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Defense contracts, the boon and bane of many a young technology startup; have been welcomed by several small tech firms in the Pacific Northwest.

Bothell, Wash.-based Microvision, (Nasdaq:MVIS) develops optical imaging systems mounted on helmets worn by pilots. The company has about 100 of its Nomad visualization systems deployed with the U.S. Army's Stryker Brigade; to give drivers of Stryker armored trucks/tanks a good view of topographic data.

Founded in 1993, Microvision is still in the early stages of its development. "We are very cautious and don't put all our eggs in one basket between commercial and government sales," said Tom Sanko, vice president of marketing for Microvision.

"On the product side, what we're trying to do, at least for now, is take the commercial-off-the-shelf and sell to the military. That's better for them and better for us, because it is short-term revenue that can ramp quickly," Sanko said.

The company divides its business into two sections: technology development, with contracts that make up more than half of the company's revenues, and off-the-shelf products, he said.

"Last year we had the Stryker Nomad order that made up more than half of our product revenue. It's very strategic for us, because it's part of our [business] model to leverage the technology development contracts into our commercial products."

Microvision's market cap is now $127 million, as their stock trades in the middle of their 52-week trading range of $4 to $11. In July this year, they spun off their subsidiary, Lumera (Nasdaq:LMRA), raising $42 million. Also based in Bothell, near Seattle, Lumera makes nanotechnology-based polymer materials for wireless antennas.

"FLIR's order books are stronger than Microvision's have been," said Alan Robinson, director of research at Delafield Hambrecht. "I think FLIR's products have demonstrated their efficacy, because they have been on the market longer. "Microvision is more of a startup company, even though it was founded in 1993, and still has a fairly narrow product portfolio.

"Microvision has fallen afoul of a consistent theme in terms of military budgets," Robinson says. "A lot of money is being spent in the military sector, but they are concentrating beans and bullets. There has been a needs statement issued for about 500 more Nomad visualization systems, but it is an unfunded item right now."
Alan Robinson of Delafield Hambrecht holds the unique distinction of being the analyst who gave a 'sell' rating on Microvision at $4 a share on August 6, 7 months after issuing his 'buy' rating on the shares at $7.80 back in January. Ten trading days after saying 'sell at $4', Microvison was up more than 50%. You just can't put a price on investment advice like that.


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