Uneducated Investor

MVIS Q3 2008 Conference Call

2008-11-08T08:17:00.000-08:00

Standard intro...
Alex: Thank you Tiffany, thank you everyone for joining us this afternoon. Our outline is going to be similar to past calls, I'll give you operating results then Jeff will take you through financial results, then we'll end with Q&A. So let me begin. Despite the economic meltdown, the 3rd quarter was very good to us as far as executing on operating milestones. We hit several important goals related to customer commitments, supply chain maturation, and product development advancements. We also raised cash in a very difficult environment. I will amplify on each one of these items shortly, but lets step back for a moment and look at the direction of this exciting new market segment. Despite the gloomy economy the indications we get from the external market data, our direct user studies, and the strong OEM pull, the mobile projection market is ready for some serious explosion in 2009. Despite the slowdown in the overall handset market growth, the smart cell phone segment is expected to grow rapidly. And according to Yankee group, there will be over 780 million smart cell phone users by 2012. If you combine this with the fact the global mobile tv market is expected to top 17 billion in less than 5 years, and the fact that some carries are already rolling out features and infrastructure for mobile devices to enhance the video download to handsets, the price looks very, very attractive. In fact, in today's wall street journal, some of you may have read, anyone who owns Sprint mobile cell phone could get national football league game on Thursday and watch it off their handset. So why projectors inside mobile devices. All of this is based on very simple thesis, that user experience and enjoyment from the existing mobile devices could be greatly enhanced, if you enlarged the video screen size from 3 inches to 60 inches to view and share the expansive library of pictures, videos that you have today on your iPhone or personal media player. Not surprisingly everybody sees this opportunity and there's a lot of players pursuing it. I believe that we'll be able to fulfill our mission because of two key ingredients, disruptive technology, and a team of bright driven people at Microvision. The technological advantages are known and well stated in the past; you know the small size of our engine, high brightness, DVD quality resolution, wide color gamut and focus free operation. And that is exactly what we have been consistently communicated to prospective pull in customers and partners. So how are we addressing this need... We took a systemic approach with our go to market strategy which is based on continuous innovation and improvement and is rooted in phased product introduction. As you know we are targeting introduction of our first product, picop accessory in first half of 2009, followed by volume production in second half of 2009. The embedded application we're targeting to be appearing within 9-12 months after the accessory followed by aftermarket head up display sometime in the second half of 2010, followed by the eyewear in 2011. The important part of this strategy is that all of these products will be based on the core platform that we're building today. So now let's circle back and look at the third quarter accomplishments and map them to the previously communicated targets for launching the accessory product which is at the forefront of what we're doing today. The areas I want to focus you on are customers, technology development, and supply chain, so let's start with customers progress. As you know consistent with our guidance, we began shipments of our enhanced picop prototypes to several partners in mid September. These units include important advancements in several critical areas including the next generation green lasers which are built on the same platform that is expected to be used on the commercial lasers. A smaller picop display engine which projects a brighter image and several important image quality enhancements. To date, several large hand set makers, several consumer electronic companies, and several mobile operators received these units for evaluation. The evaluation as you know is in early stages and is expected to continue into next several months, we plan to use the feedback we receive from these evaluations to finalize the accessory pico projector design which is targeted for the late 2008. The final configuration product based on the input will be powered by fully integrated ASIC electronics which will be substantially smaller and lower power and these units would then be provided to similar customers and some additional customers in the first quarter of 2009. Our plan remains the same; the goal is upon the completion of the acceptance testing we expect that some of the LOI's we have to date will be converted into firmer purchasing commitments. Area number 2 is product development, and there are 2 pieces to product development, the technology advancement and supply chain maturation. So for the people that are new to the story, let me explain, let me give you a brief overview of what picop is. There are 4 main parts of our picop projection engine: optimechanical module (that houses mems, optics, and lasers), mems scanner, lasers, and finally ASIC electronics. So we're going to walk one-by-one and explain what type of improvement and advancement we have done during the third quarter. Let's start with the optimechanical module. We hit a very significant supply chain milestone here, as you know we announced a strategic supply chain agreement with Asia optical who is a leading manufacturer of electro optical components, and we gave Asia Optical an ability not only to manufacture the optimechanical engine but also manufacture the final product, our gen 1 product. We selected Asia optical because of its extensive experience in designing and manufacturing multiple high precision optical and electronic components and also for their full vertical integration capabilities expertise for a variety of consumer products including digital cameras and business projectors. Asia Optical's list of customers and partners is very very impressive and include the likes of Fuji, Olympus, Kodak, Toshiba, GE, Hitachi, BenQ and others. This milestone you realize is directly related to our maturing the supply chain goal. Let's move now to MEMS, the second component. As you know, MEMS is at the heart of picop display engine. What we've done during the third quarter on MEMS, we've validated one of the important reliability milestones. One of the key indicators for product reliability is a shock and drop susceptibility of product which is typically dependent upon the drop and shock susceptibility of the components that comprise this product. Because MEMS is one of the components of picop it is important that it withstand the shock that is consistent with the consumer use models. We have externally validated this key shock resistance reliability requirements, and the tests have shown that our scanning mirror exceeds twice the shock performance requirements necessary to be used in consumer devices. This testing was validated externally and was conducted by the very reputable body which is the Fraunhofer Institute for Photonic Microsystems a recognized leader in research in MEMS and other subsystems. Why is this important, you ask yourself? Well, ask yourself this question. How many times have I dropped my cell phone, and again this is a very important milestone for us because it shows we're not only able to put something in the lab, but we're able to produce something that can withstand some major major use. Let's move to lasers now. AS you know red and blue lasers are commercially available today. You also know that green lasers are being developed. So let me start with saying that first and foremost we still see a strong commitment by the two large green laser suppliers to deliver commercial quantities of green lasers in 2009. We believe that the issues that were driving some of the delays in the delivery of green lasers to us in the first half of this year are being resolved. AS an indication of this progress, we have received an increased quantities of green lasers which have been successfully integrated into the latest prototypes which allows us to ship the evaluation units in mid September. We expect that the volume of these green lasers arriving to continue to increase. Now let's move to ASICs. ASICs represents essentially our command and control center that essentially orchestrates and coordinates all main parts within the pico projector, is controlled through electronics. Over the past two years we have reduced the electronics size from something that looked like a large desktop computer in 2006 to something that started looking like large laptop computer in 2007 to size of the iPod which is what you've seen with the show demonstrator, to the size of a quarter in 2009. The last step is only possible through a full conversion of our electronic components into asic chip. So why is this important, because these ASICs chips contain the secret sauce that Microvision has been developing over the years? ASIC electronics for the accessory projectors are expected to be completed and fully integrated into the final product configuration in the late 4th quarter of this year. After we complete this exercise we expect the units we will start showing to the customers in the first portion of 2009, will be 25% smaller and have reduced power, therefore allowing them to operate on a single battery for 2 hours without the need of recharging. Now let’s shift back and let summarize what we've done on operating expense. On operating cash as you know we subsequent to in the beginning of the third quarter we raised 26 million dollars. 24 million net in operating cash, and we've done this during challenging market conditions. Based upon our operating plan we believe we have capitalized for the launch of the accessory product and into volume production. At this point I'm going to pause and let Jeff give you a highlight of the financial results and we'll come back with Q&A.

Jeff: {Essentially reads the press release verbatim}
For the nine months ended September 30, 2008, the company reported revenue of $5.1 million compared to $7.5 million for the same period in 2007 and for the three months ended September 30, 2008, the company reported revenue of $894,000 compared to $2.6 million for the same period in 2007. As of September 30, 2008, the backlog totaled $647,000 compared to $5.7 million at September 30, 2007. The decrease in backlog from 2007 is primarily attributed to completion of government and commercial development contracts in 2007 and early 2008.

The company reported an operating loss for the nine months ended September 30, 2008 of $25.3 million compared to $18.8 million for the same period in 2007 and $9.0 million for the quarter ended September 30, 2008 compared to $6.5 million for the same period in 2007. The increase is primarily attributable to lower revenue for the quarter and increased development costs associated with the planned introduction of PicoP enabled products. The increased development costs include increased headcount in strategic sourcing, supplier quality and business development as well as increased material costs consistent with product commercialization.

The company reported a net loss of $22.7 million for the nine months ended September 30, 2008 compared to $13.8 million for the same period in 2007 and $8.4 million for the quarter ended September 30, 2008 compared to $4.7 million for the same period in 2007. The net loss for the nine months and quarter ended September 30, 2007 included a gain on the company’s sale of its investment in Lumera Corporation of $6.4 million and $434,000, respectively. Excluding this gain, the adjusted net loss for the nine months and quarter ended September 30, 2007 was $20.2 million and $5.2 million, respectively.

The net loss per share was $0.38 for the nine months ended September 30, 2008 compared to $0.29 for the same period in 2007 and $0.13 for the quarter ended September 30, 2008 compared to $0.08 for the same period in 2007. Excluding the gain on the sale of Lumera of $0.13 and $0.01, respectively, for the nine and three months ended September 30, 2007, the adjusted net loss per share was $0.42 and $0.09, respectively.

Net cash used in operating activities was $22.3 million for the nine months ended September 30, 2008 compared to $16.6 million for the same period in 2007. The company ended the quarter with $37.2 million in cash, cash equivalents, and investment securities

TIffany: We'd like to go ahead and start Q&A now...

Christian: Hey, thank you. Couple quick questions guys. I know you mentioned briefly in your prepared comments, but I'm just wondering if you could possibly elaborate your confidence that there's no risk to the commitment to corning in particular to mass produce green lasers.

Alex: Christian, good question, it's on everybody's mind. There’s risk in everything in life you know, we just feel comfortable with the fact that corning and osram see the value and opportunity of this market and there's a strong commitment to get commercial quantities to market in 2009. We haven't seen anything different to tell us that it would not happen.

C: OK, so you've had recent dialog with them and even though the recent things have been difficult for them...

A: Christian, we're in weekly contact with both companies.

C: Perfect. If everything continues on track, and congratulations on being on track so far, for the commercialization of the accessory projector and then the launch of the picop within mobile phones, can you kind of walk us through how revenues just generically could ramp over the next few years.

A: Sure, let's start with the accessory. Again, let's restate what the target is. The target is to commercially introduce accessory in first half, latter portion of first half of 2009, and move to larger volumes in second half of 2009. At the same time as we introduce accessory, there will be work that would be continued from 9-12 months to integrate the engine inside mobile devices. So if you just use simple math and we expect right our expectation is that embedded product would be in the market sometime middle of 2010 as an initial introduction to high volume introduction in second half of 2010.

C: Right, and then can you just categorize what that revenue opportunity ...

A" Let's use simple example, if we're able to secure a single cell phone manufacturer, that decides to put in a single smart phone model. High end smart phone model. Typically these are sold in quantities anywhere from 1 - 5 million a year. And let's take the low end of that spectrum 1 million units, if you look at transfer price which is somewhere around 100 dollars, that kind of gives you the basis for the standalone business right there. Obviously if there is 2 cell phone manufacturers that would like to do the same, you multiply by the number of people interested. Our intent is to work with more than 1 cell phone manufacturer to achieve these goals.

C: Great, thank you guys.

Josh: Hi Alex, hi Jeff. Just a couple questions, can you go into a little bit more detail in what the derivative gain was on the income statement this quarter

J: Sure, we have the warrants that were associated with some previous financing that we reported during reliability ? each quarter we have to mark those warrants to market which the decline in the stock price due to the market fallout during the 3rd quarter the value of those warrants has declined and the decline in the value it's counterintuitive, the decline in the value of those warrants results in a gain on the income statements, so it's a non cash non operational gain.

J: Ok, and you had mentioned the ASICs a bit in your prepared comment, can you just give us a little bit more color upon when that process will be completed and roughly how much that will cost?

J: The process will be completed over the next, again we have different level of asics coming in for both the accessory and embedded, but they will be done over the next 3 months, and again more in the next 6 to 9 months, and the standard cost on an ASIC is in the, it's actually come down a little bit in recent years, but it's in the 600000 to 1 million dollar range to turn an asic.

A: And Josh, just to elaborate to what Jeff has correctly stated. We have 2 types of asics. We start with the accessory asics, then we move to embedded asics, these are two sets of chips that we've been developing and the difference being we can get the accessory asics earlier so we can get to market earlier and then embedded can come in later, they are smaller and lower power and will replace them as we move to the embedded solution.

J: Ok, great, I'll pass it on, thanks.

Joe: Hey Alex, hey Jeff

A: Hi Joe.

J: I have not been able to see the new pico projector versus the one you've shown in Las Vegas earlier this year. Is there any analogy you can give to us who have not been able to see what the difference in quality of picture is?

A: Absolutely Joe. There are 2 primary differences between the old model that you've seen earlier and what we're shipping right now. First the current projectors are brighter, uniformly brighter, so now we're able to consistently produce something that is 10 lumen display plus or minus 1, which is pretty tight spec, if you look at competitors they typically get close to 20 percent to the target, so we're much tighter in this regard. We did not have this before. The second improvement is the image looks a lot sharper and cleaner. We implemented several enhancements to improve image quality and presentation and for the first time we can on our projector you can read text that is 10 point font. We were never able to produce this before.

J: I noticed that on some of the Newsweek article, that I could actually read the text, that was a big difference. Did you say 10 point font?

A: YEs.

J: Ok, I've got a couple questions if you don't mind. And then the green laser that's going into the demo, is that a new green laser, if it's the same have they overcome the hurdles that you guys were experiencing in developing, you know in being able to mass produce the product?

A: Fair question, the green laser that is in the current units is based on the same platform that one of the green laser suppliers will take into commercialization. Prior to this we were using basically lasers built by hand in the R&D lab, so this is a big big milestone for the green laser manufacturers.

J: And no reason to believe that they can't mass produce it? No worries about transfer of technology or anything like that.

A: There's always risk Joe, but I think a lot of emphasis has been placed, and the market opportunity is pretty large, both players really want to be successful, I think they are doing everything possible to ensure there are commercial samples available in 2009 to allow us to introduce accessory.

J: And last question, and I know this is going to be difficult to answer but that's what we do. When and what is it going to take to get either for the accessory device or the embedded version for somebody to go ahead and finally step up, commit, and give you guys an order?

A: It's basically the process that I outlined earlier, let me just repeat this again. It's a series of trials, we started in mid September, we shipped extended number of units to start doing user, end user, trials and basically get internal validation. Once we get this feedback, but the end of the year we're going to incorporate this feedback and produce next generation unit that will be of the same form factor and power as the final product we then ship the larger quantity of those units in the first quarter of 2009, then customers will use these units, not only for end user trial but also for start of acceptance test to determine whether they can withstand temperature test, life test, upon completion of that we expect to start receiving PO's and firmer customer purchase orders.

J: So as long as you start receiving positive feedback in Q4 from your customers..

A: It's Q4 and Q1 Joe.

J: Ok, and then the process continues and your goal is to have orders first half of 09 ready for larger production by Christmas.

A: Yes, that's our goal.

J: OK, thank you guys.

Art: Hi Alex, my question is largely been answered but if you wouldn't mind, it's been a while since I've seen anything with regard to what we think can in 09, 10, and 2011 we can do in terms of revenue, do you have any kind of a model like that you could go over, or is there something that management has endorsed that somebody has put out.

A: You're asking a very good question, I think everybody should be interested in this. My best recommendation is to take a look at the models done by independent analysts, Christian just did an initiation report on us, he has some projections, you can look at Jed as well as Darice's. These are the three key analysts that are covering us right now, and they all have models developed based on what the pieces we've presented and they use, so I would recommend this to be the first place I would go to get this information.

Art: Can you put a link on your website for any of this information, obviously for those of us that are institutional we can get that information, but a lot of people probably can't.

A: Good question, we can not endorse anyone, so we can redirect everyone to these people and you can get it directly from them, easily readily available.

Art: Ok, Thank you.

Alex: Thank you. What can I say, our technology supply chain and customer strategy are coming together nicely, partnering with Asia Optical, reliability programs on MEMS, completion of ASICs, customer unit evaluation, and raising over 24 million in operation cash in challenging market conditions all are evidence of steady execution of the operating plan we've communicated. Going forward it's all about execution, by us, by our supply chain partners, and by our OEM partners. Our goal is to be the first to market with the right product. What do I mean by the right product? It's a projector that will allow you to watch a full featured video without running out of battery in less than an hour. It's a product that is bright enough that it could be used in most indoor lighting conditions; it's a product that produces a screen size that is equivalent to your television size and not small laptop screen. And finally it's a projector that is always in focus and it doesn't require continual thumb wheel adjustments. That's what we're trying to do. Lastly, before we check out, I'd like to invite all of you to visit us at CES in January in Vegas, 2 months from now, so that you can first hand see the innovations that are being brought to life by our amazing Microvision team. And you have a chance to speak directly to some of the people that are making your and our dreams come to reality. Thank you for joining us and I look forward to talking to you next quarter.

MVIS CC Q2 2008

2008-08-06T12:36:00.001-07:00

MVIS CC Q2 2008

Tiffany reads the standard intro…

Alex: Thank you Tiffany. Thank you everyone for joining us this afternoon. The outline of today’s session is as follows. I will provide operating results, and Jeff will come in and provide detail on the financial results for the quarter and for the first half, I will come back and give you a strategic outlook and we’ll wrap it up with questions. SO let me begin with the operating results.

