Welcome to a single post written in two parts, a Before and After perspective on MicroVision and MVIS. MicroVision, the company that’s about to have success any time now, sooner or later, it must be getting closer – for years, has reached a crux point. Good news and bad news and no news is being delivered nearly simultaneously. As I write this post, one of their customers (Celluon) announced a significant product (PicoBit), while the stock hit a new low at under one dollar. That creates a mixed mindset that’s worth chronicling because it is a common situation for individual investors. Alone, that would be worth a post. In about twelve hours from when I begin typing this, MicroVision will announce quarterly earnings. Whether that is good news or bad news or no news, it will be too easy for that announcement to erase tonight’s Before mindset. So, here we go. A post in two parts: Before earnings and After. The next twenty four hours will be an interesting ride.

If you want more background on MicroVision, cruise through my blog. I’ve written about the company, the technology, and the stock dozens of times. The short version is that MicroVision can enable projectors to be as ubiquitous as embedded cameras – or not.
Before

Thanks to a contributor to Reddit, the investment community now has a list of MicroVision products beginning with NOMAD, the Augmented Reality headset from 2004. I look forward to creating a graphical representation of the information, but that may take a while, and I am deciding to wait until the earnings report.

In the history of MicroVision’s products, there has been a trend to more autonomy, utility, and brightness. NOMAD was mono-color and required a computer worn on a belt. The SHOWWX was a projector the size of a smartphone, but it required stiff cables, a computer, and dim rooms. Within the last few days, Celluon made the PicoBit available for sale. The PicoBit is slightly larger than a smartphone, but can be a self-contained unit and is at least four times brighter than the SHOWWX. As I understand it, with the PicoBit you can load up a bunch of movies, find a place to set the projector, and watch unencumbered by power cables or data connections. You may want to plug in bigger speakers, but that’s your choice. Besides, headphones work, too. Just in time for the shopping season (though actually months late from some perspectives).

With such good news the stock should go up! Which it didn’t. MVIS closed at $0.94, down about 8%. Guessing market moves is guessing – though pundits can be paid very well for proclaiming their guesses with confidence. The market is down (or up) because – no readily apparent reason, usually. MVIS may have been down because:
1) Neither Celluon nor MicroVision made a major announcement about PicoBit. The only way I found out about it was by a lucky visit to Celluon’s web site. Since then there’s been A (one) official tweet.
2) Investors were listening for an announcement prior to the earnings report, but didn’t hear anything about the names that are associated with high volume products: Apple, Sony, Microsoft, etc.
3) Market manipulations happen, oh wait, no they don’t because the SEC prevents them and has sufficient resources to enforce the law.
4) Someone knows or suspects the earnings announcement will be bad news in any of a long list of dismal events: product delays, recalls, reverse splits, delisting, dilution, etc.

There is great potential for good news.
1) Revenues are small relative to expenses, so higher revenues could dramatically reduce the time to profitability.
2) Sales reports for existing products could be good.
3) New customers, or customers previously operating under NDAs, could be made public.
4) Any of the “several OEMs” that were supposed to “launch by the end of the year” could announce product launches. Listen for Apple, Sony, Microsoft, etc.
5) For some investors, a change in management would be an encouraging sign.
6) An embedded cellphone could be announced for sale in the US, which fits in a previous category; but the reaction could be greater because it is the market that includes most investors, and years ago the CEO said the company would be profitable six to nine months after the launch of such a product.

The stock is at $0.94. Ninety-four cents. To me, the only way that valuation makes sense is if the company never becomes profitable and revenues decline to zero. The present value of future revenues discounted for risk (read my book, Dream. Invest. Live. for details on my methodology) only get to such a low number if the discount is over 90%, in my estimation. With revenue growth of 40%-70%, much greater recognition, several products available, and several more about to available (supposedly) this would look like a good time to buy. And yet, the stock is down 68% in the last year, 86% in the last five years, and 94% in the last decade. Getting the stock back up to its 2007 high of over $40 would pop lots of champagne corks in the discussion boards, make the next stockholders meeting more fun, and help me sleep better. It seemed undervalued then.

In October, 2010, I wrote When’s It Going Up?;

“I’ve held the stock for over a decade. Its high was back in the internet bubble days at about $60. I bought a few shares above $30. Today the shares have been diluted ten-fold and the stock is trading at about $2. My patience for them has been dwindling for years. And yet, I’ve bought more.”

That was before an eight for one reverse split. Allow me to correct the text.

“I’ve held the stock for over a decade. Its high was back in the internet bubble days at about $480. I bought a few shares above $240. Today the shares have been diluted ten-fold and the stock is trading at about $16. My patience for them has been dwindling for years. And yet, I’ve bought more.”

