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From Dow Jones Newswire

LONGVIEW, Wash. (Dow Jones)--Inventing a new retinal scanning display technology and then getting products that use it on the market has taken Microvision Inc. (MVIS) longer than expected.

But the Bothell, Wash., company has recently signed contracts for use of its retinal and micro miniature optical scanning technology in automotive, defense and medical applications that will put Microvision on track for solid revenue growth in 2005, said Chief Executive Rick Rutkowski.

"We think we're going to be able to put things together this year after a tough couple of years," he said Thursday in an interview.

However, because the company has spent so much time and money developing new technologies, Microvision hasn't recorded a profit since it went public in 1996 and likely won't be profitable until the first half of 2006, Rutkowski said.

Microvision's retinal technology allows wireless computers, called Nomad, embedded in a headset to project images into the user's retina, through the use of a laser and tiny mirror.

Unlike its competitor's products, Microvision's technology is see-through, which means the user can monitor information without looking away from the task at hand and the view isn't blocked by a small solid screen.

Microvision also has a patented optical scanning technology, which can be used to read barcodes.

One of Microvision's challenges is that the micro display industry has taken longer to develop than some people hoped, Rutkowski said. "Because we're sort of a loner out there pursuing scan beam technology, we've had to take on the mantle of doing the missionary work," he said.

But the company is entering 2005 with its largest year-end contract backlog ever, Rutkowski said. Sales have been made to the U.S. Army Reserve and to 23 auto dealerships. Earlier this week, the company signed a $6.2 million product development agreement with Johnson & Johnson's (JNJ) Ethicon Endo-Surgery subsidiary that could increase to $11.7 million after product evaluation.

Next week, executives are scheduled to meet with the U.S. Army to discuss the purchase of more Nomad systems.

Microvision is also marketing its Flic Bar Code scanner that uses its scan beam technology, and is working with BMW to develop a new windshield display for automobiles, which allows drivers to see information without having to look down at the dashboard.

The U.S. Army Reserve and auto dealerships like the Nomad system because it allows mechanics to perform maintenance and repair with all the information they need right in front of their eyes, Rutkowski said.

"In maintenance activities in general, people need to be hands-free and are often in a space where they can't look at another device," he said.

In another application, the U.S. Army has 100 Nomad systems for use in its Stryker vehicles and is trying to get funding for 200 more, Rutkowski said. The Nomads allow soldiers to have Global Positioning System information available to them in their headsets as they look out the top of the vehicles rather than having to go inside to get that information, he said.

Sees Auto Repair Niche

Microvision already has sold Nomad systems to a wide range of dealership brands, including Honda, Volvo, Saab, Lexus, Ford and General Motors. The company has installed 102 Nomad units in 23 dealerships in 18 states and has more than 400 product demonstrations scheduled with more dealerships.

Given the number of auto dealerships, and the increasing complexity of cars, Rutkowski said Microvision could potentially sell 100,000 Nomad units a year in four or five years.

Rutkowski said he couldn't give many details about the development deal with Johnson & Johnson's Ethicon, but it is the first commercial application of Microvision's technology in a medical device. Microvision will realize the $6.2 million in revenue from the deal through the first half of 2005 and into July.

Other revenue will come from the Department of Defense, automakers and a development deal with an undisclosed Asian laser printer maker. This will help keep cash flowing to the company as Microvision continues to develop revenue opportunities, he said.

"We will see some really good topline growth in the first quarter," Rutkowski said. "Comparisons will be very good year-over-year and sequentially."

He said the company doesn't comment on specific analyst estimates. Analysts, on average, predict Microvision will report a loss of $1.48 a share in 2004, according to Thomson First Call. And in 2005, the company is seen losing $1.04 a share, according to a survey of two analysts.

Microvision has high hopes for its Flic Bar Code because it is small and affordable enough to be used by doctors, lawyers and other professionals to do such tasks as track files in offices, Rutkowski said. The company recently signed a contract for 1,000 Flic scanners with Trax Retail Solutions to be used for loss prevention.

Microvision is also working with BMW on an improved windshield information display system on cars. While BMW already offers this feature in some of its vehicles, Rutkowski said Microvision is working on a system that is easier to see in a variety of light conditions.

"We're very near having a product," he said, adding that if testing continues to be positive, the feature could be offered on cars for the 2007 model year at the earliest.

Microvision spun off its Lumera Corp. (LMRA) subsidiary last year. Lumera is developing extremely high-performance optical network components. Microvision retains 5.5 million shares in Lumera.

Microvision shares were recently down 4 cents, or 0.6%, to $6.67, on Nasdaq volume of 106,945, compared with average daily volume of 183,066.

Shares hit a 52-week low of $3.75 in August and a high of $10.93 in March.

-By Paula L. Stepankowsky, Dow Jones Newswires; 360-636-2008;
Thanks to zeeker.


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