Although second quarter was quiet by external IR standards, we’ve made very important progress in all 4 key areas. Specifically these are customers, technology, supply chain, and liquidity. Let me begin with the customers update. We believe markets interest in picop remains strong. During the second quarter we received several letters of intent from customers for the picop accessory product for 2009 release. We expect to commence the extended field trials with our OEM partners very soon to solicit broader feedback for the final product accessory requirements. It is our belief that successful completion of these extended trials that will span the remainder of this year and early portion of 2009, and will include both collection of consumer feedback as well as the internal testing on the part of our customers, will lead to firmer purchase commitments. During this time we will be working with our OEM partners their ultimate timing for the accessory product launch, however we expect to be in a position to launch the accessory product in the first half of 2009, and support volume production in the second half of 2009. Let’s move on to technology and supply chain. During second quarter, we made several important advancements on our core technology. As you all know the new wide angle MEMS scanner is an integral part of our picop display engine that we targeted to serve several different market segments. The requirements for this scanner are driven by very stringent requirements by the cell phone market. The new scanner is required to provide reduced power consumption with similar or lesser form factor and be robust at the same time to shock and drop tests, as compared to earlier microvision designs. In late 2006 we began the definition and design of the first MEMS device specifically focused on the needs of the mobile projection display markets. This new device was expected to challenge the existing technology limits and require significant innovation in MEMS scanner and package design on the part of our development team. We exhibited the first prototype of this new scanner about a year ago at Society for Information Display. We’re pleased to say that in the last quarter we began internal testing of its key attributes, first let me talk about power consumption. Power consumption of the latest version of the MEMS scanner has been reduced by approximately 75% over the previous version initially shown about a year ago. What is this significance of this reduction. Let me give you the big picture. The cell phone manufacturers told us that the target spec for the overall power consumption of the embedded pico projector which includes MEMS scanner, light sources, ASIC’s, and other components, should not exceed 1.5 watts. Before this 75% reduction that we measured recently MEMS power contribution was about 25% of the totally allocated budget, today it’s approximately 7%. Second, we implemented internal testing, and completed internal testing of the wide angle MEMS scanner for shock and drop survivability, these results showed that our MEMS scanning mirror exceeds the shock and drop test requirements consistent with mobile handset industry standards. We’re not done yet, there are more reliability tests in progress, but the shock survivability milestone is a good validation that we are moving the right direction. ON the ASICs front, we’ve progressed with our efforts on further miniaturization and power reduction of the key ASIC subsystem necessary for the accessory and embedded product. Finally let me close on a brief talk on liquidity. AS you know, subsequent to the end of the quarter we raised 26 million, about 24.2 million net, through the sale of common stock and warrants, from high quality investors. The primary goal was to strengthen our balance sheet and give us the ability to commercialize the accessory product. Jeff will amplify more on this subject during the financial update. We believe that this additional cash could support our overall operating requirements until late 2009, through initial launch and volume production of the picop based accessory product. ON the other positive milestone, in June we joined the Russell 2000 and which all of you know are widely used by investment managers and institutional investors as benchmarks for investment strategies. At this point, I’m going to pass the baton to Jeff and he will provide you with financial results.

Jeff: Thank you Alex. As Alex mentioned in July we completed the financing of 26 million dollars, in connection with that we issued 11.2 million shares of common stock and warrants to purchase 6.7 million shares. A little bit about the warrants, the warrants have a strike price of $3.60, they can be called by the company 1 year after they were issued if the average market price of the stock exceeds $7.20/share for 20 trading days. If the warrants are called by the company the company would receive an additional $24 million in cash, in addition we expect to list the warrants on Nasdaq. Just going through the financials for the company for the 6 months. During the first 6 months, the company earned revenue of $4.2 million compared to $4.9 million in the same period in 2007, and $1.6 million in the second quarter compared to $2.7 million in the second quarter last year. As of the end of the quarter we had a backlog of $679000 compared to $7.7 million last year. The decrease in the backlog is primarily attributable to the completion of government and commercial in 2007 and early 2008. The decline in contract revenue backlog is also part of the company’s conversion from a technology development company to a products company. We’re entering the final stages of productization and there are fewer opportunities now to enter into development contracts since our customers are more focused on product introduction. As we’ve stated in the past our goal is to bring high volume products to market while minimizing our cash burn and working toward this goal may require us to forgo certain short term revenue opportunities that are not consistent with our overall product roadmap. We reported an operating loss for the first 6 months of 2008 at $16.4 million compared to $12.3 million in 2007 and $9.3 million for the second quarter in 2008 compared to $6.3 million in the same quarter last year. The higher loss is primarily contributable to lower revenue an increased development cost, an increased head count, and strategic sourcing and business development. Our net loss for the first 6 months in 2008 was $14.3 million compared to $9 million in 2007 and $9.3 million for the second quarter 2008 compared to $2.2 million in 2007. Remember that in the 6 months in the quarter of 2007 those results included the gain from the sale of our investment in Lumera Corporation of approximately $6 million. Excluding this gain, the adjusted net loss for the first 6 months of 2007 was $15 million and $8.1 for the second quarter. The net loss per share was $.25/share for the first 6 months of 2008, and $.15/share for the second quarter of this year, compared to $.21 and $.05 respectively for the same periods in 2007. Excluding the gain on Lumera the adjusted net loss was $.35/share for the first 6 months and $.19 for the second quarter of 2007. The net cash used in operations for the first 6 months was $14.9 million compared to $11.5 million for the same period in 2007, and our cash burn from operations for the second quarter was approximately $9.6 million which reflects both the higher loss and some one time payments for our MEMS development partner and employee bonuses for 2007 that were approximately $1.8 million. We ended the quarter with $20.7 million in cash, cash equivalents, and investment securities, to that we added approximately $24.2 million from the proceeds of the common stock and warrants. Alex.

Alex: Thanks Jeff. Now before we move to questions section, I would like to give everyone an outlook for the next couple years, what to expect from us and commercialization strategy that we defined in 2006. As you know, since 2006, after we defined and implemented and announced our picop commercialization strategy, we identified specific milestones on an annual basis that would lead us to the ultimate goal. During this same time, we’ve been very predictable in successfully executing against our external communicated operating milestones, which included defining and implementing the new business and technology roadmap that will support this new strategy. We focused business on the vital few market opportunities for the customer who was the strongest, re-organizing the company around the new business model, continually maturing our product development skills that are absolutely necessary to be a viable products company and simplifying capitalization structure and eliminating debt. As we progress towards the development and commercialization milestones and get closer to product introduction, this specific timing of product launch will be determined not only by our ability to be ready but also by final commercialization of key components by our strategic supply chain partners as well as by established commercial product launch windows of our customers. With respect to the key components most of our strategic suppliers continue to meet original product development timelines, some have experienced longer development and commercialization product cycles than we have anticipated this is not unusual when bringing new technologies to market. Good news is that in the instances where the progress has been delayed, these companies have invested millions of dollars and continue to communicate their commitment to bring their critical component to market because of the large market opportunity. In addition as you all know, we’ve been pursuing dual supply chain capabilities in several key areas, and consequently we remain optimistic about getting picop display engine to market in 2009. Based on what we know today about critical component availability and consumer electronic sales cycles, the outlook looks as follows. So we’re going to go through each segment and provide some color on what and when. Starting with accessory and embedded consumer picop segments. All of you are well aware that we need red blue and green to generate a full color projector. Red and blue light sources have been successfully commercialize and adopted in various industries in the past while green laser technology is currently being commercialized. Green laser development has experienced a longer development cycle than we have originally anticipated based on the ongoing discussion with our ongoing partners we believe that we’ll be in the position to introduce initial quantities of the accessory picop in the first half and move to higher volumes in second half of 2009. Based on all our communications with prospective customers, we anticipate that embedded product will be commercialized approximately 12 months following the introduction of the accessory. Moving on to the automotive picop segment. We have provided, to date we have provided vehicle display samples to all 3 of our tier one automotive integrators, today they are marketing these samples to their OEM customers. Typical automobile design cycle that leads to the end product take approximately 3 years. Also, the automotive industry as you know is currently reacting to the changes in the global economy and rising energy prices. This could potentially result in industry reprioritization of key programs focusing more improved mileage and reducing emissions versus implementation of safety features such as embedded HUD. In response to the global economic changes and the 3 year design cycle, we’ve been placing more and more attention on the aftermarket HUD opportunity because commercialization timelines are shorter. In support of this effort, we have developed and demonstrated already a proof of concept after market head up display that could be installed on the existing vehicle. We are marketing this concept to segments where safety need is greatest with target product introduction in 2010. Finally let me conclude with the eyewear picop segment. It is crystal clear to us that in order to create a successful eyewear solution for consumers, fashion and ergonomic factors are just as important if not more important that image quality performance of the product. In addition to the progress we have made to the picop display engine which is expected to be an integral part of Microvisions eyewear solution, we’ve made important progress in creating a lightweight, thin, optical design that could be incorporated into fashionable eyewear. The market pull factors for our wearable display products are the same as they are for the pico projectors, proliferation of broadband mobile devices and content which is constrained by tiny display that minimizes usability and enjoyment of mobile media. We expect the demand for wearable display to increase over the next few years and we target to meet this demand of wearable display products about a year after the embedded picop solution, which is 2010. In summary, I’ve laid out our incremental growth strategy that is based on the core picop platform, accessory first in 2009, followed by embedded solution a year later, immediately followed by the aftermarket HUD solution, fashionable eyewear and finally embedded HUD application. At this point I would like to pause and we can open the Q&A session.

Darice: Good afternoon guys, in the press release you mentioned some LOI’s from several companies for the picop accessory product for ’09 release. Can you give us some color on who these are from, are they from current customers, new customers, and what type of quantity are we talking about.

Alex: Darice, good question, at the point, we would not provide any more color the only thing that I can tell you very clearly is that our goal is to move beyond LOI’s and get firmer purchasing commitments from the same customers and then additional customers through the planning that I just described earlier to commence the external trials, trials starting in September and continued throughout the year with culmination and the final product testing within the customers shop to confirm that the reliability as well as the core performance of the product will be consistent with their expectations. Anything else?

Darice: Well, I guess so is it safe to assume though that most of the LOI’s you received are from current customers?

Alex: We you know to date, we’ve only announced there’s only one customers on consumer side that was announced even though we have a list of customers, our core group of customers we’ve been working with consistently with over the past year for the accessory as well as the embedded picop application, only 1 has been acknowledged, and the LOI’s that we’ve received to date include some new customers, some old customers.

Darice: Let’s move on to your timeline. So the accessory product timeline is now about 6 months behind schedule, and the embedded product is about a year behind early expectations. What gives you confidence in this current timeline and in the prior conference call you said part of the issue regarding the timeline was green laser supply. Can you give us an update on what’s going on with availability for that product?

Alex: It is true Darice, let’s start; I think there are 3 questions. It’s true, until recently we’ve publicly guided that the stretch goal for accessory was end of year, December 2008. Again, it was exclusively stated was a stretch goal because we’re dependent upon component availability. As we’ve gone through the year we’re warned the quantity and availability of some of these critical components would be limited which would push our launch into 2009 for accessory. In terms of the embedded, most customers that we’re in discussions want accessory immediately followed by the embedded product. They typically decide to launch the accessory with a small number to test the market and immediately follow up with a larger quantity and embedded solution. So the embedded timeline is actually tied in some ways to the accessory and this is why when accessory product was moved into the first half, the embedded trailed accordingly. Finally, confidence about green laser supply. The good news is that our partners who we continuously in discussion with and monitoring on the progress and issues resolution are very confident and excited about this market opportunity. There are enormous amounts of investments in place in success of the green laser program at several of the institutions, and they all are driven by the large market opportunity that is in front of us. Other than this I can tell you that the will and desire is there, and it’s all up to resolving the issues that are typically found when you transfer technology from in-house to your CM partners, and everything we’ve seen today shows that there’s a strong commitment on everybody’s part to solve the issues and enable the green laser quantities in 2009.

Darice: Ok, so let me just clarify 2 points. One, the green laser that component constraint is what’s holding back your timeline, is that what you’re saying?

Alex: Typically when you’re developing and commercializing a product you have a series of issues but some of them are more critical than others and green laser is an integral part of the integrated photonics module which is an integral part of the pico projector, which is an integral part of the accessory, so you need to have all of the components in order to complete critical tests and determine what is the final configuration of your product.

Darice: So the answer is yes, um, I guess the second point is I’m a little bit confused when you say that those customers want the accessory product first then the embedded product second, for guys like Motorola that don’t really have an accessory product, wouldn’t they want the embedded product first and doesn’t your new timeline mean that there won’t be a Motorola product until 2010.

Alex: I don’t want to single out anyone in particular. In 9 out of 10 cases, whether it’s cell phone manufacturer, whether it’s consumer electronic OEM, which has a larger portfolio of products which may include cell phones as well as other devices, everyone first is interested in accessory and immediately followed by the embedded. Again, I think the desire is driven by the risk profiles that they expect to incur when they are going directly to embedded without proving something with the accessory. But again, it’s not unanimous there are incidences where there are specific customers interested in the embedded solution first.

Darice: OK, thank you guys.

Joe: Hey good afternoon guys.

Alex: Good afternoon.

Joe: Can you give us any color on the latest round of financing that you did. Based on the filing it appears that you have highland capital partners, but there’s also highland credit fund, then James Dundero listed individually for maybe 3% of the shares, can you tell us how these shares are held, are they held by highland capital themselves, or individually by Dundero, or by Highlands credit strategies fund.

Jeff: This is Jeff, the short answer is we’re not privy to exactly Highland is holding those shares, as you said, Highland is a very large investment fund, they have lots of different funds, so we don’t know exactly which fund is holding those shares, but as you can tell from the filings Highland was my mathematics the largest investor in the financing.

Joe: Alright, and as far as your timeline is concerned going forward and letting us know, I mean obviously you guys don’t make it a practice, maybe you couldn’t, announcing your LOI’s, which is fine by me, but at what point do you, your timeline going forward stays in place, and when will you be able to let us know some additional information about LOI’s turning into hard contracts. How far ahead of the game will your customers let you announce that?

Alex: Joe this is a good question, notice we haven’t issued any separate press releases regarding letters of intent because we don’t intend to do this. This update simply summarizes there’s a strong interest from the existing customers, and it’s been supported by the letters of intent which they don’t have to sign if they have no interest at all. And in terms of the conversion of LOI’s into firmer purchasing commitments, again, I come back to what I said earlier it starts with the further validation of the device externally and internally by our pulling customers. In terms of the planning we expect to commence the extended field trials with OEM companies in September at this point we’re going to provide them with units to obtain a broader feedback from their customers for the final accessory product requirements. That’s the first step. The second step units also will be provided in the second half of the year to our OEM customers to complete their own reliability test which is a normal part of the product acceptance by OEM’s from their suppliers. All this process is going to continue from September until potentially as late as early 2009 first couple months 2009, and during throughout this process it is our intention that we start converting some of these LOI’s into firmer purchasing commitments. When exactly this will happen is difficult to pinpoint because the validation cycles of each customer are different. Some take fewer time to get all the answers, some take longer time, and it’s very difficult for us to predict and speak on their behalf when they can make this decision, but logically it’s going to happen between when we make the initial available and the increased quality so that they can not only solicit the consumer feedback but also do some destructive testing internally that we have a reliable product.

Joe: If you’re planning on providing them somewhat quantity in September for their field trials, does this mean you have from this phone call going forward that you’ll actually have quantity available of the green laser.

Alex: We have confidence that we can have quantity available that we can do the necessary validation, but the launch pre-production and production quantities would be available in 2009.

Joe: Ok, thank you.

Richard: Yes, this is actually John Orlando, many of my questions have already been answered, but I have a generic question, we’re trying to better understand who owns the existing shares that are outstanding, we currently see that um…

Jeff: It sounds like he was asking who owns the shares. Obviously we can’t make any comments past what’s in the public filings, so people that own large shares they’re filed with the FCC, that’s the only comments we can make about who owns the shares.

Alex: john, is there a follow up a question.

Tiffany: That concludes our Q&A let’s turn our call over to Alex for closing comments.

Alex: Thank you Tiffany. What can I say? We remain confident about our commercialization of picop despite the delays in some of the supply chain components, we’re still very excited about the opportunity to fundamentally change the way people view and share information with their friends, family, colleagues, and customers. We continue to pursue 2008 priorities and the second half of the year we conclude continued maturation and validation of the picop technology from the examples you’ve seen to date. A completion and announcements of the executed supply chain agreements with the product assemblers and integrators that will enable this go to market strategy, and finally securing OEM commitments for the accessory and embedded products. You understand how ? the timelines, we believe we have very credible plan, now everybody has to execute, you understand the opportunities amazing, and this is why we believe that our supply chain partners will address whatever issues remain, and we’re going to launch the first product in 2009. I’m looking forward to talking to you 3 months from now, have a great rest of the day, thank you for joining us.

Microvision (MVIS) Q1 '08 Conference Call Transcript

2008-04-27T09:08:00.000-07:00

Tiffany reads the standard intro…

Alex: Thank you Tiffany. Everyone good afternoon, and thanks for joining us today. Agenda will be similar as to previous earnings call. I will give you synopsis on the operating results. Jeff will highlight financial results, and then will come back to Q & A.

Overall 1st quarter operating results were solid. We completed several important developments, business and financial milestones that should allow us to move closer to the goal of commercializing high volume consumer and automotive products based on our proprietary picop display engine technology. 1st quarter was all about getting ready for the initial introduction of our accessory product. The key element of this plan includes the following tactics. 1st engage and validating the picop momentum as major mobility trade shows and conferences. The 2nd one is maturing our core platform technology. The 3rd one is strengthening global supply chain. And finally, 4th, progress and commitments with customers, let me touch on each one individually.

Let’s start with validating the picop momentum. As you know we have successfully unveiled at 2008 CES our Show prototype which is a PDA sized fully self contained battery operated full color laser projector which is intended for mobile device applications. Immediately after CES the momentum was continued with strong showings at two other premier industry trade shows. One was world mobile congress in Barcelona the other was the CTIA wireless show in Las Vegas where in addition to demonstrating our standalone prototype we also exhibited in private meetings the first picop embedded display that was inside a fully functional prototype mobile device. We continued to receive very strong interest from prospective partners, several of whom are already evaluating our technology for their accessory and embedded consumer applications.

Let me highlight what we our progress on the second item which is maturing our core platform technology. We’ve made important progress on miniaturization and power reduction roadmap for the accessory and embedded products by completing several key milestones on ASIC development. As you know ASIC is an integral component of our electronic subsystems which we said we were going to miniaturize this year which would reduce power.

On the supply chain front, you already know we can not execute our go to market strategy alone. As a result we have been partnering with a very strong and world renown supply chain partners. In the 1st quarter we took additional significant steps in enhancing our supply chain structure to support this global commercialization of the picop enabled product as we signed development agreements with 2 new high volume manufacturing partners to further strengthen the go to market strategy.

