the high-volume markets the company will serve could provide life-changing returns for today’s investors. Even so, the earliest investors in Microvision – those who have been waiting more than a decade for the company’s disruptive technology to become commercial-ready – are likely a bit weary and impatient by now.

But the good news is that you don’t have to wait like they did. All the major development milestones, hundreds of millions of dollars in investment, and years of miniaturization efforts and design improvements have already been made. The company is just months away from launching high-volume production of their ultra-miniature projection engine.
And you can buy shares today with less execution risk and at a lower cost than ever before.

At the recent Consumer Electronics Show in Las Vegas and Macworld show in Los Angeles, Microvision confirmed that they will begin shipping limited quantities of their standalone accessory projector by the second quarter, with high volume production to follow shortly after.

Next Milestone: Purchase Orders from World-Leading OEMs

While the company may also launch the product under their own brand name, the goal is to license the technology to original equipment manufacturers (OEMs) to market under their own brands and configure within their own products and designs.

Already, Microvision has several partnerships with high profile companies, including Corning, Motorola and a manufacturing relationship with Asia Optical (one of the world’s largest manufacturers of digital cameras and cell phone cameras, whose products are sold under numerous household consumer electronics brand names).

As well, the company has a number of contractual relationships with world-leading companies whose names are still confidential (consumer electronics is a secretive and highly competitive business). I expect initial purchase orders and named partnerships to continue to be announced in the next few months. These announcements should provide a significant boost to the stock price.

Add a name like Apple, Sony or Nokia to the press release and I expect the stock to trade several multiples above where it is today. I fully expect Microvision technology will be integrated into devices made by these companies (and many more).

Part II

The Market for Pico Projectors is HUGE

Do you think there are people out there who might want to project images, video clips, music videos, movies, television shows, websites and games from their iPhones and iPods, smart phones, digital cameras and portable computers? I believe so. And so do many of the world’s largest technology and consumer electronics companies. In fact, they’re betting on it.

Pico Projectors will start out as accessory supplements to mobile devices. Then in a growth path similar to cameras in cell phones, they will ultimately become ubiquitous.

In an article titled, The Pico Projector Gold Rush for the trade publication, Information Display, Chris Chinnock highlights a scenario where a combined 85 million standalone and embedded pico projectors could be sold in 2012 (still a slower introduction than cameras in cell phones).

I hope the following will give you an idea what the potential market opportunity is for Microvision…

These Two Corporate Giants are Betting Big

There are only a handful of companies in the world that have the capability to produce extremely small, fast-switching, efficient green lasers. Green lasers of this type were only invented just a few years ago. Corning and Osram are two of these companies. Both are multi-billion dollar operations. They are scientific and technological leaders that have each been around for more than 100 years.

Corning and Osram are both suppliers to Microvision and have made significant research, development and manufacturing commitments to align themselves with the growth of the company. That is because they see Microvision’s disruptive technology as the platform to get their product (in this case green lasers) into millions, and then billions of consumer electronics devices.

Every year, Corning makes a decision to push just a handful of technologies to the forefront of their efforts. Some of these technologies in the past have included LCD glass and fiber optic cable, where the company is the world leader. To even be considered, the new technology must have “jackpot potential”. For a company the size of Corning that would constitute revenues in the hundreds of millions, if not billions.

On numerous occasions (and most recently just two weeks ago in an Associated Press article), Corning has confirmed the highest commitment to green lasers. Here are a couple of passages from that article:

“While ensuring an unusually high 10 percent of revenue is allocated to research, Corning's management imposed a rigorous, company-wide system for nurturing the best ideas step by step. Out of hundreds of projects a year, it keeps pursuing just a handful seen as likely to hit a jackpot.

“Among the latest high-wager hopefuls, in addition to mercury filters for coal plants: green lasers to equip cell phones with projectors, micro-reactors to enhance chemical processing and silicon bonded to glass to extend battery life for handheld electronics.”

But why don’t you take it directly from the source...

The following is a brief clip of Corning’s Chief Technology Officer, Joseph A. Miller, who oversees more than 1,800 engineers, scientists and technicians. In this two minute clip, he outlines Corning’s firm commitment to producing green lasers for Microvision and highlights Microvision’s inherent advantage over the competition:

http://www.youtube.com/watch?v=cbqUylYUcws

If green lasers (one small component within Microvision’s display engine) have enough revenue potential to make a significant impact on the bottom line of Corning AND Osram, what does that say for Microvision, with a market cap under $125 million?

What it says to me is that this is a prudent speculation worth making.

Part III

A Few Words about the Competition

As of the Consumer Electronics Show in January 2009, there are three Pico Projectors on the market. These products utilize technology developed either by Texas Instruments or 3M.

While I do not underestimate the ability of these companies to innovate, and I do salute them for rushing their products to market first, from a performance standpoint, these products lag what Microvision has produced by a wide margin.

Being the first company in a brand new market rarely guarantees dominance. The iPod wasn’t the first “portable MP3 player” by a long shot. But it is the device by which all others are measured today. The term “portable MP3 player” is hardly even used.

