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Insanity Check

Minus the company's Lumera stake (worth about $38.1M), Microvision is valued at $74M.



There are a lot of reasons why this is so:



--Most people, including most MVIS shareholders, have never seen any Microvision devices in real life. This makes it difficult or even impossible to accurately assess the value of the scanned beam display technology, or put what the company is doing in a real life context that makes sense to investors.

--Market conditions, especially for emerging technology companies, have been really poor.

--The SOXX (Semiconductor Index), which MVIS seems to be pinned to, is close to 52 week lows.

--People are sick of waiting around for something good to happen.

--As of yet there is no proof that the scanned beam display can be commercialized on a large scale and has a ready market.

--People have lost money holding these shares.

--People do not consider the near future, change, and the unknowable in their decision making. Only the known is factored in. History is the only guide.

--People still forget that big cap tech companies each started out as small cash-strapped companies.

--Timelines and projections offered by the company have been missed. People remember stuff like this for a long time and it acts as a filter on their perceptions.

--The company may need to raise funds again in a few months.

--There are some shorts here who have made a lot of money shorting MVIS and won't go away unless there's a pretty damn good reason.



This prompts the question -- how much of this stuff is relevant in 'real reality' to what the company's value really is?



In the words of Donald Rumsfeld, there are known knowns, there are known unknowns, and there are unknown unknowns. Let me try to break things down into these categories to the best of my ability (and let me know if I miss anything):



KNOWN KNOWNS:



--Microvision owns $38M worth of LMRA stock which the lock-up comes off of in January.

--Microvision owns 100+ patents on scanned beam display and image capture technology.

--Microvision's Nomad display has been found to increase productivity for auto repair technicians by 30-40%.

--The Nomad is in use by the largest Honda and Lexus dealers in the US, and the fourth largest Chevy dealers. The product is being used by real technicians at real dealerships.

--Nomad is in use in the battlefields of Iraq, where it has been found to increase situational awareness and understanding for vehicle commanders in the toughest conditions imaginable.

--Microvision is in a Phase III contract to Canon to provide consumer microdisplays. A Canon senior executive said: "Canon needs to continue this activity with Microvision to further the development activities for the commercialization of the Microdisplay, and introduce innovative imaging products."

--Microvision is under contract to BMW, VW/Audi, and a Tier 1 European Auto Supplier to deliver advanced prototypes of the MicroHUD heads-up display for vehicles.

--Microvision is under contract to design a laser printer engine using the scanned beam technology for a major Asian manufacturer of printers and office equipment.

--Microvision is under contract to a leading provider of bar code scanning and auto ID products and systems to build a demonstration 2D bar code scanner prototype.

--In September the company raised $10M by selling 1.4M shares to Satellite Strategic Finance Associates, LLC.



KNOWN UNKNOWNS



--From this Feb 27, 2003 Press Release:

"Mobile handsets and terminals continue to be a focus for our low-cost consumer display solutions. We have recently signed a memorandum of understanding with one of the world's leading suppliers of mobile handsets to explore potential designs for both built-in and head worn displays for cell phones and mobile gaming devices. We have also been awarded a contract by one of the world's leading wireless network operators to develop concept designs and conduct preliminary ergonomics and usability testing of both handheld and wearable mobile devices."

--Aforementioned contract with unknown major Asian manufacturer of printers and office equipment.

--Aforementioned contract with unknown Tier 1 European Auto Supplier.

--Aforementioned contract with unknown leading provider of bar code scanning and auto ID products and systems.

--We do not know when Canon will make its decision regarding the use of Microvision's display technology in their consumer products.

--We do not know when BMW, VW/Audi et al will make their decisions regarding the use of the MicroHUD in their automobiles.

--We do not know when sales of the Nomad to the auto repair market or to the US military will reach significant levels.

--We do not know when sales of Flic will reach truly significant levels (although we are getting there).



UNKNOWN UNKNOWNS



--Anything can happen...



It won't take much to get Microvision up off these levels. In the spirit of full disclosure, I will say this: My goal is to accumulate as many shares as possible before the unknown becomes known. I believe that there is a line of demarcation in time -- before Microvision's technology is accepted for use in a consumer product, and after. Before Nomad sales significantly aid the bottom line, and after. Before the value of the company is generally recognized by the world at large, and after.



People may say that there will be a long run-up, maybe for years, after the company has proven their ability to commercialize their technology. And that some buyers think it's better to pay higher prices once the perceived risk of never being able to commercialize the technology is not in the stock.



To my thinking, I'd rather do my homework and figure out that the company and its partners very probably will commercialize the scanned beam display and image capture technology. That way, like Fidelity Growth Fund, Barclays Global and Princeton Capital, I can buy 5 times, 10 times, or 100 times more shares for the same money as somebody who waits around for indisputable proof in the past tense.



I will settle for a rock-solid confidence in Microvision's prospects, borne by countless hours of research, witnessing these products with my own eyes, and staying focused on the big picture trends: ambient intelligence, augmented and virtual reality, and the inexorable, intimate merger of computers and human beings.

Comments

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