In terms of progress in commitments with customers you all aware that early in the year we have announced a development contract with one of the world’s leading consumer electronic conglomerates to assess microvision’s advanced pico projector prototype displays for use with a variety of mobile devices which include mobile phones, laptops, personal media players, and cameras. We have made the deliverables and this specific customer is marketing this solution to their customers. In Q1 we also conducted initial evaluate with several key customers to understand the full viability and risks associated with creation of this exciting market and application. So far we’ve got positive results, this is, all of this is helping us to develop firmer plans with perspective OEM customers that we believe would lead to commercialization of this new and exciting class of products.

Other highlights of the quarter include some of the deliverables we’ve made in the area of automotive displays. Subsequent to the end of the first quarter we delivered per contract a prototype instrument cluster display that is based on our picop display engine to one of our global tier 1 automotive customers. This tier 1 customer plans to use the deliverables of this project to gauge the interest and to market this solution to their customers who are leading car manufacturers in Europe and Asia. Eyewear displays, on the eyewear display arena we also delivered 5 advanced prototypes helmet mounted display to the general dynamic customer under the mounted warrior contract. These prototypes are being used by GD to market see through color capabilities of a soldier worn helmet mounted display to military and federal customers with the objective to gain stronger understanding of this segments market viability and to develop a commercial product.

We made some progress on the barcode scanner front. As you’ve seen probably yesterday we announced a relationship/master distribution relationship with Brightpoint. Brightpoint is one of the world’s largest distributors or wireless products and they will be distributing our mems based ROV scanner. This product was developed specifically to support growing mobility markets and the agreement will allow us to leverage Brightpoint global distribution to increase penetration for this new product. Many of you know, some of you don’t, but Brightpoint is the global leader in the distribution of wireless devices and it provides a customized logistics services to the wireless industry. It’s customers include all the known mobile operators and we expect to support Brightpoint in achieving higher penetration of our barcode scanner.

At this point I would like to pause and let Jeff give you highlights, financial highlights, and we’ll come back with Q&A.

Jeff: Thank you Alex. For the first quarter of 2008 we had revenue of 2.6 million dollars compared to 2.2 million dollars for the same quarter last year. And as of the end of the quarter, we had a backlog of about 1.9 million dollars compared to 6.9 million last year. As Alex discussed during the last part of 2007 and the first quarter of 2008 we completed work on several development contracts and right now those customers have those prototypes that we developed and they are using those as demonstrators with their customers and developing their go to market strategy for this product so that’s kind of the reason for the decline in the backlog. We also reported an operation loss for the first quarter of 7.1 million dollars compared to 6 million dollars for the same period in 2007.   The increase in the loss is primarily attributable to increases in head count, and research and development, strategic sourcing and business development, as well as R&D costs as we prepare for the initial commercial product introduction of our accessory product. We also reported a net loss of 5 million dollars for the first quarter 2008, compared to 6.9 million for the same period in 2007, the improvement in the net loss is primary due to the reduction in the value of warrants that were issued to investors in the debt financing in 2006, as you recall, those are reported as a liability and as the warrants decrease in value the liability becomes less and ends up   a non cash gain below the operation income line.   Our net loss per share for the quarter was 9 cents compared to 16 cents for the same period in 2007, and our net cash used in operation activities was 5.3 million in the first quarter compared to 5.6 million last year. And we ended the quarter with 30 million, 30 million 100 thousand dollars in cash, cash equivalents, and investment securities. Alex…

Alex: Thank you Jeff, one thing of note that we forgot to mention, as a part of the master distribution agreement with Brightpoint, we also received the initial purchase order for several thousand units. Alright, let’s start the Q&A.

Darice: Good afternoon guys, the first question has to do with the pico prototype. Early last month you stated that the company had a limited supply of these prototypes for customer trials, can you give us an update on 1, how many trials are currently running, and the initial feedback from those trials, and 2, an update on ramping capacity for additional trials.

Alex: Good question Darice, so let me try to provide as much color as I can. We indeed the initial trials that we run in Q1 and even first portion of this quarter are limited by the number of units that again are gated by some of the long lead development timelines on some of the components, and to date we had several units that we were able to build in our possession. We conducted initial trials with at least 4 different customers, most of the feedback we have received so far has been positive. There is expectation on our side as well as from the strategic supply chain partner side, that the long lead components would become available in greater quantity in this quarter and especially in the third quarter we would extend these limited trials and create extended trials where we populate larger numbers of units in (?) of our lead customers to fine tune go to market strategy, to get better understanding on the product requirements and to determine what their plans would be in commercializing these products late this year and early next year. In terms of which components are responsible for limited number of units, considering the story is most importantly you know, one of the newer technologies being developed is the green laser, and we’ve seen a great progress by two of the largest semiconductor companies in the world in maturing their green laser technology but the volumes at this point are small, we expect this to change obviously in 2nd quarter and moreover in 2nd half of this year.

Darice: Ok, and just to follow up. You mentioned the initial trials are with 4 different customers, of those 4 are 3 of the 4 with the guys you already sign contracts with or does that exclude them.

Alex: 2 of the 4 customers are the same customers that we also are pursuing the embedded applications with. If I would just set context, not all of the OEM’s we’ve been working with are interested in both embedded and accessory solutions, some are only interested in one or the other. Some are interested in both. So the embedded development should be treated independently from the accessory, so the 4 customers that we have conducted the initial limited trials on the accessory, 2 of them are also interested in the embedded application.

Darice: Then in terms of milestones, for companies like you that are in the midst of product development your stock will move more in advancements and announcements. During 2008, what type of benchmarks should we be looking for?

Alex: Excellent question, you probably asking this questions and many people on this can have that same question. It’s all about what are the key factors that drive this timing of our commercialization strategy. 4 elements. Number one is customer interest and level of commitment, and how do you track our progress here, we talked about the initial limited trials in q1 and early q2 with the goal to give these customers a sufficient amount of tools to mature the commitment within their organization followed by wider trials in late q2 early q3. The second item is our own readiness, and obviously we have to be ready we’ve been progressing our integrated photonics module design, we’ve progressing on our ASIC milestone, as well as our system design and image quality issues we need to address to get this product to market. I think you’re going to see some of this communication that may come up at tradeshows within the next few months, as well as some of the more significant agreements with the strategic supply chain partners that will bring these key components with us to market. In terms of the third component is obviously the long lead, what is the long lead items, we’ve talked about the green lasers. I can talk more about green lasers, but again good news is there is this universal commitment to get this technology to market by 2009, with early availability end of 2008 by two of the largest and well respected semiconductor companies so we feel good about this obviously there are risks. Finally, our customers go to market readiness, as you know each customer has its own product launch window so we need to time our commercialization strategy with their product launch window to ensure that we’re in synch all these 4 will be updated as we progress towards the ultimate goal. Again, getting firmer customer commitments is one indicator, getting more supply chain players on board and announced by names so you can hear who they are finally is the second indicator, maturing the technology and reducing the power and size of the accessory device to the product configuration, as you know Show that we demonstrated as CES and other shows is about 20-25% larger than the ultimate product will be and has 40% more power than the ultimate will be so all these reductions are happening as we speak throughout the year.

Darice, did I answer you question?

Darice: Yes you did. Just a follow up on that, in terms of you mentioned problems with your ASIC, and that’s translated into a better form factor as well as better power consumption, can you give us a benchmark of what it was in 4q and what it is in 1q and what you need to get it to.

Alex: Again, excellent question. Let’s start with the application requirements, what the application requirements call for based on the direct user feedback and the OEM feedback we have solicited to date, is that accessory device must function on its own for 2.5 hours without recharging, and 2.5 hours obviously comes from watching a long movie. That’s what our target is. Show prototype that we demonstrated could function without recharging for 1.5 hours. We’re reducing the ultimate power of this device by 40%, think we were talking about 5 watts during CES, so you can subtract 40% and that can get you somewhere around 3 watts for the accessory. Obviously the embedded targets are much more aggressive than this.

Joel: Thank you very much, good afternoon Alex and Jeff.

Alex: Hi Joel

Joel: Obviously it’s difficult to get a feeling for, I mean, we sense that you’re making progress along this extrapolation towards where you want to go, and it’s hard for us to get, to get clear substantive demonstrations of that we have to take some of that by faith in the sense that you’re close to your operating team and you’re obviously close to all your partners. I guess the thing that I’m interested in knowing is what are your confidence levels for definitely introducing and releasing to the market an accessory device prior to the end of this current year. Do you still feel confident, I’m not talking necessarily about the actual sales, but the ability to launch it formally into the market place before the end of the year?   How’s your general feeling on that?

Alex: If you look, Joel, if you look at the four key critical success factors that I just described that drive and determine ultimate timing of commercialization strategy to the first customer level of commitment provided in the second half, our own readiness, and the readiness of our long lead supply chain partners, specifically green lasers, and then finally the launch windows of the customers. The end of the year it still represents a stretch target for us. We want to be ready and the goal is to be sure that when we’re ready the launch windows or our customers are consistent with this strategy. How many units we’re going to have by the end of the year, it’s still to be determined, and we obviously will update you throughout the year, and it’s ultimately going to be determined on the quantity of the green lasers we’ll be able to receive from our partners.

Joel: But you do expect to see, receive, at least some minimal production.

Alex: We expect to see at least minimal amounts to get us to populate small number of units in the market. That’s our goal, this is the goal of our laser suppliers, and to date we, again, we’re going to update you as the information develops, but right now it’s still a stretch target goal that we want to achieve.

Joel: How do you feel necessarily about your, the previous caller asked a question, I think, with regards to your demonstration units, obviously we regard the share whatever minimal integrated device you have, I haven’t seen them, but I don’t know how many you have, but do you feel that um, I guess the question is do you have enough demonstration units both of the accessory devices as well as the rudimentary integrated device to engage with prospective customers in critical, very critical focus groups to begin establishing a marketing plan for the device in terms of the targeted market sectors and this kind of thing…

Alex: In the reality, you’re never going to have enough units that you’d really like to have at any given time. We feel we have sufficient minimum amounts which we can use to progress with our primary customers to the next level, to basically keep them engaged, keep them committed, and developing a firmer go to market strategy with them for the end of the year early 2009, so this is what we’re using these units for in 1st quarter, again in end of q2 we anticipate to have a larger number of units where we can do wider trials and q3 to actually get all the necessary feedback to assess final product configuration, get final feedback from the end user as well as all of the important players in this ecosystem. Keep in mind this is not, what we’re trying to do is the process and not a single event, because the ecosystem is pretty complex. When we give and market these prototypes with our customers they have to get the same feedback from their customers and there’s 3 layers of customers of their customers in this ecosystem. You get end user, you have content provider and you have carrier, so this is why first we need to convince them, and we believe we’re doing a pretty good job with the limited number of units we have. The second step in this process is for us to convince their customers and get necessary feedback to confirm that this is what they are looking for and this what they will be willing to pay for.

Joel: And obviously you need to, hopefully we’ll see that progress and we’ll see some significant step function

Alex: We trying to get firm commitments in Q3 so we have to do a lot of leg work at the end of Q2 and early Q3 to start getting this feedback, because that’s an essential component of the go to market strategy and again to date we have all reasons to believe that we’re moving in the right direction. Obviously to your question, would we benefit from more units at this time? Absolutely.

Joel: But I mean of course you’re using your cash relatively wisely but I don’t expect your operating expense will decline considering you’re going into these launch modes so obviously execution is a critical factor because inevitably you’ll drain that cash, so but obviously we see some significant traction that will hopefully support this stock.

Alex: Fair statement, you know we finished this quarter with 30 million dollars and we feel we have a sufficient amount to get us through the year. Each dollar is spent only on the critical activity; it’s not wasted on any other item. You’re right. You can see that first quarter of this year the operating expenses are higher than they were a year ago, but not much higher from the 4th quarter and this is part of our evolution as a company, any company goes from being a technology company to becoming a products company they need to invest into additional R&D resources, that’s familiar with high volume manufacturing, you need to get strategic sourcing team in place, you need to get the right (?) team that can close some of these remaining contracts.

Joel: Well good luck, I’ve got to get on another call, I’d like to talk with Jeff after the call, and good luck going forward guys.

Alex: Thank You.

Jed: Hi, thanks, um, Alex, couple questions, they um, uh, I joined late so you may have already mentioned this. What is the um performance of the embedded, uh, the integrated, uh, product, uh, that you’re showing as a demonstrator, or, um, working with your customers demonstrator.

Alex: Well Jed, this is a byproduct of our collaboration with Motorola that was announced July of last year, so basically we created together we created a functional cell phone with embedded projector that both teams, specifically Motorola are using with their customers in private settings to gauge their interest to better understand the fundamentals of the this application from mobile operators to content providers and finally from the end user to determine what is the final configuration that would serve well to all the people involved. So they’re in the process of collecting this information and we’re facilitating helping them whenever they need us and we’re also doing some external validation on our own.

Jed: Can you um, can you talk to, uh, what the power, um, range is of this, uh, product as well as the size.

Alex: The power range of this prototype is really very similar to what we introduced on the standalone. What the target power for the embedded engine is is sub 2 watts. We were always targeting 1.5 watts, and that’s what we’re pursuing right now as a part of the ASIC development roadmap. We have actually 2 developments ongoing concurrently, one is to get the electronics for the accessory for the earlier launch, and then to have a more efficient and smaller electronics for the embedded within the next six to nine months,

Jed: And so, I guess on the ASIC, where are you in that process, um, have you already done a first spin, um, or you still in the, uh, um, in the, uh, um, design, and um, uh, could you also give color on what geometry and which foundry you’ll be using.

Alex: Wouldn’t be able to provide the name of these partners, but I could tell you yes, we completed first spin on several accessory ASICs and we’re in the process of second turn.

Jed: Alright, and what were the errata(?) after the first spin?

Alex: Just you know a collection of things because these ASICs contain for the most part our core IP basically, this is you know this as well, I don’t know if everybody else does, what we bring to the table in addition to MEMS mirrors we also provide all the system parts that would coordinate the light propagation between mirror and lasers and other components, so our systems controls are now smart are sitting inside these ASICs, so as we get more feedback from the customers on image quality improvements all of these are fed into the ASICs and as we respinning these we incorporate new features to improve the performance of this product.

Jed: Alright, and then on the green laser, um, the uh, prototype are you using a vixel (?) there?

Alex: No this is the frequency doubling, the solid state is probably 5 years at least 5 years away, you know, so all of the players right now are pursuing frequency doubling techniques to achieve the wavelength necessary to produce green color.

Jed: Alright, um, fantastic, I’ll uh, pass it on, thanks.

Alex: Thank you.

Chris: Thanks for taking my call guys, um. Quick question on the positive results you received on your risk evaluation from your potential customers. I was wondering if you could go into a little bit more detail on that, on the feedback you got.

Alex: Well let me see let me just collect my thoughts for a second Chris and see what I can say. Fundamentally, we have been evaluated against other technologies similar technologies and so far we’ve been getting very favorable feedback once we get evaluated against technologies that are competing for the pico projection market, so we’re deemed as having advantage in brightness, we’re deemed as having an advantage in resolution, we’re deemed as having a better performance in terms of infinite focus, so some of the key attributes that determine the mobility products success we’ve been succeeding in these. There’s obviously some open questions from everyone to date as to what will be the ultimate power, but when we show our power reduction roadmap it’s believable enough for people to say you know we understand you’re at 5 watts, we understand how you’re going to get 3 and 1.5 for the accessory and embedded, and that makes us so far pretty successful.

Chris: Ok that kind of leads me into my next question. The kind of dynamic between your laser suppliers and the ASIC roadmap how much of the, is there any push back from your laser suppliers on waiting to see that you can actually develop this ASIC that can deliver on the power consumption that you are targeting and is there any financial commitments that they would be making in advance if you could deliver those in terms of manufacturing are they waiting to invest in manufacturing before you can develop these ASICs.

Alex: No, these are independent concurrent events so basically we’re working in conjunction with laser manufacturers to improve their performance for these applications so as we, you know, give you an example, the Show prototype that we have exhibited as CES contains earlier versions of green laser from one of the major green laser manufacturers, based on the feedback we get from our customers we’re providing that critical feedback back to them and they go and modify and improve functionality of the device which benefits all people involved so in terms of the relationship to ASICs, there’s no relationship in terms of one is waiting for another, it’s strictly up within our timelines, we need to understand the requirements of the green laser so that if we need to manage the stability of these devices over time etc, that functionality will be included inside our ASICs. So again, this timeline is first you put something together, get customer feedback, based on this feedback you modify and you instruct your partners specifically in this case laser suppliers to modify something in their design to improve the overall functionality, that’s the cycle we’ve been pursuing so far and we’ve been pursuing successfully.

Chris: Ok great. And then going back to advantages that you’ve gotten feedback on from your customers, are you still the leader and still the most thin option for mobile projector.

Alex: This is, I think this is what gives us ultimate advantage you know, you may rack-n-sack every attribute we’ve discussed but the bottom line who can get inside a handset without making handsets look like a pregnant device, and to date you know, we’re the only company who is able to show a device that is less than 7mm , 7mm or less, that can actually fit inside mobile handset. Any other technology that is being discussed to date show thicknesses of 10 mm and higher anywhere between 10 and 25 mm, and we believe based on what customers told us is insufficient to get inside a cell phone.

Chris: Sure. And lastly a financial question from me. With the order from Brightpoint is that going to reduce your burn rate later in the year at all?

Alex: With the Brightpoint, we got a initial deal for 4000 units, recognition practices such that we can recognize this once they sell it through, obviously we’ll be counting on revenue from ROV this year to alleviate some of the pains with the burn rate, yes.

Chris: Is there any way you can quantify it?

Alex: It’s still, we’re not providing guidances at this time. We’d like to stick to this policy at this point in time.

Chris: ok, thanks.

Alex: Once we become a true product company we’ll give you a lot more credible guidances on each product (?).

Chris: Got it.

