A Current State Assessment

Having had a chance to listen to the call a few times, I wanted to put it into a larger context and editorialize a little bit. Like Perry, I'll organize my thoughts into the verticals the company is addressing (leaving aside LIDAR for the moment).

DISPLAY ONLY
We can expect $13M of revenue attributable to the Display Only license agreement in Q3 of this year, by virtue of the $10M license fee recognition and $3M of NRE work associated with the technology transfer to the licensee to be completed during the quarter.

This would seem to suggest a Q3 2018 profit is achievable, as the margin on the license fee should be 100%.

So, this is great. But, to me, the real story here was this:

Our licensee has been actively meeting with Tier 1 customers about the sales opportunity using Microvision display technology. We understand that they're getting good response from these customers and remain optimistic that they will be successful in landing them. Of course, this will result in sales of our components to them in 2019. 

It stands to reason that leading cell phone companies are likely to feel more comfortable and assured embedding a laser projector provided by a fellow 'Tier 1' electronics company into their product vs. dealing with Microvision themselves. This sense of trust that the supplier of the novel component has a good history as one of their suppliers, and has the wherewithal to deliver what is needed at the right volumes and price points, is a big part of the decision making process -- so it makes sense to have the licensee out doing the selling.

The 720p projection module is available to the licensee to sell today and it's already incorporated into phones from smaller OEMs trying to make a splash in the market as the new killer app. So I'll be interested to see if the current module could gain a design win with a name-brand OEM, under the purview of the new licensee. 

It was also described on the call that the newly developed 80 lumen, 1440p solution is to be available to the licensee. I wonder if anyone has thought to put one in a streaming box? No TV needed, just a white wall.

AUGMENTED/MIXED REALITY
It's very encouraging that MVIS is hitting the development milestones on their $24M contract and being paid as such. The call described a $2.5M payment on the contract hitting the books in Q3, bringing us up to an expected $15.5M in Q3 revenue. Awesome.

On the call, we learned that the 'difficult technical tasks' have already been completed successfully and that MVIS has been advised that their customer intends to launch a product from the fruit of this labor in 2019. 😀

This thread on the MVIS Reddit ties together a bunch of the available data, assembing a case on circumstantial evidence suggesting that this development work is for Microsoft's next-generation Hololens. The circumstantial evidence assembled there includes MSFT AR patent applications referencing MVIS, cross-pollination of former MVIS engineers now working for MSFT on Hololens, and inferences and dot-connection derived from deliverables listed on MVIS required financial disclosures.

It's possible that we may hear more about the progress of the next-generation Hololens at the 2018 Frontiers in Optics + Laser Science (FIO + LS) conference next month, where Microsoft's Director of Program Management, Mixed Reality, Mark Bolas is scheduled to speak, alongside Optical Architect Bernard Kress and Research Hardware Engineer Joel Kollin. Further, a "demo session showcasing various VR and AR headsets will be available for sign-ups." It would be fun to attend those presentations for sure.

INTERACTIVE DISPLAY
The focus here is to achieve a design win with a Tier 1 AI platform smart speaker provider, of which there are only three that I am aware: Amazon, Google and Apple. A win with any of these companies would seemingly assure volume sales of MVIS components in the millions. 

From the call we learned that the last piece of the Interactive Display componentry, the new Digital ASIC, is to be taped out, and developer kits made available, this quarter. According to the call, everything is on track technology readiness-wise for this biggest expected contributor for 2019 revenue. 

Additionally, demonstrations of Interactive Display alongside an AI smart speaker to a target customer (ahem) demonstrated how much easier it is to make purchases on an AI platform when you can actually see what you're trying to buy. Imagine that. 

Mention was made that the new Interactive Display platform dev kits shipping this quarter achieve 80 lumens brightness. This dovetails nicely with the availability this month of samples of the new, brighter green laser diode from Foxconn Sharp which is ramping to mass production of 500,000 units per month, starting in October. 

All in all, a very encouraging call and setup for Q3 and the coming year.