The stock looked cheap then. Dilution alone does not explain the price drop. A drop in market confidence is important, too. Market confidence is psychology, qualitative, subjective. As pessimistic as it has been, it could be equally optimistic. As I finish this Before section, both perspectives persist. Tomorrow morning, November 2nd, the company will announce earnings, have a conference call, and the market will respond and react – and I’ll write the After section.
After

The stock closed up 14.8% to $1.08; barely above where it closed last week. There are enough details in the earnings report for analysts to keep busy. The possible scenarios have expanded. But, the market basically said that the mix of bad news and good news balances out to not much different. That is one advantage of the market. People can make lots of noise but they vote with their money.

To me, the story is more of the same; great potential and no guarantees.

What I heard was that the long list of catalysts that haven’t showed up in 2016, won’t show up in 2016. They may show up in 2017, but the delays are out of MicroVision’s control. Sony has dominated MicroVision’s operations, and Sony motivations and incentives are Sony’s, not MicroVision’s. The existing products are selling, there’s interest in the technology, there’s commitment to developing and selling products; but other issues like feature creep are delaying product introductions – which means delays in MicroVision’s revenues. The current interest is significant enough for MicroVision to celebrate 67% increase in revenue, but the delay may create a divot for a quarter or two. So much for steady, rapid growth quickly leading to profitability.

MicroVision watched potential customers be dissuaded by the need to address Sony’s needs. Now that MicroVision has helped establish Sony’s customer and product pipeline, MicroVision can independently work with the neglected customers. To do that, MicroVision is developing products and components that emphasize three distinct (and possibly mutually exclusive) features: gesture recognition, so users can control or interact with the images; smaller engines, for more compact application, at least; and LIDAR, a version of radar based on light, for industry and robotics. They are also excited about working with autonomous vehicles (auto autos?) and augmented reality. In an uncommon moment, they provided guidance of the potential revenues. The first unit could be available for sale in 2Q17, and they anticipate revenues of $30M-$60M within the 12-18 months after first availability. That would be double to quadruple current revenues.

The Sony news wasn’t bad, just a delay in the good news. But an investor can wonder about when, when.

The non-Sony news is impressive. But, and investor can hear the unspoken ‘if’s.

So, the bad news includes possible good news and the good news includes possible bad news. And the stock sits just above $1.

In the midst of today’s news I heard an echo of history. Several years ago, MicroVision was proud of a great relationship with some major companies: NEC, Honda, Ericsson. The bar code scanner, Flic, never seemed to gain attention when part of NEC’s product line. The augmented reality headset, Nomad, that was launched with Honda, a car company, faded. Ericsson was involved in early attempts at using MicroVision technology in cell phones, but it seems that Ericsson has faded.

Ironically, the company may have forgotten the downsides of being a very junior partner to a major corporation, but is learning; augmented reality is back, and MicroVision could’ve been a leader, and may be again; and smartphones with embedded projectors are still seen as the major product to pursue. To continue with the irony, the LIDAR application for autonomous vehicles is similar to the steerable antenna with no moving parts that was being developed by Lumera – the group that was a division of MicroVision, then became a spinoff, and is now part of GigPeak.

It’s almost as if they would be doing better if they’d stuck with improving the products they developed years ago rather than abandoning those projects and coming back to them now. Green lasers are a key enabler in today’s environment, but the bar was set a lot lower back then.

Within that echo I hear yet another shift in strategy, but when strategy shifts that often it isn’t strategy. Ah, but this time will be different; because it is. Red, green, and blue lasers are available. Manufacturing processes have been established and improved. A variety of demonstration products are available, some basic commercial products are available, and the breadth of applications is becoming more apparent within the industry – an industry which is helping create the demand for themselves, too. This time, the company is making millions from products, not just development contracts; and the revenues are growing significantly.

Does it seem like this explanation has been going on long enough? Good. That’s partly the point of the post. Understanding a company, investing in a stock, doesn’t require daily diligence; but occasionally a concentrated effort is warranted. Years of following MicroVision, mostly from earnings reports and stockholders meetings – and the friendlier folks on the discussion boards, provide the perspective that is available to people who are Long Term Buy and Hold investors. Dropping in to glance at an earnings report or a five day stock motion may suffice for some, but my version of research can build on itself. That doesn’t mean I can control what happens with the company or the stock, but it does mean I have a better idea of whether to Buy, Hold, or Sell.

From what I’ve heard, I will Hold. The potential remains as great as ever, so I won’t Sell. The stock is cheap, so Buying would be easier than usual; but I have enough shares to re-retire if the company and stock succeed soon enough. I’ll also Hold because one scenario hasn’t changed; the company has financial difficulties now and a great potential that could be realized as soon as within the next year or so – for more than a decade.