Jack: Hi, good afternoon, thanks for taking my call. I just wanted to get a synthesis of some of the time frames that you guys have been discussing on the call to understand so if we could break it down into the two products. One, the embedded and two the ancillary device. The timeframe I heard was a stretch goal for the end of the year, and I assume that’s for the ancillary device, and then what the embedded timeframe would be. And also, in greater detail discuss burn rate and synching the balance sheet up to that goal and just house keeping question I saw investment securities, can you walk us through what portion of the cash in that and what is that comprised of.

Alex: Let me kick this off and Jeff will pick up the tail end. Yes, so the accessory stretch goal target is still the end of the year, and again it is going to be primarily driven by some of the lead long lead items and components that comprise the final application. Based on everything we heard from long lead supply chain partners specifically green laser manufacturers they still want to produce some volume for end of 2008 to allow us to do this. The embedded product is targeted for about 9 months later. Why is there a gap between the two? Typically it takes additional time to integrate something into a larger envelope specifically if this envelope determines industrial design of a core product of any company so if you introduce yourself inside a cell phone or personal media player or a laptop you need to kick off a program, it’s a longer term program that takes your byproduct and then integrates it into the final core product and that’s why this delay’s in place. In terms of the case, we’ve been very prudent with cash over the past several years and as you know we only spending it on vital few programs and so far we’ve held up our part of the bargain by reducing it in 2007 and we expect although we don’t expect this level that we’ve seen in 2007 we expect to use every dollar of 30 million we have to date on the accessory and embedded proliferation to stick with the target timelines we’ve articulated. Jeff anything else.

Jeff: I think you had a question about… what was your other question?

Jack: My other question was about the investments on the cash line. Just you know a lot of companies have been getting and hurt with the liquidity in terms of being in auction rates that aren’t performing were performing say December and then all of a sudden in March were having problems.

Jeff: Right, of the 30 million dollar in the K we had some exposure on the auction rate securities as of now we have about 3 million dollars in auction rate securities they are all triple A rated insured auction rate securities right now.

Jack: So you pretty much have liquidity across the board there.

Jeff: Yeah, the rest of the portfolio is in highly liquid commercial paper, money market type investments.

Jack: Ok great, thank you very much.

Brian: Hi guys, good afternoon. Quick question in regards to the backlog, there was a reference in the press release on the annual basis, I’m wondering how the backlog trended quarter on quarter.

Jeff: From Q1 or from the year?

Brian: From the December quarter to the March quarter, what went on with the backlog?

Jeff: From the end of the year we had a back log of about 4.1 million, and then at the end of March, we just talked about 1.9 million.

Brian: Ok, and how much of that is for product sales vs. contract revenue?

Jeff: Um, we don’t typically disclose that. It’s mostly contract revenue.

Brian: Ok, great. And Alex, I think you talked about getting a several thousand unit order for your ROVs what is the going ASP for those products.

Alex: It’s typically not disclosed ya know, we have it ranges based on the volume and the discount that we provide to these partners and I can’t give you an exact price but the retail price is 299.

Brian: Retails 299 ok great.

Alex: Although average selling price is much less than that.

Brian: Understood, but that’s close enough, that’s good ballpark for me.

Alex: Brian, to your question on the backlog it’s very important question. One of the things that everybody has to keep in mind, the contract, the joint development agreements and contracts that we’ve won and executed on in 2007 and in portion of 2008 as we delivered these outputs our prototypes in each of these segments whether it’s automotive, eyewear, or projection display are being used by our customers to market to their customers whether these are car manufacturers or military and government institutions or carriers and content providers, so we’re in the process of evaluation and support of our customers in marketing the solution to their customers we anticipate that significant portion of these contracts will get next step on commercializing on each one of these solutions. We plan or we hope will result in further contracts.

Brian: Ok great, and in just going through checklist here of clarifications that I’ve picked on. Jed asked earlier with regards to the green laser not being a vixel(?) I think you stated that it’s a frequency double and then the solid state equivalent of a green laser is probably 5 years away. What does that do in terms of your planning for power reductions and commercial viability for unit volumes?

Alex: It obviously, you know, again, for people who don’t understand the difference between frequency doubling and solid state laser, solid state device is typically less complex and cheaper than most. But they’re much more difficult to achieve at these wavelengths, so the power the anticipated power from the green laser even with frequency doubling techniques is included in the final power ratings that I had discussed earlier. So again, for the accessory device, 3 watts would include everything; it would include green laser, every other light source, as well as all of the electronics and optics for the embedded solution. Again, when we talk about 1.5 watts for the embedded device, it’s inclusive of all the components including the green laser.

Brian: Great, great, and then just one final one and this was an issue raised by another caller earlier. It’s fairly obvious you guys are going to have to raise money, whether that’s through debt or doing a share offering, I’m curious if you hit your targets and if you get the reception that you’re hoping for, how much money do you think you’re going to have to raise in the 3rd quarter in order to facilitate building up your initial accessory products.

Alex: Brian, this is a topic we don’t intend to discuss in much detail because we can’t we’re continuing to reviewing these options that are available to us, and we intend to raise money when market conditions are favorable and when it’s the right time for the company.

Brian: Obviously you’re not going to wait until you run out of cash, and you’re hoping to manufacture these things for introduction early next year, which gives us an obvious time frame in terms of when you have to raise money, I’m just curious as to how much money it’s going to take for you guys to get the initial volumes up and running.

Jeff: How much it’s going to take will depend obviously on the ramp, the access to other working capital lines, how much our suppliers and customers finance that, so that’s something we are continually monitoring and modeling and evaluating as we go through time.

Brian: Ok, well guys look forward to seeing you at the SID show.

Alex: Thank you Brian.

Joe: Hi Alex, hey Jeff

Alex: Hi Joe.

Joe: You talked about having green lasers in greater quantity towards the end of the year. Those things don’t, at least not until 5 years from now, grow on trees. Have you been given some sort of commitment from those suppliers that they’re going to have them to you and that they’ve made the financial commitment to start building whatever foundries or order equipment, can you see the commitment from them?

Alex: This is a great question Joe. Let me start with the good news, there is a universal commitment to get this technology to market by 2009 with early availability at the end of 2008 by two of the worlds largest and most respected semiconductor companies, this commitment has been supported at the highest levels within each organization and this support is not just words, there’s a significant, and when I say significant I really mean significant budget and resources have been allocated by both companies to actually execute these programs. We as you know have synched our development programs with them and have been guiding each other in this development. Overall the technological progress over the past 1.5 years have been nothing short of outstanding by both of them. Now the pragmatic assessments, any time you incubate and develop a new technology in house you need to transfer it to your contract manufacturing partners, and technology transfers are complex processes this carries scheduling risks. Again, this time we wanted to (?) this. We at times both parties run into challenge but so far they’ve been able to work around very difficult things and again it’s a constant on going monitoring that we have both of them to insure that our timelines are synched. But risk are out there.

Joe: I’m going to assume that these world class semiconductors are not committing these mass amounts of man power and dollars without some sense of comfort on their own that there is and end customer out there.

Alex: Absolutely Joe, absolutely. They actually are doing a lot more proactive assessment than you would ever expect of a component manufacturer not only do they solicit our customers and others directly at the highest levels within an organization to get an assessment we also introduce them to some of our customers to get direct feedback so that they understand that this is a real market pull and not a microvision concocted story. All of these are happening in parallel, and I guarantee you no one within that amount that they’re investing to date without having assurances that they will be successful. It’s not in their minds it’s not if it’s when, and they’re trying to make sure that when is synched with our introduction timelines.

Joe: To your previous caller was asking about raising and mentioned 3rd quarter and you’re going to ramp this thing up. Not to put thoughts in his mind or read his mind, but sounded like he was sort of convinced that you guys were going to have to foot the bill for the entire manufacturing process which that never seemed to be the case for me. You mentioned contract manufacturers you mentioned partners, so the dollars you raise are not, am I assuming correctly, that you are not going to be spending the entire amount on manufacturing you will have some partners.

Alex:   No nothing has changed Joe, you know, we still partition and try to distribute cost around our architected supply chain and the strategic partners are defined by their contribution to this common cause so we don’t treat people or supply chain players as pure contract manufacturers which is the model where we have to pay for everything. We’re given certain advantages first market movers then to certain market share projection guarantees in exchange for them coughing up some of the dough to cover these expenses.

Joe: Are any of these partners of yours potential sources for your next capital raise>

Alex: Good question, I can’t give you the answer.

Joe: I knew you wouldn’t. All right, last one, can you give us some idea of, ok, listen, it’s April 24th. You’ve got a timeline, when do the ASICs get completed, when are the green lasers up, when do you expect to hear, when can we get some names of these companies you’re working for or working with.

Alex: our goal Joe, is to get some of the names become available in Q3, definitely Q4, this is part of the commercialization strategy. As you know, again, I stated this several times in the past, there’s nothing to gain by anybody that we’re engaging with in acknowledging their plans, commercialization plans, to the rest of the world. There’s nothing to gain and everything to loose. Unfortunate part of being a small public company, we have to disclose a lot of these things to keep you guys happy, but it doesn’t help us with our competitors because they want everything that you know, and makes our job more difficult.

Joe: Well, I’d like you, if you could just to give us all people on this call a sense of your confidence level that you’re ultimately going to be able to make this a very successful venture and company.

Alex: Joe, nothing has changed since 2006, number 1 when this all started and people just as engaged and energized and even more so from 2007 results. I don’t know if I, and I’ve probably never mentioned this, but one of our metrics is the retention of employees and top talent and we beat industry standards by a mile in terms of retaining the top talent and all the employees we keep them energized. If that’s not a good sign, then I don’t know what is.

Joe: Ok, thanks guys. You all have a good night.

Alex: Thank you again for joining us this afternoon. We’re looking forward to Q2 and beyond. The goals are clear, I think we stated this repeatedly we need to complete the development of longer lead items specifically ASICs, we need to continue to retire the supply chain risks, specifically related to the long lead items and green laser. We will continue to continue strengthen the existing customer funnel and look for new partnering opportunities and again it’s our desire to acknowledge these publicly and to keep you informed, but in many cases it’s not being possible at this point in time. Also, don’t forget that we have other interesting activities in the pipeline, we have automotive and eyewear strategies that we have been pursuing quietly while all the focus has been on pico projectors and we’ve made some great strides in both segments and expect to continue to do so, and again anytime sure information comes in that you need to know we will make sure that you are aware and educated in time. The team remains dedicated to completing all the necessary steps to achieve our priorities that were articulated during the last earnings call, and again were focused and just as excited as we were last year and more so than a year ago because 2006 was a tough year and now it’s a cake walk compared to what we had to endure in the first year. Obviously it’s not going to be easy here, we’re dependent on others to be successful and we’ll be doing rigorously we engaging in every entity that we’re dependent on in this go to market strategy and proactively managing risks and issues to ensure that we can stick to the timeline as much as possible. At this point I would like to break, and again thank you again for joining us, and I look forward talking to all of you in 3 months.

(Note: If you find any errors in the transcription please correct them by sending a comment. Thanks...)

Should I transcibe the Q1 '08 MVIS conference call?

2008-04-25T12:21:00.000-07:00

I certainly listened to the recent MVIS conference call, and was less than impressed with the amount of information provided. Since there was little substance (in my opinion), I've decided to take a poll...

Opinion Polls & Market Research

MVIS FY'07 CC

2008-03-07T09:01:00.000-08:00

Tiffany reads the standard intro…

Alex: Thank you Tiffany. Everyone good afternoon, and thanks for joining us today. We have an informative session for you, and I believe everyone will be satisfied with what we have to say today.

I’ll start with 4th quarter results. 4th quarter has been very productive for us. Our operating and financial results represent a culmination of the tremendous effort put forth by the microvision team in 2007. We announced in 4th quarter, signed and announced 3 joint development deals, one with the consumer electronic OEM, specifically targeted for the development of the picop consumer product. We also announced an agreement with a large European tier 1 player for the development of the picop based automotive display. And finally we announced a very important agreement with a high volume manufacturing partner, who will lead the integration of the picop engine into the product of our customers. We also ended the year with almost 36 million in cash and cash equivalents. And we reduced at the same we reduced our burn to sub 5 million of the 4th quarter. Jeff will spend provide more detail on this matter.

One of the most visible results of the success that we had in 2007 is represented by our showing at the consumer electronics show in Las Vegas in January. At this show we introduced our first fully functional self contained PDA sized battery operated prototype code named show, as in show me the money. We received a very, very strong feedback and positive feedback from our partners and prospective partners and members of the media. There are many comments that we can not state publicly, but I’ll cite some of these that were available for distribution and could be attained on a response.

Lance O. – who is the editor and chief of PCMagazine has stated that this is one of the coolest things that I’ve seen at CES in a long time, I can’t wait to get my hands on it.

Shawn – Who is the editor of popular science said that your next telephone could have a 100 inch screen without getting an inch bigger. Microvision’s tiny picop projector can turn a wall, tabletop, or any other surface into a display. It’s small enough to fit into a packet, because it uses laser which sips power, are extremely bright and produce little heat. They also do away with bulky lens. The pinpoint beams are always in focus from any distance. This ability to shine a big screen image anywhere is awfully appealing.

There was many, many more of these attributes that came up at the consumer electronic show. One of the more important ones came from Chris C. Who is the senior analyst and editor of Insight Media, he’s a 30 year veteran of the display industry, and a long time skeptic of Microvision’s capabilities. Insight media has awarded Microvision as the best pico projector demo at CES, and he stated I quote, “At CES there was a lot of pico projectors, but almost all featured LED illumination, Microvision has stuck with laser illumination and their 2 axis scanning mirror approach, but image quality has always been underwhelming, at CES this has changed.”

He said a lot more, but for the sake of time, I’ll focus on other attributes. Some of the testimonies came from our partners. For example, at most recent shareholders meeting at Corning, their chief operation officer, and exec vice president Joseph Miller has stated that Microvision’s show projector is an illustration of the outstanding image quality produced by laser based projector. The show projector has 5 times the number of pixels as the LED based projectors shown at the consumer electronics show, and therefore is able to produce high resolution images from a very small footprint. He went further to say that laser based projector; especially scanning mirror projectors have advantages in quality of image, size and power consumption. These advantages become most significant as this market will move to the embedded projectors. Projectors using LED as the light sources do not produce the same level of color saturation and therefore the projected image appears to be less bright even when achieving the same nominal output power. All of these are very critical statements and these are testimonials of people that have seen what we’ve shown at CES.

The momentum has continued after the consumer electronics show. As the 2008 mobile world congress which is also called GSMA in Barcelona, which is the largest mobile communication conference in the world, we demonstrated picop projectors in the booth of several of our customers. So they actually showcased our projectors to their customers. Based on all the feedback that we have received to date, we believe that these successful demonstrations to global OEMs, mobile carriers, and development partners, have advanced their interests in bringing picop technology to market.

At this point, I would like to pause and give you a highlight on the 2007. Overall we very good about the results from 2007, it was very rewarding year for Microvision internal and external stakeholders, because we made outstanding progress in all of our articulated focus areas all while managing our operating expenses. As you know we also retired the outstanding debt, and raised over 34 million through the call of our call of the publicly traded warrants without additional dilution to our shareholders. We continue to position ourselves for future growth, particularly with high volume, consumer and automotive products based on the picop display engine, which as you know is the high resolution, small and low power device that can be embedded in a variety of mobile products.

Let me just go by segment and just outline some of the key accomplishment by this team in 2007. I’ll start with pico projection displays. First, as I mentioned earlier, we successfully unveiled at 2008 CES the show prototype. We also signed an agreement as you know with Motorola, to develop pico projector display solutions for mobile applications using our engine. And most recently signed the second development agreement with the world leading consumer electronic OEM for the development of the pico projection for the variety of devices that range from the cell phone, to the lap top, top personal media players.

We delivered on the automotive side; we delivered our first advanced picop based projection module for the automotive head up displays. We delivered to our existing partner Visteon and they will be using this to solicit feedback and get commitments from their customers which are the automotive OEMs around the world. We signed 2 additional development contracts with global tier 1 integrator, 1 in Europe and 1 in Asia, to develop a variety of picop based display applications for the automotive industry. Which in addition to the automotive head up display include improved instrument cluster display and entertainment displays. There’s a strong belief on our part that this is greatly enhanced our go to market strategy for the automotive segment because the spreading our risk and we’re improving our global coverage.

Next, I would like to highlight some of the accomplishments in the wearable display space. Specifically, I’m referring to the eyewear. We delivered per the contract a demonstrator unit of the innovative eyewear optical system to the air force, and this project essentially has set a foundation for our future commercial solution in this segment. We were also awarded a 3.2 million contract from the air force to provide a lightweight, see-through, full color eyewear display for the applications of this branch.

There’s an important component that needs to be mentioned as a win in 2007 specifically pertaining to the maturation of the platform technology and supply chain. As of 2006, we became a market driven company, and a perfect example of this is our new wide angle projector. It was developed based on customer feedback, and that’s one of the reasons we developed new wide angle platform scanner, that better suits mobile application and mobile usage models. We improved image quality of the picop display engine, and validated these improvements through customer feedback and direct user studies. The testimonies were many, and you heard some of them. We accelerated progress with leading ASIC development partners to reduce the size and power consumption as well as cost of the final solutions. We also, this is very important statement; we successfully integrated several green lasers into our picop platform.

Bar code scanners, as you know, we released our new laser based bar code scanner called ROV. It’s the first product in the history of the company that is based on core MEMS technology. The ROV was developed for use specifically in mobile application to provide simple and affordable point of scan capability. I want to discuss more about what our plans for this segment in 2008.

We also received as a bonus, several industry awards and were recognized by IEEE and were named as one of the top 20 electronic company’s world wide in patent pipeline for 2006. This is an important accomplishment by Microvision team because companies that are listed in the top 20 have issued thousands of patents while Microvision has issued only 19 in 2006 compared to the larger companies, but we still made the top 20 pipeline because of the value and importance of these patents. We also received a 2007 North American Frost and Sullivan award for technology innovation specifically because of our MEMS scanning mirror which is the key component of the picop display engine. At this point I would like to stop and pass the baton to Jeff who will cover the financial results and then we’ll come back and I’ll discuss the 2008 focus areas.

