Landscape with Dreams pt. 1

With today's news that Microvision has hired Craig-Hallum to advise them on strategic alternatives including a sale of the company, it would seem we may be approaching the final days of MVIS as a standalone company.

It has been quite a ride over the last 25 years, and hopefully someone writes a book about it one day. From the perspective of someone who wants to see MVIS technology proliferate into the everyday lives of regular people, an acquisition by a well funded, visionary company should help accelerate things.

But for now, the outcome remains to be seen, and the ending of the book remains to be written. I am not sure what may happen, but I suspect whatever the outcome is, it's likely to happen quickly.  What follows are my opinions, speculations and ideas but are, as ever, not investment advice. It might be wrong. It might be long.

Use Cases: Augmented Reality (part 1)

When we think about Microvision's value to an acquiring company, it's useful to think about it in terms of the experiences that MVIS tech can make possible, or accelerate.

Microvision's laser beam scanning technology is the best way to create beautiful, high brightness images overlaid on a user's vision while maintaining a clear view of their surroundings, with a small size and low power consumption. A deep-dive exploration of the power of Microvision's technology in these aspects is in this presentation by Microsoft's Zulfi Alam.

Now the question is, who is going to have Microvision's technology to help them capture the estimated $60B AR Market coming in 2024? Let's look at the Tier 1 candidates:

1.) Microsoft

Microsoft is the most obvious suitor to acquire Microvision because they understand better than anyone the inherent strengths of MVIS technology for augmented reality. While it's never been acknowledged by either company, and 99.999% of humankind to this day remain unaware, it is a historical fact that Microsoft is the "April 2017 customer" and the product that MicroVision was hired to develop for them is the HoloLens 2.

MVIS did their part and delivered a high-performing two-mirror laser scanning display engine for Microsoft, who loved it so much they claimed, in interviews, tweets, and articles, that they invented it themselves. (Microvision has apparently been bound by NDA to never say that they were responsible for the miracle engine underpinning Microsoft's mixed reality strategy, while undergoing an 80+% decline in value over the past year. So while the company, due to its engineering excellence, had finally broken through into a sensational product with the world's most valuable company as their go-to-market partner, their lack of ability to communicate this made it impossible for them to express the value proposition of MVIS to the market, leading to the current situation. Sometimes life is funny...)

Now Microsoft has agreed to change their original agreement with MVIS and will manufacture the MEMS laser scanning display engines themselves, and simply pay a royalty to Microvision for every Hololens 2 unit sold. Given the deserved pride Microsoft has in their marvelous product, and how pivotal Mixed Reality is to Microsoft's strategy, it seems to me that it may displease them to have to write royalty checks for every HoloLens 2 sold in perpetuity to an Apple, Facebook, Amazon or Google should one of these companies get out their checkbook to acquire Microvision.

Over the years, Microsoft also has hired great engineering talent from Microvision, including Josh Miller, Dean DeJong, Greg Gibson, Rick James, Wyatt Davis, Clint Rollins, Michael Beard, Scott Woltman, Shawn Swilley, Mark Champion, Harpal Sira, John Lewis and other amazing MVIS alumni in various roles. How this intimate knowledge of MEMS laser scanning and stable of phenomenal talent impacts Microsoft's thought process regarding acquisition of MVIS is another interesting question, but given their lengthy commitment to advancing the technology, it seems unlikely to me that they would just allow a potentially unfriendly competitor to purchase the foundational IP for laser beam scanning without getting involved themselves.

2.) Facebook

Facebook's greatest weakness is that it has no physical platform. It relies entirely on Google Android and Apple iOS to bring its products to market. Facebook has designed its products to be addictive, to stimulate people with notifications, giving people a dopamine boost that they come to subconsciously crave. They've leveraged that approach, along with a massive data collection and analysis platform, into a global micro-targeted eyeball empire. But, every day FB doesn't own its platform, it's at the risk of total disruption. Google or Apple could at any moment simply delete Facebook or Instagram from their app stores and OS and cause devastation to FB's business. 

To mitigate this platform risk, Facebook is spending billions on AR/VR, with investments including the acquisitions of Oculus, CTRL labs, Scape Technologies, and recently on exclusive rights to micro-LED technology through agreement with Plessey Labs.

Zuckerberg recently stated that there's going to be a breakthrough in AR glasses technology this decade and that AR is the next platform. He's got the means, and the motivation to acquire MVIS  in order to capture the critical technology to enable the next platform and secure his place as a mega-cap technology leader of the future.

We've also seen FB's attempt to platform themselves manifest with their Portal telepresence device. This product line hasn't gained much traction yet and seems as though it could probably benefit from an interactive laser projector and from MVIS' short range LIDAR capabilities.

3.) Apple

Apple is also looking to dominate consumer augmented reality.  In 2018, Apple acquired Akonia Holographics, the AR lens maker, and have a lot of people working on a whole bunch of interesting patent applications. They're bringing out AR content and capabilities for iPads and iPhones (such as the ARKit development platform, and the inclusion of a LIDAR system in the latest iPad for spatial mapping). It's been reported Apple is planning an "AR headset" in 2022, followed by "AR glasses" in 2023.

By acquiring MVIS, Apple could immediately obtain a revenue stream in AR, via Hololens 2 royalties, add a staff that would give them the know-how to create the best displays for AR, and the eye watering MVIS IP portfolio, giving them the ability to claim IP rights to pretty much any MEMS laser scanning eyewear display product that should materialize (including, one would imagine, the eventual Hololens 3).

Apple is also working on technology to support autonomous vehicles. MVIS has described being ready to sell developer kits of an automotive LIDAR solution in Q4.

4.) Google

Google Glass was one of the first efforts at an augmented reality eyewear product for consumers, and Glass has recently been rebooted as an enterprise tool targeting similar use cases to Hololens 2. Google probably views Glass as a strategic, multi-generational product line with advances in capability (and market opportunity) with each generation.

Google's advantage in content and services, including navigation, search, OS, mail, calendar and cloud computing capability could allow them to create a totally integrated AR experience, if they could just obtain the best display technology for the job.

Google also manufactures the Google Home smart speaker. So the interactive display and LIDAR products could help Google differentiate and gain market share in the smart speaker segment (currently 25% to Amazon's 70%).

With MVIS now officially soliciting bids, and Google driving product offers in both AR and smart speakers, one could think Google could be as motivated as any of the aforementioned companies to secure laser beam scanning technology to accelerate their product roadmap.

Honorable Mentions

5. Valve 

Supposedly Valve is Apple's partner in the development of their "AR headset". Valve manufactures the "Index" VR Headset and understands the limitations of the VR market and use case. They must look at AR as a much larger market opportunity. Acquiring MVIS would allow Valve to cement their place as a key partner to the Apples of the world and unlock the AR opportunity.

6.) Magic Leap

Magic Leap has found the AR market challenging and has already put itself up for sale (asking price, $10B!), but it is possible they may realize that having the MVIS IP portfolio makes them more attractive to potential suitors. They probably still have enough cash to make a compelling offer, having raised an amazing $2.3B as a startup. Acquiring MVIS would be a quick way for them to be able to position a credible product roadmap beyond the Magic Leap One to acquiring businesses.