(Editorial note from an astute reader who caught the mistake made by a writer writing too late on a Friday night. “I think you mean Lasers where you have mentioned LED’s. LED’s are light emitting diodes and are not used in Microvision technology.”
I was looking forward to writing about good news for MicroVision. Good news for MicroVision should be good news for the stock, MVIS, which should be good news for my portfolio, which should be good news for me. The company’s press releases sound positive, but the stock price suggests the investors are less interested in investing as a result. Chief Executive Officers are the chief officers in charge of making sure the corporation executes their plan to reach their goal, generally. They are paid well, and they do carry the responsibility, but nobody and no company is in complete control. The rest of the world has an influence whether it knows the company exists or not. The lack of control is part of investing, and something individual investors get to deal with. Here’s one example from MicroVision, a company that seems to be nothing but anecdotes and examples.
Good news? In the last month, MVIS is down ~39% and after hours is down another ~9%.
My interpretation of the market’s response
Revenues are up 50%, but expenses were up and long-anticipated deals weren’t announced during the conference call for the earnings report. Patience evidently wore out for investors who expected a positive report before the end of the year. There were hints of deals about to be signed, but unfulfilled hints are too common for MicroVision. It looks like many investors finally gave up, gave in, and sold out.
A new CEO is taking command, which some have been hoping for. The announcement came days after the earnings report and the stock price drop. Regardless of the skills of the new CEO, many read the transition as a sign that the good news hinted at during the conference call may not be happening. That’s only speculation, but without better information, speculation is all most investors have to make decisions from.
They’ve raised millions of dollars, which also suggests yet more dilution (A Study In Dilution MVIS). The more positive news would’ve been a long-awaited surge in sales that carries the company to cash flow positive and profitability. Maybe they need the cash for expansion. Maybe they need it for survival. As I just wrote above; “That’s only speculation, but without better information, speculation is all most investors have to make decisions from.”
The stock drop associated with the earnings report wasn’t under the control of the CEO. A drop in stock price can lead to disrupted deals, degraded financial terms, and a decrease in confidence about the company. Big companies are cautious about dealing with little companies, and little companies that look shaky can look like bad business partners. Maybe that encouraged the shift in CEOs. Who knows? Someone, but not the investors.
The departing CEO didn’t live up to expectations, arguably expectations that he raised; but he is still recognized as one of the most positive developments in the company’s history. He replaced a CEO that made great bombastic promises, that only later were shown to be more talk than substance. The departing CEO did a great job at providing solidity to the design process, initiated a crucial technical development and invention program that resulted in real rather than virtual products, and may have almost succeeded. If there were critical flaws in the product or the business, they haven’t been revealed to the investors. The lack of significant sales suggests that something was amiss, but that’s speculation, again. The new CEO benefits from expectations that are at their lowest in years. At this point, survival may be seen as an accomplishment.
Raising millions of dollars may simply be a smart move by the new CEO. Create a cash cushion during an apparent crisis that could be attributed to the previous management. If the deals come through, then the financing is just that, a cushion. If the deals fall through, there’s enough money to provide hope for other deals to succeed. Raising the money is under their control, but the stock price associated with it is not.
There’s a story of the lack of control from an unexpected source. Thank your iPhone and its Gorilla Glass.
MicroVision’s technology uses a series of laser LEDs to paint the image. Red, green, and blue lasers rapidly turn on and off to create all of the necessary colors, just like most monitors. The difference is that the lasers shine (or don’t) onto a tiny oscillating mirror. Do it right, and an image is projected. A device the size of a thin mint can create images measured in feet. They dim with size, just like a flashlight, but images the sizes of standard monitors can be very bright. They can also be very crisp because they don’t have to fake black.
Red LEDs have been around for decades. Blue LEDs are newer, but BluRay devices is a sign that their quantity was up and their cost was down. Unfortunately, the first CEO didn’t make much mention of the green LEDs. The second CEO pointed that out soon after taking office. He launched an impressive campaign to invent, truly invent, the technology necessary commercially viable green LEDs, and got big corporations like Corning to participate. That was good news. There was great anticipation. And then people realized that Corning backed out. There was no explanation, just a disappointment. Fortunately, enough advances were made that green LEDs were feasible, though not as economically viable as needed.
Here’s where the benefit of reading broadly comes in. I enjoyed having a subscription to Wired Magazine. They catch trends early and relay the news in an entertaining style.
In September 2012, a Wired Magazine article described another possibility for Corning’s decision. The CEO was being interviewed about the origins of Gorilla Glass. Evidently, The CEO was giving a tour to Steve Jobs. The CEO mentioned the possibility of embedded projectors and the need for direct green lasers. Jobs’ response was that he was committed to what would become the iPhone. He needed a strong glass that hadn’t been developed. Corning’s CEO decided to switch development funding from lasers to Gorilla Glass.
MicroVision has risen to the point of being the topic of discussion between the CEO of Apple and the CEO of Corning. That’s impressive for a tiny company. Unfortunately, MicroVision wasn’t there to defend the technology and their concept. The key conversation was out of their control. Hence, disruptions, delays, and a chance for competitors to catch up.
As much as I’m writing this about MicroVision’s CEOs, I suspect even the CEOs of Apple and Corning find that they don’t have as much control as they’d like.
And yet, CEOs are responsible, as is appropriate. To be responsible is to be able to respond. Another connotation is to take the credit and the blame for the company’s successes or failures. The shift in CEOs may simply be a reflection of that response, or it truly is only that the departing CEO wants to spend more time with his family. It happens.
Investors are responsible, too. I am the only person who has to respond to my investment decisions. I’ve held MVIS since about 2000. If it didn’t seem like a good idea, I would’ve sold. As usual, though, I’m holding because those deals may come through. The cash flow may finally turn positive. The new CEO may have just the right negotiating and management skills. Maybe they’ll succeed quickly enough that any further dilution will be minimal. But, there are too many maybes in there for me to buy, and I think that lack of control may be a larger lack than expected.
Individual investing can be a powerful wealth creation tool. Passive asset growth is very nice. I’ve experienced it for decades. It can happen again, but it requires a high tolerance for risk (understatement) and a realization that no one is truly in control. Not even the CEO.