Jeff: Thank you Alex.

For 2008, we reported revenue of 10.5 million compared to 7 million last year and 3 million for the 4th quarter 2007, compared to 1.8 million for the same period last year. We ended the year with a backlog of 4.1 million compared to 7.1 million last year. We reported an operating loss of 2007 26.7 million compared to 29 million last year. And we had a loss of 7.9 million for both the 4th quarter of 2006 and 2007. Overall for the year the improvement of the operating income is primarily due to improved gross margins on contract and product revenue as well as lower SG&A costs. These improvements were partially offset by increases in our R&D spending as we make rapid progress on our picop technology.

We also reported a net loss available to common shareholders of 19.8 million in 2007 compared to 27.3 million last year, and 6 million for the 4th quarter compared to 8.7 million for the 4th quarter in 2006. That translates into a net loss per share of 40 cents for 2007 compared to 81 cents last year. And 11 cents per share for the 4th quarter compared to 21 cents for the 4th quarter 2006. The improvement in the net loss available to common shareholders reflects the improvement in operating income as well as reductions in interest expense and not having to repeat the cost of the preferred stock conversion we did in 2006. As Alex mentioned earlier the cash used in operating activities was 4.7 million in the 4th quarter compared to 5.8 million for the 4th quarter 2006. And we ended the year with 35.8 million in cash, cash equivalents, and investment securities. Alex…

Alex: Thanks Jeff.

Let’s for a moment focus now on 2008, describe briefly what our key priorities are, and anything I will not cover will be able to cover through the Q&A session. So 2008, it’s going to be an important year for us. We expect to continue the single minded focus on our primary goal of accelerating our path to market for high volume consumer and automotive products. As a manifestation of this goal, we’re targeting the initial commercial introduction or our first picop based accessory product for the end of the year. This goal is aggressive, and in order to fulfill it, we must do the following. There’s really 3 critical pieces that have come to place. First we need to further advance picop product miniaturization, power reduction. I’ll come back and explain some of the steps that need to be taken to address this. Second, we need to secure initial customers, to brand, market, and distribute our picop accessory product. And finally, we need to complete assembly of robust supply chain that will support this global commercialization.

Let me start with the first item, what does it entail? Some of the technical work, that’s left for us to do in 2008, to finalize the design, to further miniaturize the product, and to reduce the power. The device that we showed at CES is the first hand held prototype that we developed for the purpose of doing initial customer trials. We expect the final product to be at least 20% smaller than what we showed at CES, and have 40% less power consumption. We’re also working with several experienced partners for the ASIC development to complete several remaining ASIC chips. The integration of these final ASIC chips, will allow us to reduce the size and power, and therefore increase the battery life of the final device. Our goal is to have a device that could work on standard battery for more than 2.5 hours, what we showed at CES as a prototype, was pretty good, could last about 1.5 hours, but again, based on the customer feedback we solicited it needs to be at least 2.5 hours, which is why further power reduction is necessary. We feel comfortable about reaching these goals, and we’re going to update you as we progress.

The second item is securing initial customers to pull this product to market. As I mentioned we’re using the existing prototypes to get additional feedback from the OEMs and potential customers. We’ll use this feedback to make further refinements if they’re necessary, and then we’ll complete the final reference design and start ramping the manufacturing supply chain.

The final item is the robust supply chain infrastructure necessary to have this global commercial rollout. We have been actually engaged in building the supply chain to support volume manufacturing for quite a while. We started this in 2006, because at that time, as mentioned to you through previous calls, we realized we don’t have this expertise, so we need to engage and solicit strategic partners to help us to go to market. We started this at the end of 2006, there’s been progress in this in 2007, and we have to finish this in 2008. We have been synching our development efforts with the key suppliers to meet the targeted timelines, and implement the joint programs in place to monitor this progress and help out our partners when necessary. Green laser has received special attention from many of you, and we also know that it’s an item because it’s the only; it’s one of the few components that hasn’t been available commercially prior to this introduction. As what we have done effectively in 2006 and continued in 2007, we’re getting involved with all key green laser manufacturers and created a tight corporation of partnerships to help to mature this and help them whenever they need our help, and also basically synchronize our efforts to ensure that what they’re developing is consistent with our expectations. As you know, Corning has recently discussed its green laser development program during their shareholders meeting, I gave you a quote from Joseph Miller, and Corning is very excited about this opportunity. He stated that green lasers for micro projection is an opportunity in the consumer electronic market space, and we expect micro projectors to become a reality in 2009 first as an accessory, and then as an embedded. We have engaged with customers, and it’s one the top priorities from the new products and new programs that we have at the company. He also stated that we’re planning to introduce our first green lasers later this year, and focusing on the long lead production items to have sufficient volume for full blown production in 2009. All of these factors are very encouraging. And our final goal for 2008 is to complete the manufacturing agreements with product integrations, IPM suppliers, and light source manufacturers to complete final pieces of the puzzle. But this is not all, what I have described is just one of the focus areas of 2009. specifically I attributed to our first high volume product introduction, we’re also focusing on other items, just as important, specifically we’re looking on securing new OEM commitments for picop enabled display solution for the embedded devices as well as for the vehicle and automotive displays. We’re planning on working with our customers to further develop the innovative eyewear technology we started in 2007 to enable this lightweight, small form factor, full color eyewear which becomes a great complimentor for pico projector.

Just think about if you’re on the move, if you have a pico projector and an eyewear you have everything you need to use, share, information, doesn’t matter where you are, whether you’re in transit, outside, inside. You have total solution, and that’s what we’re focusing on. We’re also planning on delivering on the existing customer commitment on the current projects and contracts that we signed in 2007 in all of the tree segments, consumer projection segments, automotive and eyewear.

Our final goal of the year is to increase sales of our ROV barcode scanner by at least 100% over 2007 figures, and we’re going to do this by partnering with the key application providers, and the large mobility solution integrators as well look in some of the traditional channels.

I think at this point, I will stop, and we will open for questions.

Q&A:

Joel A: Thank you, good afternoon gentlemen.

Alex: Good afternoon Joel

Joel: I was wondering, since obviously the show is exciting to see at CES, but we haven’t heard of a great deal about your work with Motorola. When might we see some kind of a mock up or preliminary form factor of an integrated handset device, is that something we might see shortly?

Alex: Good question Joel, our work with Motorola is progressing very, very nicely. We have completed the development of first handset prototypes with the embedded picop projectors, this is truly a historic event since it represents for the first time in the history that a pico projector has been installed a fully functional handset, and I don’t think anybody can claim this. Both Motorola and Microvision recently demonstrated pico projection cell phones at the mobile world congress GSMA in Barcelona, this was done in private settings, and we’re very proud about this accomplishment and our continuing relationship with Motorola. We expect both parties, Motorola and Microvision, expect to show the handset prototypes privately, specifically focused at major events, with primary goal of engaging the consumer interest, assess the full market potential, and refine the requirements for the final product.

Joel: Might that be at like CTIA, or SID 08 in L.A.?

Alex: Good question, listen, when I said at most of the major events, I believe that CTIA falls in this category, but if you really want more precision on specific dates and shows, it would be wise to call Motorola PR and get this information from them because we’re under the restriction of what we can say.

Joel: I understand. I was interested in your comment on Corning, and this semi-green laser as opposed to frequency doubling manifestation, Alex. Is it possible, I mean obviously it would seem probably more propitious a solid state green laser to work with, but could you possibly have a production viable product and still use your frequency doubling green laser manifestation.

Alex: Absolutely Joel. The leading green laser manufacturers right now are first focusing on introducing the frequency doubling green laser, this includes everyone that you know. However, people understand that the solid state lasers bring inherent advantages. Following this it takes at least 5 years or so to develop this technology so my guess without speaking for the green laser manufacturers, they are developing the frequency doubling technology to introduce in the near term, but they are also looking for a longer term solution, which I believe would include solid state lasers.

Joel: Very good. And final question, Alex, obviously continuing engineering work, when are we going to see some major player besides obviously OEMs your working with obviously have a vested interest, but it would be nice to see some interest somewhere down the line from some major operator that this says this is really hot stuff, and we can’t wait to see it get out the factory door, so that we can begin to market it to customers. We might we see some kind of endorsement like that, do we have to wait until 2009?

Alex: It’s a very good question. I’m just as impatient about this as you are, probably more so. The show, what we’ve seen at CES and in Barcelona Mobile World Congress, gives us very good feel and mobile operators really want this solution because ultimately they will be dealing with cell phone manufacturers to get this to market because I personally believe, and I think this will be affirmed within a few years the biggest beneficiary of this feature are in fact mobile carriers and content providers because they will make the most amount of money on the subscription services and the content downloaded that today is not. And when this occurs I cannot tell you but what I can tell you is that some of these companies have a plan to do this, but they will not communicate their intentions until they are very close to product introduction. So I will anticipate you will hear this in early 2009 maybe late 2008 but it would be difficult to see if there would be early announcements unless there is a surprise.

Joel: Well hopefully you can hold on the show schedule in later part of 08 and hopefully we’ll see some more information on the integrated product, good luck going forward.

Alex: Thank you very much.

Darice (sp?): Good afternoon guys. Alex you presented some priorities for 2008, and there is quite a list. Can you put some dates, target dates, around this?

Alex: (Laughing) You want me to give all the competitive information to the pprm's(sp? ) no, listen; I’ll be as transparent as I can without compromising what we do. So of the three activities we need to finalize the final reference design to get commitments, final commitments from the pull in customers, and to solidify our supply chain. Some of it has started already, so we anticipate to kick off some limited trials with customers, limited because we have limited number of units today. The goal of these trials is for our customers to better sense what the consumer and user things of the performance, functionality, price to basically to create their own go to market strategy before they can give further commitments, specifically what are the volumes and what are the average selling prices they expected to get out of these devices. So this initiative is going to start, it’s already started, and we anticipate it to continue throughout the first half of the year.

In terms of the technology maturation, we find that we’re pursuing does not happen simultaneously. What this means is that we phase in different components at different times, so we anticipate to complete this detailed design, by I’d say, our goal is somewhere by the end of the first half early third quarter, because that’s what we need to enable the year end introduction.

In terms of supply chain structure and supply chain agreements, the work is in progress and I believe as we progress through the year, you’re going to see the periodic announcements as we bring in new players and acknowledge them. To date we already have actually signed several joint development agreements with our supply chain partners, but we’re not privy at discussing who they are or what they’re working on, and all of this is that we’re honoring their request at keeping this information secret. So expect first half to be very important in positioning for this year end launch and the information that we expect to get in the first half early third quarter would be probably naming some of the customers, naming some new supply chain partners, and also giving you updates on how we’re miniaturizing and reducing power on the final product because it’s important for it’s success, and I believe you’re going to see some of the symptoms of this definitely at SID and possibly earlier.

D: Ok fair enough. And in terms of the demos that you’re giving out, I know that a number of the guys that met with you at CES wanted some sort of prototype. Are most of the prototypes that you’re sending out, are they more for embedded solution or for accessory solutions?

Alex: You’re good. Listen, it’s both. It’s both.

D: It’s more like 50-50?

A: That’s all I can say, unfortunately.

D: Ok, and you are confirming that you will have an accessory product out by 4Q ’08?

A: Our target is to have that, that’s correct.

D: And you guys are on track for it?

A: Well, there’s a lot to do, but we feel it’s an aggressive target, the end of the year, but we feel comfortable that we have the tools in place to reach that target.

D: Fair enough, and the last question is for you Jeff. Op-ex increased quite a bit quarter per quarter, what level should we model then going forward in 2008?

J: We talked about having expenses increase in 2008 over where we were in 2007, as we got closer to product introduction. I think for the first half of the year, you won’t see much increase from where you were in Q4, and then I think update that as we get closer to product introduction in second half of the year, but I think you can see some more increase in the second half of the year.

D: Is that both R&D and SG&A, or is more weighted towards R&D?

J: Certainly more weighted towards R&D, and if you look to the increase in the 4th quarter, it was much more weighted towards R&D.

A: And specific areas the areas we are trying to strengthen the manufacturing we tremendously our strategic sourcing capability and service as well as the procurement parts for the initial beta units.

D: OK thank you guys.

Jed D: Hi guys, is actually Josh for Jed who’s on the road. Just a couple questions for you, you mentioned that and this is obviously consistent with what you’ve been saying for a while you mentioned that you’re hoping to have the accessory by the end of the year. Do you anticipate material revenues or are you hoping for material revenues in the actual Christmas shopping season, or do you just plan on introducing the product and not having much of an impact for the Christmas season.

A: It’s the latter. We want to introduce it, but we’re not counting for revenue in 2008.

J: Ok, and just a housekeeping type of question. You talked about op-ex coming up a bit in the year. Can you talk us a little bit through your burn rate and what you expect that to look like for the next 4 quarters or so?

Jeff: Sure, if you look at Q4, we talked about having the 5 million per quarter, we achieved that in the back half of 07, and I would expect to see that increase pretty much along the lines of op-ex increases. Maybe a little bit of an increase in the first half of the year, and then a little more of an increase as you get to the back half of the year, and I’ll have a little bit more guidance for that as we get through the year, and we kinda refine the product launch plans. We’re not talking huge increases.

A: One of the key aspects of the question is ultimately, number is going to be determined by the volume that is going to be given by the customers, also what we’re trying to do to mitigate this, we’re trying to pass some of these costs to our strategic partners, we’ve given them first mover advantage in this activity.

D: Ok, that’s actually it for me, thanks for the time.

Chris: Thanks for taking my call guys. I’m just wondering if you could update me on how long it would take for lead times in each of your products with a embedded opportunity, and accessory opportunity, and the automotive. How much lead time to do we need once you get a design in there before you actually see a product.

A: Are you interested in each of the segments mentioned, or in one of them?

C: Each of them. I mean how long does it take if we get a design for the accessory product how much lead time do we need before manufacturing rolls them out?

A: For us to initiate the introduction of the accessory product we need to have a serious commitment in hand by third quarter of this year, this is I would say the latest, the desired date, would be the end of the second quarter. In terms of embedded solution, as communicated in the past, our goal is still to introduce an embedded product sometime late second quarter early third quarter of 2009. And as far as the automotive products are concerned, the goal for this year is to help our partners, our tier 1 integrator partners to find a pull in customer, to date they’re essentially using what we gave them, we delivered to them, to get commitment from the automotive manufacturer for this specific model of the future, when that year it is 2010 or 2011 we don’t know yet. We enabled them to do it as early as possible but they have to carry a big load and use their influence with their customers to get that commitment, but we’re helping with everything we can and so far we’ve been very predictable in what we’ve delivered to them, it’s always been on time, and at the performance level that has been specified. So again, I can’t give you a precise year, but it’s 2010-2011, but for us to enable that launch we need to complete our development as early as this year as at the end of this year, as late as probably end of 2009.

C: That clears it up on the automotive and the accessory but I’m just a little unclear still on the embedded opportunity, if you introduced in late Q2, when does the design have to be finalized.

A: The design has to be completed pretty much by the end of this year.

C: Great, and on the supply chain side, besides the light source integration, what are the other hurdles remaining?

A: The big hurdles, I would say the light sources, which everybody knows about, and just to put the general supply chain to broker and to sign supply chain agreements between different partners, we don’t want to be involved in every step of managing the traffic, we just want to be involved in the critical steps we add value. Today as we negotiate agreements with our direct supply chain partners, we also help them broker supply chain agreements with other supply chain factors involved in this go to market strategy. All of these activities will happen, and should conclude in the next 6 months, I would say.

C: Then on the prototype you had in private sessions in Barcelona, did you say that was a Motorola model?

A: I said that Microvision and Motorola, Motorola showed a cell phone with microvision’s picop embedded projector.

C: Great, all right that helps very much, thanks.

Joseph: Hi guys, how are you today.

A: Good Joseph

J: Good, hey listen, in Barcelona that was a fully functioning, I could pick it up, make a phone call, and flash my pictures on the wall, cell phone?

A: That was it Joe, that’s why it was an historical event, and I think all of us and all of you should be proud that we achieved this before everybody else.

J: Was that shown to carriers in Barcelona?

A: It was shown privately to Motorola’s customers. So obviously it wasn’t to their competitors. It was carriers and mobile providers and other end users that Motorola views as their customers.

J: Can you give us some sense on, I know you probably don’t want to give away costs of the product yet, but there’s a certain cost to it, what’s the response from the carriers, can they see the value there, if there going to subsidize this, say $50 a unit, are they recognizing they can up sell video content greater than that over the life of the product any comments on their initial response to it.

A: You ask a very good question. The response from the carriers has been very, very positive. Can’t disclose the details and comment on what they said on how much subsidies they are going to do and what the ultimate price is they are going to charge, but what I can tell you is that there’s a strong interest from the carriers and mobile content providers and the reason is very simple. If digital camera can penetrate cell phones from 0 to 75 % penetration within 5 years, and digital camera is not benefiting carriers and content providers, then we believe projector will do just as well, specifically because now you know, you and I can download anything we want, and we can play it anywhere we are.

J: There’s been a lot of obviously Motorola has been in the news, there’s been a lot of turmoil of late, has it caused any disruption in your timeline with them, are the champions of your technology still in place at Motorola.

A: Simple answer is yes, champions are still there, they’ve been actually promoted. It’s good for us, and Motorola’s turmoil, one of the reasons for Motorola’s turmoil is the lack of innovation over the past and this is a perfect example of why they should be interested in getting this to market, because it represents something unique that no one else will have.

J: The other day, I was listening to Greg Brown, they did what I guess what they called a fireside chat, and he said that they were going to be moving away from the traditional slim and colorful, to the more feature rich smart phone/PDA devices. Have you guys been given any indication that you are part of that focus, and due to their need have they accelerated the process at all.

A: You asked a very good question Joseph, I can’t answer it. Even if I had the answer, I can’t tell you this because we’re not privy to discuss a lot of information, so I apologize, but that’s the best answer I can give you. What I can tell you, something that is really cool. The cell phone that Motorola has shown, if you’ve seen it and you’ve held it in your hand, you’d never guess there’s a projector built in, and the reason is because you know, we’re able to produce ultra thin embedded engine that no one else has.