Based on performance characteristics, there is a good chance that Microvision will dominate the pico projector space. If that holds true, then this will be one of the greatest investment opportunities of your lifetime.

But the company doesn’t have to dominate the market for this to be a phenomenal opportunity. Nokia is not the only handset maker. Dell is not the only computer maker. And Intel is not the only chip maker. The market for pico projectors will be huge and there will be room for many players. Even if Microvision captures just 5% of the worldwide market, today’s investors will be looking at a home run.

I won’t go into the technology again in this update. All the details are in the full report and last week’s recommendation letter. But I would like to point out why Microvision is in a superior position.

The Advantages that Set Microvision Apart

The device that Microvision showed off last week at the CES and Macworld is the highest performing display in its class. It comes in the smallest and thinnest package (thinness is a big issue when it comes to embedding a device in a cell phone or iPod).

It also has:

The highest display resolution
The widest color gamut
The highest brightness
And the lowest power draw

But there is a HUGE advantage to Microvision’s technology that might be easy to overlook on paper. The image is always in focus, at any distance, on any surface (even curved or angled surfaces). And it doesn’t need a projection lens or focus adjustment to accomplish this (meaning less cost and complexity and a smaller package size).

With the devices offered by Texas Instruments and 3M you would need to refocus the image every time you moved your hand. This is not only inconvenient, it detracts from performance. Microvision has none of those limitations.

Over the years, the military has invested significantly in Microvision’s development efforts, including two military related contracts in the past month alone. Given a choice, do you think the military would choose a device that must constantly be focused, when a better option exists? Can you imagine: “Hold on a minute. I know they’re shooting at us, but I can’t get this map to stay in focus.”

But rather than take it from me, here just are a few recent snippets from articles following the Consumer Electronics and Macworld Shows last week, illustrating Microvision’s key attributes.

Part IV

From Techworld:

“The concept of ultraportable, pocket projectors isn't new: Mitsubishi and Samsung both have models they refer to as "pocket" size. By comparison with Microvision's new prototype projector, those models are boulder-sized rocks.”

“The PicoP uses red, green, and blue lasers to project a WVGA (848 x 480) 16:9 widescreen image with 10 lumens of brightness and a contrast ratio of better than 5,000 to 1. It was adequately bright under ambient show floor lightning, and substantially brighter than any of the other micro projectors we’ve seen this week. In a dark room it projects an image up to a staggering 100 inches, but the best part is that since it uses lasers, it’s always inherently in focus. This is an important feature, since the whole point of a microprojector is that you can whip it out and use it anywhere.”

From the Houston Chronicle:

“My favorite product at the show was Microvision’s way-cool SHOW WX Pico Projector. Smaller than an iPhone, it’s a tiny video projector that uses laser light rather than lamps or LEDs to project an image from 6 inches to 100 inches and is always in focus on any surface. It looks incredible and should be available later this year for under $500.”

Hearst Electronic Products Magazine:

“Some devices already in the market are challenged to provide bright projected displays. Then too, they seem to require careful focusing. A MEMS-based device called the PicoP engine from Microvision (www.microvision.com) being demonstrated at CES this year overcomes these drawbacks, and is scheduled to hit shelves sometime in 2009.”

Before I conclude, I should point out that in addition to the two recent shows and the company’s announcement that they will begin shipping product in just months, Microvision also recently announced to military related development contracts totaling $1.5 million.

In the grand scheme of things, that is not a lot of money, but the deliverables for both contracts involve high definition pico projectors and see-through eyewear displays. This is truly a game changer. Compared to the competition, Microvision already has a brighter and much smaller engine with almost double the resolution.

And the company has already mapped out a path and has contracted for the development THIS YEAR of devices that will take the display resolution to high definition format. The future is looking VERY bright for Microvision.

The original recommendation to buy Microvision went out about 10 days ago, when the stock was trading at $2.05. I mentioned in that report that the price could be volatile, and that after the 100% run from $1.11 to $2.20 it could be due for a pullback after the excitement of the Consumer Electronics Show.

That is why I only advised buying one quarter of a full position.

However, you might ask why I would have recommended it if I expected the stock to pull back. The reason is simple. There is a small downside risk in this stock right now… but there is an even greater risk of being out of the stock for a major move up.

Part V



Numerous household name OEMs are currently concluding their evaluation of Microvision’s technology. The device has already passed third party drop tests with flying colors. There is a real possibility that you will wake up one morning to a press release stating that Nokia… or Apple… or Sony… or RIM has issued a purchase order for pico projector engines with “Microvision Inside.”

You do not want to be on the sidelines when that day comes. If you have not already taken a position, buy one quarter of a full position. If are holding the company already, consider adding to your position incrementally over the next several weeks or months.

Remember, the price will be volatile in the near term. But we could care less about “price”. We’re concerned with value. The value is there. This technology is likely to be “the next big thing” in consumer electronics. And Microvision is the only pure play.

If you missed buying the other “Micro” based in Redmond, Washington when it was trading under $2 a share, don’t miss this one. I daresay it could be just as profitable.