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A $1 Dollar Stock in Multi-Trillion Dollar Market

9/5/2018 Anant Goel

Real billion dollar companies have trillion dollar market size, they are scalable, and they leverage drivers of growth to go viral or global.

In Part I, we introduced a 20 year old high-tech company at the cusp of hyper growth in sales revenue and profitability. In the last year or so, all of the enabling technologies have come together to make mass production possible to meet global demand at reasonable cost.

The Next Billion Dollar Idea is here…

Company: MicroVision [NASDAQ: MVIS]

Technology: Laser Beam Scanning [LBS] Display Engine, Interactive Display Engine, 3D Scanning, LIDAR 3-D Scanning, Augmented Reality (AR), Internet of Things, and broad base IP Portfolio for technology licensing.

What defines the billion dollar Idea

  • Trillion dollar size of the market for products      and services.
  • The ability to scale product or service and deliver stated ROA/ROI, performance, quality, reliability, and safety.  [ROA: Return on Adoption]
  • The ability to leverage drivers of growth, such as, capital, energy, cheap labor, technology, other people’s time, or other people’s money to take it viral or go global.

In Summary

Real billion dollar ideas have trillion dollar market size, they are scalable, and they leverage drivers of growth to go viral or global.

Leverage and command over these drivers of growth are constantly changing; as technologies become democratized and use of energy and cheap labor becomes common place. When this happens, the playing field is leveled again and new markets or a new set of drivers of growth or new leveraged advantages must be found.

Those who understand and learn how to use capital, energy, cheap labor, technology, other people's time, other people's money combined with the power of business systems that deliver great value are the ones who create wealth. Once they get such formula correct, huge wealth comes from SCALING that value delivery to the masses at a global scale.

Today the power of leverage is found in many ways. Financial strategies, diverse technologies, business models, outsourcing, communications, web 2.0, social media, advertising, real estate, transportation, to name a few...

To become a billionaire… develop a billion dollar idea… and help a billion people on this planet of over 7 billion humans.

Multi-billion Dollar Markets

In addition to PicoP projection display MicroVision is targeting four noteworthy tech arrivals of the last few years that are gaining momentum, and are expected to experience extremely rapid growth in the next few years.

I believe 
MicroVision has keystone technology for all of them:

After reading Part I, we suggest reading rest of this article to bring you up-to-date as part of your due diligence…

Having had a chance to listen to the Q2 earnings conference call a few times, I wanted to put it into a larger context. Like MicroVison CEO Perry Mulligan, I'll organize my thoughts into the verticals the company is addressing while leaving aside LIDAR product line for the moment.

Here's the full Q2 earnings conference call transcript...

Microvision (MVIS) CEO Perry Mulligan on Q2 2018 Result-Earnings Call Transcript

PRODUCT: Display Only

We can expect $13 million of revenue attributable to the Display Only license agreement in Q3 of this year, by virtue of the $10 million license fee recognition and $3 million 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 and 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.

PRODUCT: Augmented/Mixed Realty

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

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 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.

PRODUCT: 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 components and the new Digital ASIC are to be taped out, and developer kits made available this quarter. According to the call, everything is on track technology readiness-wise for this and is the biggest expected contributor for 2019 revenue. 

Additionally, demonstrations of Interactive Display alongside an AI smart speaker to a target customer 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 development kits are shipping this quarter and achieve 80 lumens brightness. This dovetails nicely with the availability this month of samples of the new and brighter green laser diode from Foxconn/Sharp which is ramping to mass production of 500,000 units per month, starting in October. 
A very encouraging earnings conference call and some exciting news expected prior to Q3, 2018.

Here are the key takeaways from yesterday's call on MVIS value proposition for AI at the Edge. 

  • MVIS offers two flavors of IoT modules, Interactive Projection and Consumer LIDAR. 
  • MVIS IoT modules are "Edge computers" designed to display, sense 3D space, provide inputs to the AI cloud service and perform local processing tasks that reduce the cost and latency of the AI service.
  • MVIS has a self-evident value proposition for world-leading AI companies (Amazon, Google, Samsung, etc) that MVIS' sensing and display system makes it easier to interact and therefore easier to transact. 
  • Transactions via AI assistance are the key to 'monetizing the AI platform' which is critically important due to huge and growing multi-billion dollar investments by these players. 
  • MVIS makes AI cloud services feel more 'magical' by reducing latency of responsiveness by a factor of 10-100x for certain interactions. 
  • MVIS has successfully passed these world leading companies' scrutiny of MVIS Operations, which was has been key to enabling their described current advanced "levels of conversations." 
  • These conversations involve seven-figure (1M+) and eight-figure (10M+) unit volumes, because that's how these world leading AI companies define success.
  • Unlike several years ago with green lasers, there are no problems with components in the supply chain that would gate MVIS from providing modules at the volumes being discussed (1-10M+ units). PM: "We are primed and ready to go".

The latest wave is the emergence of on-device artificial intelligence (AI). Instead of relying entirely on the cloud for AI insights, a new wave of specialized algorithms and chips is delivering deep insights wherever work is done. According to ABI Research, shipments of devices with edge AI capabilities will grow fifteenfold by 2023, to 1.2 billion units. The share of AI tasks that take place on edge devices instead of in the cloud will grow more than sevenfold, from 6 percent in 2017 to 43 percent in 2023.

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