J: let me ask you one more question, and then I’ll get back in queue. How long are your hands going to be tied cause obviously shareholders, it gets frustrating the lack of news, and when do you think the first change the public will get to see these prototypes or phones?

A: The Motorola solutions will obviously be determined by when Motorola decides to share it in more public forum than what they have been doing. In terms of what we have, specifically pertained to Show, and it’s derivative as we move towards product, you’re going to see further in innovations as we move into the year, and I believe we’re going to have some major shows on the way CTIA is one, SID is two, which will happen within in the next 3-5 months you’re going to see some new toys from Microvision, you’re going to see how we’re progressing towards the ultimate goal. You obviously, everybody can make their own opinion, but so far we’ve been predictable in what we’ve said we’re going to do despite the aggressive goals we’ve set, and I believe this is going to continue.

J: Ok, thanks, I’ll get back in queue.

Bob: Good afternoon. It’s….equity group. How are you guys. Congratulations on another year filled with just terrific milestone achievements. My question is at CES, it seemed to us there was a tremendous amount of positive media coverage and also lots of excitement about the company’s product offerings, but there was also what we would call misperception I believe about potential competition from the likes TI and 3M as to perhaps those companies beating Microvision to market. Can you give us your take on our observation?

A: It’s a good question, so let me try to break it into several sub questions. So I think you’re asking what about the competition. There was at least 13 competitors at CES who demonstrated several flavors of projectors ranging from small to something a lot more bulkier. So the question is, could they introduce something earlier than us this year, and what does it mean to us. Am I capturing this?

J: You are absolutely on the money.

A: All right, let me start with the first one. Anytime you have a large market opportunity you will draw competition. It’s a fact of life. The number of companies developing small projectors which are at various stages of development, TI and 3M happen to be 2 of them, and they happen to be large companies. We believe personally, and I believe, and we believe this is a good thing because it confirms that this emerging market has huge, huge, huge opportunity. So leading consumer electronic OEMS, our customers or perspective customers, have indicated they see great promise in Microvision’s solution primarily because our display engine, unlike other, can be made smaller, thinner, and consumes less power, and produces much brighter and higher resolution images than any other technology. In terms of the moving to the next step, which is the holy grail of this market, and embedded solution, even though there are people that will claim they will introduce, and they probably will introduce accessory products this year, I don’t think anyone have claimed that they can make it an embedded solution, and our strategy has always been start with accessory, click along with the embedded and basically create a totally different usage model for mobile consumers, that’s what gives us strategic advantage and tactical advantage over everybody involved. Could someone introduce something earlier? It’s possible; however being first does not guarantee success, just ask Toshiba with HD TV and ask Pan AM. So we want to introduce the right product, and our targets are aggressive, and we’re going to stick to them and do whatever it takes to make it happen, but if somebody should introduce something earlier, they have to battle certain attributes that they have to explain to their users because DLP specifically and all cost technologies have some basic issues in performance starting brightness, you know the projectors are not very bright, the colors are washed out. The center is brighter than the sides. It’s not because TI and 3M and others cannot do a good product, they can. It’s just the inherent limitations of the technology they use. Also, the projectors are lower resolution than ours, and as you know there’s been a major push to broad band networking, and one of the final attributes, that I think is going to be very, very critical for mobile applications, we’re the only technology today that can say we’re focus free. Even though some of the players claim they are focus free, they really deceive the public by hiding the button to adjust the focus.

J: Is it your opinion that size and power are the two key gating items and that Microvision has both, and that the others don’t/

A: I would add two additional items. It’s size, its power, its brightness, and finally it’s resolution.

J: Terrific, thank you very much for that, and all the best of luck to you this year and next.

A: Thank you, one more question.

Randy: Thank you fellas, and I’ll second the last question about your year, fabulous year. I want to go back to the auxiliary product Alex if I could for a minute. Just to give us an idea while you commented that you would just introduce the product under your timeline with no intention in 2008 Christmas to mass produce the device nevertheless you need to be thinking I’m sure, or have been thinking about what theoretical market sizes are in terms of units over time, and I don’t know if you’ve ever shared that with us. Could you give us some feel for what we might look forward to in terms of ramping in ’09 and 2010 with respect to the assuming everything is successful in the rollout in late 08?

A: randy, this is a very good question, and not because I think I know the answer, but because it’s a very good question, because it’s a very important question. One of the things, let me start with the basic premise. My personal belief is that the demand is going to be far greater than the supply. I don’t think there would be enough capacity from us or ever from somebody else to introduce something for the accessory to meet the demand if it’s the right product obviously. We believe we’re doing everything possible to make sure it’s the right product. Now, let’s talk about the accessory first, and then I’ll move to the embedded market opportunity. Addressable market for accessory is anything that contains multimedia applications. So what is inclusive of this? It’s any cell phone that has the right video output, it’s the 100 million installed based of ipod users and mp3 players, it’s everyone who’s carrying a laptop around and wants to have a quick projector connected to a laptop to share information with business colleagues. The market opportunity is very large. How many people will actually purchase it is going to be determined by the ultimate performance price ratio of each device. So again, the opportunity is pretty large; the price is going to be I believe one of the factors that’s going to determine the ultimate volume. We believe it would be modest growth in 2009 or say a couple million units for the total market, and I think it would be determined primarily not because users do not want it, but because people will not be able to produce it in the quantity that people want it and at the price potentially that people want it initially. If you look at the embedded proposition, this is really what we’re building the company around. The accessory is a step for us to get to the embedded and if you look at the embedded market, just ignore laptops for right now, ignore mp3 players, ignore digital cameras and just focus on just cell phones, there’s probably a billion and a half cell phone sold by 2008-2009 of which at least 60% would be multimedia phones, basically these phones that you can browse the web, play video, download videos, run business applications, etc. Of the 60% of 1.5 billion is 900 million, right? So 900 million number represents an addressable market, we’re just making a very modest production if we just take 1-3% of that market we will be very, very happy. And keep in mind that today we believe that there’s no one that can get inside the cell phone.

R: I had heard that analysis before with respect to the embedded and I sure appreciate it, that’s certainly the goal of the company to get there. You haven’t reflected at all initial roll out prices per unit have you? Prices to Microvision.

A: there’s simple reason for it, our first desire is to private label this product to our customers, so it would be the consumer electronic manufacturers, cell phone manufacturers that put their name on this, and that’s one of the reasons they would need to do extensive user trials in the first half of the year and potentially third quarter to solicit this feedback to understand what the price range is the consumer will tolerate and what are the necessary features that need to be added to potentially to the solution to make it more attractive so they can gain more margins. Based on what we know to date, we’ve done some street studies with direct users, we also read several reports done on this area. People anticipate when accessory hits full production it will be in the range of 300-400 dollars, that’s the retail price. Within 3-4 years, it’s expected to go down to $200. That’s what I have been reading from the other studies, it’s very similar, very close to what we’ve been getting from the direct user studies that we have conducted, our marketing team have conducted.

R: Ok, and I just want to go ahead and make a closing question with respect to something you had said in the past, and I’m not quite sure about the timing, but I believe it was mid to late year in 2006 and you were quite excited about the prospects about the future, in fact you used the word pumped to describe yourself, and you mentioned something about being in the super bowl in 2006, and winning the super bowl in 2007. Are you going to modify that or are you sticking to that this year, do you still feel like we’re in the super bowl.

A: You’re almost accurate, let me just correct some of it. First of all, I’m still pumped. What I said in 2006, remember when I started, I said 2006 would be our rebuilding year, we basically were a 1-16 team and we need 2006 to completely rebuild it was cleaning house here; it was basically changing many, many variables at the same time. 2007 was our positioning for the playoff year, and how do you validate whether you’re in playoff? It’s the CES for us, consumer electronics show, if we show what people and we surprise people, then to us that means we made the post season, and we’re ready to go on further. This year is what I would call the championship year, the conference championship year. If we do what we said we’re going to do, and we’re going to meet most of the milestones I described here at CES of next year I believe we can say we made the conference championship year. And then 2009 when you have full production on at least 2 products, I would call that a super bowl year.

R: Ok, great, well it’s certainly, I’ve been around for 8 or 9 years here now, and it’s certainly a different company since you came on board so congratulations. Thanks so much for answering my questions.

A: Thank you Randy.

Closing remarks:
A: I don’t know what to say. 2008 is going to be important year for us. We need to, we have been maturing steadily since 2006, this is going to be another major maturation year for this company because we’re going to do something we’ve never done in the history of Microvision. Our goal is still to complete the necessary technology business development and supply chain milestones that are required to bring this picop enabled consumer product to market while still delivering on and progressing on embedded and automotive solutions, as well as the eyewear products. We feel very good about our competitive position, and believe that picop display engine will meet, should meet size, power, and image quality requirements of our customers and ultimate consumers, and they will demand this. I’m very proud of what we have accomplished last year over the past two years, and again we continue to remain very, very excited about the future of this company. And absolutely no regrets of leaving cushy job at GE 2 year ago. This is the best move I ever made. At this point I would like to say thank you and talk to all of you very shortly.

Thoughts...

2008-03-04T11:31:00.001-08:00

It's been a while since a blog, so I have to put some info down... Some thoughts... I am mostly bearish at the moment, with holdings in DOG, DUG, FXP, MVIS, POT, REW, SRS. It should be noted that since I doubled my money in MVIS last year, that I only hold half as much MVIS as I used to, so I don't care if it continues to decline, it's a long term hold (playing with the houses money).

I really want to buy AAPL, but the market doesn't favor it, so I'm going to hold off until the path of least resistance is up. Actually that's my thinking almost across the board right now, take the path of least resistance, things want to go down, so they will.

Notice that that RSI in GOOG is exceptionally low, and the selling can not continue at this level. I'd venture a step in if the markets weren't puking itself. Granted any uptick will probably only be temporary, as people continue to sell GOOG. But for a decent gain it may be worth a shot, as it's really getting over done.

GOOG Q4 2007 CC Transcript

2008-02-11T19:43:00.000-08:00

Good afternoon, everyone and welcome to today’s third quarter 2007 earnings conference call. With us are: Eric Schmidt, Chief Executive Officer; George Reyes, Chief Financial Officer; Larry Page, Founder and President of Products; Sergey Brin, Founder and President of Technology; Jonathan Rosenberg, Senior Vice President of Product Management; and Omid Kordestani, Senior Vice President of Global Sales and Operations.

Eric, George, Larry, and Sergey will provide their thoughts on the quarter and then Jonathan and Omid will join us for Q&A.

Please note that this call is being webcast from our investor relations website. Blah blah blah, safe harbor.. etc....

With that, it is my pleasure to turn the call over to Eric.

Eric: Thank you very much, Krista and in looking at 2007, we are very, very pleased with our year and also with the quarter that’s just ended. If you look at 2007, a strong financial performance across the board, reflecting a performance and a focus here at Google on both growth and profitability, with of course very strong revenue, operating income, and earnings.

I want to call out strong international growth. More than half of our search traffic is now outside the United States, more than 150 domains and still growing. The international market is still very nascent with tremendous potential for what we could do over time.

And of course, the model at Google about product improvements and innovation continues. Hundreds of search quality launches, greater advertiser control and transparency, obviously higher ROI as a result, lots of new ads formats, YouTube video ads, from example, contests, branded channels.

We’re working hard, by the way, to promote open mobile and developer platforms and we’re completing an application suite, [inaudible] integration, presentations, et cetera, and in concert with both product and international focus, we have a global team. We now have offices in more than 20 countries. We are working on having a local presence across global markets and this global local focus is reflected both in our organization and our products and in the way we run the company.
Of course in Q4, a solid quarter without a question, pleased with traffic growth across the board even in the relatively mature markets which is always exciting. And obviously we are very happy with gross revenue on both google.com and on our AdSense partners.

I think we are going to have Larry and Sergey take you through product highlights. My emphasis area is search, infrastructure investments, things we don’t talk that much about, leading to improved quality as seen by end users that we can measure, and of course giving advertisers more control as the product matures and obviously, as a result, improving their return on investment.

The APP strategy, which we announced earlier in the year, now fully visible, more innovation, data portability, all the apps now either in place or coming and mobile, which we are very excited with Android, the My Location service as part of Maps and many other new features that are both out and coming.

So we are optimistic about 2008. We have growing revenue streams across a broad range of verticals and markets. As I mentioned, this international market which is central to our global rule, still relatively nascent with a tremendous potential. Ad dollars continuing to move from offline to online, a trend which is not going to reverse, and of course our ability to use our strong position in markets in order to essentially offer more services to end users and get people even more to see the new benefits of the new Internet world. So with that, rather than me talking about more of the details, why don’t we hear from George and then Larry and Sergey on some of the amazing things that have been happening. George.

George: Thanks, Eric and good afternoon, everyone. At a high level, we had another strong quarter, with gross revenue increasing 51% over Q4 of 2006 to $4.8 billion. Our google.com properties increased 58% year over year, reflecting strong traffic growth during the holiday retail season and, to a lesser extent, monetization growth. AdSense revenue grew 37% over Q4 of 2006, driven by particularly solid performance among our AdSense research partners, including e-commerce and search partners. Offsetting this growth was the impact of a quality improvement to AdSense for content. This changed the clickable area around the text-based ads to only the title and URL, reducing the number of accidental clicks and increasing advertiser ROI.

Now let’s look at aggregate paid clicks growth. Aggregate paid clicks includes clicks related to ads served on Google properties, as well as ads served on partner sits. Aggregate paid clicks grew approximately 30% over Q4 of 2006 and approximately 9% over Q3.

Let me now discuss our international performance. International revenue increased to $2.3 billion, or 48% of revenue in Q4. Revenue in the U.K. grew 5% this quarter to $692 million, reflecting the usual Q4 seasonal slowdown in the finance and travel verticals. Revenue growth in EMEA was primarily driven by a strong performance in France and Germany, where gains were made in the retail, technology, and finance verticals. We also saw solid gains in relatively smaller markets, such as Canada, Ireland, Spain, and the Nordics. Asia and Latin America continue to show impressive growth rates as well, with Brazil, Mexico, Argentina, and China being notable performers in the quarter.

Now turning to expenses, traffic acquisition costs were $1.4 billion, or roughly 30.3% of total advertising revenue, down 40 basis points year over year but up from 29.1% in Q3. The increase in overall TAC rate was primarily related to the performance of a few AdSense partner sites, for which we are required to make guaranteed payments. We have found that social networking inventory is not monetizing as well as expected.

AdSense TAC was $1.3 billion, while TAC related to distribution partners and others who direct traffic to our websites totaled $125 million in the quarter.
Turning to other costs of revenue, which includes $6 million in stock-based compensation, increased $75 million over Q3 to $516 million. The largest driver of the increase was the increase in costs related to our data centers, including depreciation, equipment, and operations. We continue to anticipate that other cost of sales could increase going forward. Other than cost of revenues, operating expenses in Q4 totaled $1.4 billion, including approximately $239 million stock-based compensation. Expenses related to payroll and facilities increased $97 million to $756 million. At the end of the quarter, we had a full-time employee base of 16,805 employees. We added 889 employees in Q4, with over half the new hires being in engineering, followed by sales and marketing.

We have implemented and continue to follow a disciplined hiring process in all areas of our organization. Hiring in Q4 tends to be slower due to the holidays but as we’ve indicated in the past, we will continue to invest in our core business, both in the U.S. and internationally.

Turning to non-GAAP operating income, which excludes stock-based compensation, increased to $1.7 billion in Q4, with non-GAAP operating margins of 35%, compared to 36% in Q3. The sequential decrease in margins was driven primarily by the increase in overall TAC, as discussed earlier. As we have said before, margins may decline in the future as we continue to make ongoing investments in our business.
Turning to tax, our effective tax rate for Q4 was 25%. Our Q4 rate was more favorably impacted by an R&D tax credit in Q4 compared to Q3 as a result of stock option activity. This was the primary driver of the difference in tax rates between Q3 and Q4.

And finally, turning to cash, operating cash flow remained strong at $1.7 billion, with CapEx for the quarter of $678 million. As in previous quarters, the majority of our CapEx was related to IT infrastructure investments, including data center construction, production of servers, and networking equipment. We expect to continue to make these significant investments in CapEx in future quarters.
Free cash flow, a non-GAAP measure which we define as cash flow from operations less CapEx, was also strong at $1 billion.

So in summary, we believe our results reflect the strength of our core business across our three primary initiatives search, ads, and apps, with disciplined investments that position us very well to capitalize on the long-term opportunities we see for Google.

With that, I would like to turn the conversation over to Larry.

Larry: Thank you, George. I’m really excited to tell you about some key new things that we did in both search and advertising. So to begin with in search, we had over 100 launches in Q4 with focus on our internationalization and investing in our quality.

One of those was universal search, which is now available in 15 languages, up six in Q4. We also launched the universal navigation bar in all languages, which gives our users easier access to all of our Google properties. And book results are now blended in all domains.

We also made some behind the scenes infrastructure improvements to improve our quality, and the biggest of those was increased index size, which really improved relevancy, especially for non-English results. We also had substantial improvements in latency and freshness, particularly in Europe, Middle East, and Asia-Pacific.
Now, we also made it easier for webmasters to make their site searchable. There’s two things there. The first was webmaster tools. We have several million sites now using and actually doubled our user base over last year, and that basically lets webmasters easily tell what’s being crawled from their site and what’s being indexed and so forth. And we added a bunch of new features to that in Q4.

We also have our site maps product, which is another tool to let webmasters make their sites easier to crawl and we added Florida, District of Columbia, and U.K. National Archives, among many other sites, and added many, many thousands of pages there.
Now in ads, that’s obviously where we get a large portion of our revenue. We launched some key features there that really drove performance for advertisers and really helped us gain traction.

First of those in AdWords was call the AdWords Conversion Optimizer, which we launched in early January and that lets customers big by specifying a cost per acquisition rather than a cost per click. So for example, you could pay only when someone actually buys something rather than just when someone clicks on your ads.
AdWords actually, the system actually optimizes their click-based bids to approximate that cost per acquisition for each auction, and that’s really gotten strong adoption, particularly among our larger clients and we’re really excited about that. That really improves the advertiser return on investment. That gives them more conversions which is really what they care about when they actually make money at a lower cost per conversion.

In AdSense, we also launched cost-per-click on placement targeted campaigns, such as campaigns that are on a particular website. And this got really strong adoption and it really helped drive better performance and increased spend for our [directory] advertisers, so we are really excited about that too.
Now I’m going to turn it over to Sergey.

Sergey: Thanks, Larry. I want to talk to you about some of our relatively newer initiatives. I want to start with Google Apps and related products. gmail, gmail launched an important new infrastructure in Q4 and this has really increased performance. For those of you who are gmail users, you may have noticed how it loads a little bit snappier, you can switch between conversations a little bit faster. It’s really improved my productivity and I hope you see that as well.
In addition to that, this new infrastructure has really made development easier and in fact, we were able after that to launch eight new features within a span of eight weeks.

A couple of new features that also makes gmail more open, we’ve added IMAP support, so you can use all of your favorite e-mail clients, including, of course, devices like the iPhone and you don’t have to use POP3 anymore, you can now use IMAP, which is the better way to go, if you have the choice. You can also now chat with AOL instant messaging users, so this is great now in the Google chat little screen in gmail. You can connect not just to other Google Talk users but also AIM users, which is a really large population.

I want to jump now from gmail to YouTube. YouTube has continued to have a really strong user growth. In fact, we had a few special events that just demonstrate this. We hosted the CNN Republican debate together with CNN and in fact, almost as many people saw it on YouTube as did on CNN. We consider this a great milestone and we hope to continue to do great partnerships with CNN and others to jointly grow audience for events.

We also, I should mention that YouTube is now available in 17 languages, eight more than last quarter, and so we are seeing a lot of international growth. We are really excited about that.

In enterprise, we’ve gotten a lot of increased interest, trial, and adoption of Google Apps in larger companies. First of all, we’ve signed an agreement with Taylor Woodrow, which is the construction services division of Taylor Wimpey, a FTSE 100 company in the U.K. We are also finalizing an agreement to deploy Google Apps at Genentech, and those are just a couple of the really big ones we have. We are talking to many, many companies and many are adopting it all the time.
In addition, the universities that have deployed this quarter includes the University of Southern California, the North Carolina Greensboro, Florida International, and Clemson.

Now jumping a little bit aside in mobile, we’ve really been revving the Google Maps for mobile, among other applications, and Google Maps is just really useful on your cell-phone now. Some of you might have seen our launch of the My Location, which allows you to see where you are on your cell-phone even if you do not have a GPS-enabled phone, and that’s really amazing. In fact, even if you have a GPS in your phone, the My Location can give you a first cut much faster than you can usually get a GPS signal, and it will work indoors. I was just using this, I was at a conference in Switzerland, I was able to find a really small hotel and then even switch over to the satellite view on my phone to figure out that I needed to take a vernicular to get up there. It was just a really amazing experience and we continue to add features and reliability to it all the time. I should mention My Location is available now in 21 countries and it works on four different platforms altogether.

We also launched a new rev of apps for the iPhone. We call it Grand Prix internally, but basically you get access that’s really fast and integrated to the major Google products, including search, gmail, calendar reader, and others. And it’s really had great uptake. I use it personally myself. Many people have really been enjoying this product. It’s growing very rapidly.

Last but not least, I’m going to do a shout out to Android, which is the operating system that we are developing for mobile phones, and it’s completely open, of course. It’s going to really solve a lot of the challenges the company’s in the mobile industry have. We’ve released the SDK for it. We formed the Open Handset Alliance, which has now 34 industry leaders in it, and we really think that this is going to make Internet on mobile hopefully as frictionless as it is on your desktop normal Internet experience. This is going to spawn lots more activity and what we love, it’s to see lots of great, open access to the Internet wherever and whenever you are.

Anyway, that’s what we’ve been doing on those fronts and now, back to you, Eric.

Eric: Well, thank you very much, George, Larry, Sergey. As you can see, not only did we have a very good 2007 but we are quite optimistic about ’08 and our model continues to work very well.

Why don’t we go ahead and move to your questions and I would also like to bring in Omid and Jonathan, previously introduced, to help us answer your questions on this or anything else. So could we go ahead and get our first question?

Q&A

We’ll take our first question from Imran Khan from J.P. Morgan.

Imran: Two questions; first of all, paid click growth rate declined 15 percentage points sequentially year over year, growth rate, so I’m trying to understand how much of that growth rate decline was due to the changes you made and if you see any improvement in the price-per-click because of increased customers return on investment, because your year-over-year revenue growth rate decelerated 10 points as well on your website, so to better understand the relationship between price-per-click and paid clicks growth rate.

And secondly, social network monetization is difficult. You talked about that and I believe it’s with News Corp that you signed a long-term contract, so how should we think about that contract and what does that mean for your TAC rate going forward? Thank you.

Eric: Why don’t we start with Jonathan? Why don’t you take the first part of Imran’s question?

Jonathan: Sure, Imran. Basically paid click growth, which you referred to, tracks the traffic growth rate and the traffic growth rate did decelerate. The number of search ads basically grew faster than the number of content ads, so I think one of the things that you have to look at there is what is the mix issue. And then I think there were probably some secondary factors there. Some factors would include things like the focus that we’ve had on weeding out the low CPC, high click-thru rate low quality advertiser, so that’s probably a component. The other thing that we did was there was probably some impact from the non-clickable backgrounds which we launched on AdSense for content, so those were probably the biggest things. I think there was also a little bit of an issue with the timing of the holiday. Monday and Tuesday were Christmas and Christmas Eve, which are conventionally our biggest days, so that was probably a component.

On the CPC side, generally CPCs have been going up, click-thru rates have been going up, and coverage has been going down. I’m not sure I could add much more there.
Sergey: I just wanted to follow-up on the social networking question. We don’t talk about individual partners’ performance or anything like that. Now I do want to highlight though, we have had a challenge in Q4 with social networking inventory as a whole and some of the monetization work we were doing there didn’t pan out as well as we had hoped. But we are continuing the efforts and we are still optimistic about future quarters.

We’ll take our next question from Douglas Anmuth from Lehman Brothers.

Douglas: Thank you. My question is regarding the U.K. it looks like your growth Q2 was about 5% in the U.K. and that compares to about 11% in the fourth quarter of last year. Could you talk about what you are seeing there beyond the usual categories that you may see weakness in typically during 4Q and what you are seeing there from a macro perspective as well? Thank you.

Eric: Omid, do you want to go ahead and handle that?

Omid: In general, we are very pleased with our performance in Europe. And actually, I know you asked about the U.K., but very quickly we are seeing great results in France and Germany as well in the retail category. I think in the U.K., we saw the typical seasonal patterns but we were, there are certain categories that we believe the auction is in effect fully sold out and we are working on clever ideas and conversion analysis for our partners to really improve their understanding of how they should spend and how they should price their bids. But overall, we are very satisfied with the penetration we have with the major accounts. We are at CEOCM tables. I was there throughout Q4 and overall, we’ve seen a lot of strength in the market.

Douglas: And are those two categories, travel and financial, that are typically seasonally weak? I mean, do you feel like there is an additional macro impact there?

Omid: No, those two were the primary ones.

Eric: Jonathan, do you want to add anything to that?

Jonathan: I was just going to add that it was finance and travel. Maybe the only other point to look at there is if you look at the total percentage of advertising spend in the U.K., some of the public data says that it’s roughly 15%, 16%, 17% on search, whereas in the United States it’s more like 6%. So one of the things that you see there is that the seasonality, particularly in those two verticals, is much more marked because they are spending a disproportionately greater amount of money in total on search engine efforts.

Eric: Let’s go to our next question.

We’ll go next to Jennifer Watson with Goldman Sachs.

Jennifer: Thank you. Can you give us a little bit more detail on the feedback that you are getting from both advertisers and consumers on the YouTube advertisements that you guys rolled out?

Eric: Omid.

Omid: We were doing what I can best characterize as just a lot of touch points with our, both publisher partners as well as advertisers. We are trying different formats. The in-video ads have been very successful. We’ve had a number of campaigns and the way we are also approaching this which I think is unique for Google is really from an integrated and scalable fashion.

In the case of, for example, if I may name some clients, General Motors, for example, Chevrolet Europe, we did what I think is a really truly possible with the advantage that Google has, you know, running the campaigns across multiple countries, delivering large numbers of impressions from YouTube to the content network to the search campaigns. Adobe, for example, ran one of the biggest homepage campaigns we’ve had in the history of YouTube. So all in all, we are doing a lot of experimentation. We are starting to do it globally and we are doing it in every integrated fashion and by adding the other key assets that we have.

Eric: Let me add a couple of other things. YouTube is doing extremely well, growing very, very quickly and doing so internationally as well as in the United States. There’s been an issue around standardizing ad formats for advertisers who would like to be able to do industry buys and so forth. So as these new ad formats are being developed, we are also looking to make sure they get standardized into a common buying pool and pattern so that people feel comfortable that they can get real value. The next generation of projects are actually very, very sophisticated ad products and it looks like they are going to do extremely well.
Next question.

We’ll go next...

Krista Bessinger

We’ll go next to Mark Mahaney from Citigroup.

Mark: Thank you. I wanted to ask a question about mobile, particularly for you, Eric. You’ve got a very interesting perspective from two companies on what’s happening with mobile Internet usage, particularly off the iPhones. How much of a ramp are you seeing? Is there any way you could quantify it and is there a way you think about how mobile search as a percentage of overall search could be in two to three years? Thank you.

Eric: It’s very difficult to estimate the percentage in a few years. We have already said in a number of public statements that it is growing significantly faster on a percentage basis than other categories, and as you mentioned, iPhone is the first of a whole generation of products that will be much more search intensive, and so there’s much more likely to be many more search opportunities and with those search opportunities comes ad monetization. We have done a number of deals for mobile devices already, KTTI and DoCoMo, for example. DoCoMo just announced by Omid in Japan, which are very, very strategic for us.

It’s difficult to estimate what percentage it could ultimately be long term, and when I say long term, I mean perhaps 10 or 20 years. It’s reasonable to assume that a majority of searches would be on mobile or personal devices, simply because over a long enough period of time, they will take on the tremendous power that’s represented in the PC and Mac platform. And the wireless networks are getting to the point where they can offer performance similar to the wireline.
Jonathan, do you want to add anything?

Jonathan: We’ve been tracking the data very carefully. We are particularly interested in looking at the iPhone, particularly because the experience on web browsing is so good and because of the optimization efforts which we did. We saw a very significant spike in December with the optimization that we did on both the iPhone and it was well over double I think within about a month in terms of increased usage.

Mark: If I can do a quick follow-up on macro trends, to the extent that you would see weakness related to a softening consumer, do you think you would see it more on the supply or the demand side, i.e. ad budgets being trimmed or less consumer commercially oriented searches? Thank you.

Eric: Sergey.

Sergey: We’ve been really studying these questions really in depth and near as we can tell, we just offer such a great ROI for advertisers that they can directly see and measures that advertisers in maybe even difficult markets and what not just have great incentive to get as much profitable inventory as they can from Google and the other different kinds of ROI advertising that we offer.
So we have not been able to detect any such effects from macroeconomic trends.

Eric: Jonathan.

Jonathan: I think some of you have observed that direct marketing tends to be less affected by economic downturns than brand marketing, given a time measurability. I think that’s been true in past recessions. I think we’ll probably see that again.
I think one thing we may see is consumers comparison shopping more and that would certainly create more clicks. It might create modestly lower conversion rates but we think overall, if people are doing more comparison shopping and looking for bargains, that’s probably positive. Clearly if there’s less overall commerce in the economy in general, then that could adversely impact overall demand, but we really think that relative to most organizations, we are pretty much tracking the diversity of the overall economy and search-based efforts will fare pretty well.

Eric: Let’s move to our next question.

We’ll go next to Christa Quarles from Thomas Weisel Partners.

Christa: The main question I guess is on the C-block I guess passed the reserve price today. Obviously you can’t mention whether or not you are bidding, but can you just talk about what those open access measures ultimately mean for you, and especially with Verizon moving toward open access toward the end of 2008? And also, if you can kind of highlight your WiMax stance.
And then a total separate quick question, I was just wondering if you could give the impact on checkout to COGS in Q4. Thanks.

Eric: On the first part of the question, we’ve concluded we cannot answer any questions in that category because of legislative rules with respect to how the auction is working, so I’m afraid we’re going to only be able to answer the second question, so could you repeat it again?

Christa: Well, can you make any comment on WiMax at all, with a separate,

Eric: As I indicated, I think it’s best practice for us just to move to the second question.

Christa: The second question was just on Checkout and whether it had a big impact on the COGS in Q4.

Eric: Jonathan.

Jonathan: I think it’s the same answer that we’ve given in the previous calls, the impact was immaterial. I think one of the strongest observations that I could give you there is that the organic growth in terms of Checkout overtook the promotion efforts this quarter, so I think that’s a good sign in terms of the general traction that we are getting.

The other things that we are seeing there, that the click-thru rates on the [badge] are up as much as 10%, so I think that’s going pretty well.

Sergey: If I may, also in addition to the click-thru rates, I think we are starting to get some anecdotal and some actual real studies that demonstrate that the conversions are also up, very substantially and hopefully we’ll be able to share more of that with you in the coming weeks. But there is really good evidence now that Checkout is able to get consumers through the process more quickly and more reliably.

Christa: Okay. Thanks.

Eric: Why don’t we go ahead to our next question?

We’ll go next to Robert Peck from Bear Stearns.

Robert: As we think about the margin levels this quarter, should analysts be thinking that based on what you are seeing as far as the social networking side, is this more of a new run-rate level, or do you think the margins were somewhat suppressed by the MySpace relationship in Q4?

And then number two, could you also talk to us about timing of a DoubleClick closing and any sort of impact you can see to the numbers for 2008?

Eric: Let me do the DoubleClick question. So everybody knows, we had FTC clearance in the United States in December, which is great, and we are working with the European Commission. We are obviously very hopeful that they will clear as well and that’s probably all we can really say about DoubleClick at this time, but we are certainly hopeful that it will get cleared. We are working with them pretty closely. George, did you want to answer the first question?

George: Bob, could you repeat the question again?

Robert: It’s really more of was the impact of social a one time impact for 4Q or should we think about this as being more of a normalized EBITDA margin run-rate going forward, particularly as other projects continue to build,

George: We’re still in the learning stages of how we monetize social networking and this is going to evolve over a period of months, so this is sort of early stage at this point.

Robert: Any idea on a replacement for CFO?

George: Maybe.

Eric: We’ve got a number of very good candidates and we are very happy to have George is still doing the job here and has agreed to continue to do this until we find the right replacement and it’s a hard position to replace, given George’s incredible performance. Let’s go to our next question.

We’ll go next to Benjamin Schachter from UBS.

Benjamin: A few questions; I was wondering if you could go into a little more detail on the social networking issues and specifically maybe talk about differences you are seeing with your non-text-based ads versus your text-based ads on social networking.

And then another question on TAC associated with Google.com revenue. It continues to move higher, it’s about 4% now. I was wondering if you could talk about the key drivers and if there is a target rate internally for where that may go.

And then finally, on healthcare, in the past, Sergey, I think you’ve specifically said that you don’t really think about Google's efforts in healthcare as really a driver for P&L and Eric, I know you are speaking at a healthcare conference in February. Any updates to that? Any change in how you are thinking about healthcare, how it might be a business opportunity? Thanks.

Eric: On the healthcare side, we don’t have any products to announce at this time, so why don’t we answer the first part of your question, Jonathan and Sergey, social networking and TAC.

Sergey: I’m afraid I’m not sure off the bat what the stats were on the image versus text ads. We did have some changes relating to allowing certain kinds of CPC ads, which were only allowed to be bid on a CPM previously, which may have contributed to some cannibalization, or at least for now.
But as I said, on the whole I’m not sure what the data is for image versus text.

Jonathan: I don’t have too much to add. We’ve certainly seen adoption of both the text and the image ads on social. I think the thing we have to figure out there is how to optimize the look and feel of the ads against the inventory that we have, how to slice the inventory up in alternative ways to try to figure out how to make it work and we’ve got some demos that we’ve just developed that are going to change the way we are doing some of the targeting, so I think we are basically going to have to look at that and try to figure out how do you find people of particular demographics that are comparable to what you might find in the New York Times or in a particular publication that you might have been previously familiar with.

Sergey: If I may summarize on the whole, we have a huge amount of social networking inventory, including the MySpace relationship, including of course Orkut, our own network, which is very, very successful and probably like 20 others, or something like that. I don’t know the exact number. But we have an incredible amount of this inventory and in fact, it varies quite a bit in how it all monetizes, based on a number of factors, some of which we understand, some of which we don’t. I don’t think we have the killer best way to advertise and monetize the social networks yet. We’re running lots of experiments. We had some significant improvements but as I said, some of the things we were working on in Q4 didn’t really pan out and there were some disappointments there. I hope to be able to report more progress in the future but it’s a big opportunity because it’s so much inventory.

Eric: Why don’t we move to our next question?

We’ll go next to Mary Meeker from Morgan Stanley.

Mary: Thanks. Dave and I wanted to revisit Imran’s question from the beginning of the call. Our worry going into the fourth quarter about Google was related to monetization levels, or cost-per-click growth, given what was going on in financial services, retail, and travel. We weren’t worried about query growth. Now you’ve reported your numbers and by our math, the cost-per-click growth was about 16%, so very robust, the highest we’ve seen in a long time, but by your math, the paid click growth was only about 9% sequentially in what is typically a seasonally strong quarter.

And as we were thinking about it, just as we read in the press release before the call started, we thought issues might relate to the fact that it’s tougher to gain share, given how high your share already is, given there might be some share loss, issues about a recession, something geographic, or much slower market growth.
And George mentioned then changes in the algorithm impacted, reduced accidental clicks. So our question, and it may be for George, is 9% sequential growth the kind of growth to potentially think about in the December quarter, or did the algorithm have a really material effect on the sequential query growth, or was it something else?

Eric: Again, we have to be very careful here not to project any guidance here with all the math, so Sergey, do you want to try to describe what you thought the components of all of this were?

Sergey: I should mention that we were reluctant to even start reporting that particular metric and it’s because unfortunately, there’s just a lot of complexity in our business and as we try to get the best possible, most useful ads to our end users, and hence get the most promising customers to our advertisers, we trade off a lot of things. So one example is the one that George mentioned, the one that you just talked about, for example, getting rid of the clickable backgrounds. But there are also factors like we might want to reduce the number of low cost clicks, or perhaps low likelihood to convert clicks, in favor of a smaller number of higher quality clicks. There are many, many trade-offs that we make.

So I just, I would hesitate in inferring too much from just that one metric alone.
Mary: But was some of the, was the change or some of the unusual things that happened that related to what you just mentioned and what George mentioned, were they global and did they take place through most of the quarter, or were they U.S. based? And then I’m done. Thanks.

Eric: Jonathan.

Jonathan: I’m not sure to what degree I can separate out the international component. It certainly is true that prices rise as advertisers get higher conversion rates, particularly over the holidays, and Hal Varian posted a blog that sort of takes you through some of that. The other thing which I think you said which I’m pretty clear is not the case, we’re generally doing very well from a market share perspective domestically and internationally, so the trend there is almost uniformly a gain in market share.

Mary: I guess the one last observation is given that the changes probably had impact throughout most of the quarter and were perhaps global, that potential slowdown could be, it could be a blip.

Eric: Again, you’re using the term potential slowdown, which is not a term we have used on this call, so again that’s your view, not necessarily ours.
Jonathan: Mary, the click growth in the quarter beat our internal forecast.

Mary: Yeah, and it was certainly strong.

Eric: Why don’t we move on? Thank you very much. Next question.

We’ll go next to Sandeep Aggarwal from Oppenheimer.

Sandeep: Thanks. Two questions; one is can you talk about how you are viewing the partnerships you have with some of the big AdSense partners? And basically, it’s clear that you did see some impact in that, acquisition cost because of the minimum guarantees. I just wanted to know how would you hedge that kind of situation going forward?

And secondly, George mentioned about investments which may drive down the margins. I just wanted to hear from you or get some sense of where these investments will be made, will this be more of enhancing your existing products and infrastructure, or some new initiatives? Thank you.

Eric: Omid.

Omid: I’ll take the first part of the question. I think in relation to partnerships, we enter all of these with a view to having very successful [inaudible] before going to the partner, as well as ourselves. We would like to have very profitable deals.

I think in certain areas, as we’ve been talking about social networking, we make bigger bets to be able to understand that space. We think that’s an important category. We have our own products in that space and we want to understand the monetization, which is again more challenging area for us to figure out, but we are confident given the innovation model that we have and the roadmap that we have that we’ll be able to perform better there. So our goal in all of these deals is to again make the proper levels of investment, proper levels of guarantees and over time, in areas that are newer to us, to understand them better and have better products.

Larry: I was going to add we’ve had I think in many of these areas with great partners, we’ve had very significant improvements in monetization and social networking in different areas. And like Sergey mentioned, I think there’s large opportunities still there. There’s tremendous amounts of inventory and the monetization levels are relatively low compared to other things. And we’ve seen the ability to make significant gains, so we are very optimistic about those areas still.

Sandeep: I’m sorry, what about the investments, future investments?

Eric: You might want to repeat your question, because I’m not sure I agreed with the premise of your question. Go ahead.
Sandeep: I just wanted to hear basically in terms of I, basically if you can provide some color in terms of future investments. Are they going to be more focused in terms of the enhancements to the existing product portfolio and improving your infrastructure versus some of the new initiatives?

Eric: Well, the general answer is that’s where we see big opportunities and our primary focus on investments is in fact in our core business, and you see the success we had in 2007 and in Q4, the vast majority of that was actually not in all the things that generates all the exciting new announcements that we are happy to talk about, but in investments in core search and core advertising globally, which I’m incredibly proud of. George, do you want to add anything on this?

George: So in terms of your comments around margins going forward, as you know we don’t give guidance. We are going to continue to higher the talented people that we always have. We are going to continue our investments in CapEx and we are going to be very careful around how we proceed with making investments.

Sandeep: Thank you.

We’ll take our next question from Brian Pitz from Bank of America.

Brian: Can you provide some additional color on why we observed more of a deceleration in Google AdWords versus AdSense? And maybe this is a point of clarification but I think we heard you say that quality changes were made to AdSense and in addition, our assumption is that it was the social networking revenue also falls in the AdSense bucket. And then just a quick second question to Larry on licensing revenue, should we assume most of the increase is due to the Postini acquisition? And that’s it. Thanks.

Eric: Jonathan, AdSense and,

Jonathan: I think we’ve pretty much answered that with the discussion that we had earlier on the mix issues. I’m not sure I can offer you anymore color. We said that the Google.com traffic was stronger than our own internal expectations. We also, if you look back at Q3, which I think we talked about on the call then, Q3 was a very, very good quarter, so if you are looking at the sequential growth rate, you are comparing it to a quarter in which we did disproportionately well, relative to what we’ve done in the past but I’m not sure how much color I can really give you there.

Larry: Perhaps it is worth mentioning, I do believe that we include the social networking revenue within the AdSense for content bucket, which is within AdSense as a whole. And perhaps it’s worth, it’s not necessarily a financial metric, but we have had great partnerships with these social networks now. We’ve now launched Open Social and we have now at least 20 partners on that. We have applications being developed so we have networks who are participating, so we are really excited about all the progress innovation there and even though Q4 for us was a little bit of a disappointment in terms of the kinds of improvements in monetization we were able to generate, that’s, Q3 was fine for us in that light, as was Q2 and we are optimistic about the future.

Eric: And remember that the Google model is one of experimentation. We keep trying and we keep trying new ideas until we find the ones that really generate phenomenal ROI and not only do we go with them but they grow very quickly.

Jonathan: I didn’t want to miss your second question, it was about enterprise growth and Postini?

Brian: Yes.

Jonathan: And what specifically were you looking for?

Brian: Well, should we assume that most of the growth in licensing was due to the Postini acquisition in the quarter?

Jonathan: I think we’ve had a lot of success to date with small businesses. We added a lot of ISPs, which tend to drive a lot of the traffic. We also pushed a lot of the education efforts, which I think had a pretty significant component. Beyond that, it’s hard to...

Eric: The answer to your question is yes. It’s easier that way. Why don’t we go to our next question?

We’ll go next to Marianne Wolk from Susquehanna.

Marianne: Thanks. I wanted to focus back on the economy. Can I confirm that when you called the weakness in the U.K. related to travel and finance seasonal, that you have already seen the normal seasonal rebound here in January?

And then as a follow-up, a few retailers we actually spoke to in Q4 said that they increased their spending in online advertising as a way to bolster the slower offline sales. Have you noticed any counter-cyclicality in the business? Could a weaker economy actually accelerate the shift in ad dollars online?

Eric: Again, you have a thesis here which we don’t necessarily agree with and in any case, we are not going to talk about the current quarter. We are talking about the quarter that ended in December. I’m happy to say that we have not yet seen any negative impact from the rumors of future recessions. We’ll see what happens.

Sergey: But if I may add, I do think that certainly like you’ve seen from several of your contacts, it makes a lot of sense for advertisers if they want to be careful about their spending and they want to make sure they are getting a good ROI, to use the exact kind of advertising that we are offering. I think that makes a lot of sense and I think lots of advertisers recognize that.

We’ll go next to Justin Post from Merrill Lynch.

Justin: Thank you. Most of my questions have been asked, but one about your future, when you think about revenue sources beyond search, what do you think your biggest opportunity is among software as a service, video or display? Do you prioritize those? And do you think any of them could be material within the next two years?

Larry: I think it’s hard to prioritize the exact ones. I think we are making tremendous strides in apps, as we talked about. There’s tremendous... those are of tremendous importance to people and we are also getting revenue from multiple sources there from advertising and from people paying for the service itself.
And we’ve obviously seen tremendous growth in YouTube, which we already mentioned, which is great. I think we’ll be, there’s going to be significant amounts of advertising there also.

I’m pretty optimistic about all the new areas we are pursuing and the opportunities there will take, you tend to underestimate the long term and overestimate the short term for any new thing and I think you want to be careful about that, but I’m very optimistic long-term.

Eric: There’s reasons to be optimistic about all the categories that you described. The display business is literally right in front of us and the DoubleClick acquisition is an essential part of that strategy, so we’ll see. But of course, we have a sales force that is perfectly capable of selling those, customers are purchasing those already, and it’s a market that would benefit from the kind of technology that Google can bring to market.

In the case of YouTube, you have a huge forward opportunity just because of the scale of the audience, globalization and so forth, so to the degree that we can develop the ad formats that we describe, it again should become very significant, exactly when is very difficult to predict.
Some more questions?

We’ll take our next question from Heath Terry from Credit Suisse.

Heath: I was wondering if first you could update us on the local business and exactly where you are in continuing to try and attract advertisers to monetize the tremendous traffic that you’ve built within Google Maps, particularly what kind of progress that you’ve seen out of the local business referral model?

Eric: Jonathan.

Jonathan: I guess the biggest thing that happened this last quarter was the Local Plus Box, which we launched I think in late November. Basically that was an improvement to the local ads on Google.com. I think it’s only available for the top ads but basically what happens is we show a plus box for the local ads and it expands and basically gives you the advertiser’s address, the phone number, a map, and this is the kind of thing that you’ll see us moving more towards as we try to make our efforts there and our ads more consistent with what is going on with universal search, convey as much information as we possibly can in the ad related to what happens if you click through to it and try to figure out how to capture the local opportunity.

Heath: Great, and on the local business referral program?

Omid: We’re not breaking any of those components out now. We are right now really focused on getting the right content, as Jonathan mentioned. A lot of the success of these areas will depend on having the most comprehensive listings and the right format and we are experimenting with all that, building the right relationships, and it’s still kind of early for us to break it out and really talk about the revenue performance.

Jonathan: The one other thing that you could look at is I also believe that we have pretty much completely revamped the regional targeting system and how that works for the advertisers, and I would expect that there will be significant improvement from that as well.

Krista: We have time for just one more question.

We’ll go next to Jeffrey Lindsay from Sanford Bernstein.

Jeffrey: We’d like to ask two things. First of all, could you give us any breakdown of the 889 new staff, geographically and/or by function?

And then second, it looks like the TAC rate increased in the fourth quarter to 88%. Why did the TAC rate go up? What were the drivers behind this and were they one-off factors or were they factors that you expect would continue? Thank you.

Eric: On the hiring question, the first part of your question, you’ll remember that we hired a little ahead of ourselves maybe six months ago, so we’ve returned to our normal hiring process, more international over time, a balance... maybe 50-50, or close to it, technical and non-technical. We are a very difficult place to get a job at and so we continue to look to the very, very top talent in each and every position, and we do that worldwide and it’s working very well. And I don’t think any of that is going to change. I think that model for hiring and building the organization has worked for us for many years and I think it will continue.

George: Our TAC rate is not 88%. We are looking at TAC as if it were a percentage of advertising revenue, which is roughly 30%. So as we’ve said, primarily this is all related to our AdSense partner sites and that’s, which is where we are required to make the guaranteed payments and social networking is also something that is coming online pretty strongly.

Eric: So with that, I want to thank everybody. Thank you, Krista, thank the Operator and thank all of you for spending so much time once again on your afternoon/evening covering Google and we look forward to talking to you in our next quarterly earnings call. Thank you very much.

WCG

2008-01-14T07:07:00.000-08:00

WCG is looking better and better. Since 11/5/07 (see previous post: http://uneducatedinvestor.blogspot.com/2007/11/just-writing-it-down-here-really-early.html), this stock has gone up 50% from 33.50 to 50. This company is not going out of business, the investigation is limited to FL, and the company will make it through (in my opinion), so this will be one I continue to support as one of my stocks of the year... (Federal fines may at some point come down and provide a negative reaction, but that's a risk I'm willing to take for now.)

2008-01-03T07:09:00.001-08:00

Some thoughts/possible stock of the year picks...
As I've mentioned previously, I think WCG could go up quite a bit this year, barring any bad news from the investigation into the company. MVIS will begin production of their standalone projectors, which should provide a nice pop to the stock, especially if they start making positive earnings. POT/MON are on a tear, I'm inclined to believe this will continue. RIMM, will the entry into China provide a significant pop in the stock? Maybe. We'll see... CERN should be good for a consistent 20% gain again this year. Why I mention that, I don't know, but 20% is better than any mutual fund you'd likely invest in. MA may well continue it's rise, but I'm holding out for the VISA IPO. What about NTDOY? Nintendo still can't get enough Wii's out the door, how long will this continue?

2008-01-01T11:25:00.000-08:00

2007 Update of some stocks I followed...

Tickr - Jan $ - Current $ - % Gain
GOOG $481.30 - 691.48 - 44%
ATI $86.95 - 86.40 - (-.63%)
TIE $28.95 - 26.45 - (-8.6%)
CHK $27.75 - 39.20 - 41%
VLO $48.96 - 70.03 - 43%
CERN $46.33 - 56.40 - 22%
ECA $44.15 - 67.96 - 54%
TIVO $5.18 - 8.34 - 61%
GS $199.08 - 215.05 - 8%
SHLD $167.55 - 102.95 - (-39%)
KONA $21.14 - 14.60 - (-31%)
MO $87.67 - 75.58 - (-14%)
SBUX $35.26 - 20.47 - (-42%)
NYX $94.87 - 87.77 - (-7.4%)
NMX $120.77 - 133.61 - 10.6%
MA $99.53 - 215.20 - 116%
CME $524.05 - 686 - 31%
MXE $26.19 - 24.57 - (-6.2%)
DIVX $23.08 - 14 - (-39%)
LVLT $5.60 - 3.04 - (-46%)
HANS $34.04 - 44.29 - 30%
ATVI $17.34 - 29.70 - 71%
HAL $29.23 - 37.91 - 30%
BWLD $54.98 - 23.22 - (-58%)
CMG $55.47 - 147.07 - 165%
UA $49.35 - 43.67 - (-11.5%)
APOL $41.49 - 70.15 - 69%
GILD $64.21 - 92.02(split) - 43%
MVIS $3.07 - 3.90 - 27%
AAPL $83.80 - 198.08 - 136%

2008-01-01T10:46:00.000-08:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year for 2007 and compare them to my own picks. Overall I'm happy with the results, certainly a few stocks fell off towards the end of the year, and SVNT really popped to end the year...

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

2007-12-11T06:42:00.000-08:00

WCG -

Since my post on Nov 5th, WCG has gone up nearly 38%. Not too shabby for a one month gain. I still believe this could double within the next year (barring any news indicating otherwise)

2007-12-05T06:30:00.000-08:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year are looking so far this year and compare them to my own stock picks for the year. DIVX made a strong comeback, and is better than a couple of cramers laggers.

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

2007-11-14T14:43:00.000-08:00

Stop losses kicked in today for VMW and NYX.

Shorted CSIQ into the close. Selling short at 15.07, covering at 14.64.

2007-11-13T13:27:00.000-08:00

Ended up shorting ETFC into the close, shorted at 5.24, got out at 5.05.

2007-11-13T11:49:00.000-08:00

quick update... GOOG, AAPL, VMW up additional 2-7% since previous post.

Nibbled on this ETFC run up... Will let you know how my gain ends up...

2007-11-13T07:04:00.000-08:00

See yesterday's post... GOOG up 2% this morning, as well as VMW, AAPL, and FSLR up more than 6% each. ETFC had a nice bounce too, probably short covering, so that may trail off. Not something I'm looking to get into. AAPL is clearly a long term hold, as is VMW (with the intro of their new server). Strong companies will continue to go up, want to double your money in a year? Buy VMW today, it will likely double by end of 2008 ($160-180 by end of 2008 is not unrealistic)...

2007-11-12T12:51:00.000-08:00

Stopped out of VMW. Interesting to see GOOG, AAPL, VMW, FSLR, all the high flyers getting crushed. These companies aren't going bankrupt, so keep an eye out for a good entry point (not happening today though). AAPL is selling phones in Europe now, you can't tell me that's going to boost their growth again. AAPL is going to be a good buy.

2007-11-12T06:52:00.000-08:00

ETFC (etrade) has a forward P/E of 3? I realize they have some writeoffs coming down the pipeline, and Citi is quoted as saying there's a 15% change they go bankrupt. How exactly you come up with that percentage is beyond me. I'm not going to try and catch this falling knife, but the numbers are interesting. If Etrade can pull their crap together (perhaps by change in leadership) I anticipate a money making opportunity...

2007-11-09T13:06:00.000-08:00

I sold all my FSLR for a healthy gain. Nibbled on some VMW. Down a third from it's high, just getting back to it's high will get you a 50% gain. GOOG is getting to be a buy, as is CMG, in my opinion...

2007-11-07T19:07:00.000-08:00

I'm picking well as of late... I bought 900 shares of FSLR this morning, 15 minutes into the open. FSLR in AH is up 23% at $206.50! I'm still holding CY from the previous day, and in AH has popped back up to the previous days close. CY could benefit a bit further from this pop in FSLR, but like DIVX, I will take some gains in FSLR and move along...

Trade Type - Stock - Time Processed --- Shares - Price --- Total Value
Buy -------- FSLR -- 11/07/07 9:47 AM - 900 ---- $170.51 - $153,559.00

2007-11-06T08:09:00.000-08:00

I got out of DIVX today with a 28% gain. You should do your due diligence and take some profits unless being a pig is your thing... Rolled some of the gains into Cypress Semi (CY).

2007-11-05T18:51:00.000-08:00

Just writing it down here really early. But VISA is going to be a stock of the year next year. Also, if WCG Wellcare makes it out of this FBI investigation, it's another potential pick for next year. Their recent release that, "a whistle-blower suit that alleged the company inflated the amount it spent on mental health care to keep more than $35 million that it should have refunded to Florida's Medicaid program over five years", I don't think that's enough to justify a stock falling 75%. 7 million less per year does not equal 75% less value in the company. The company preliminarily posted third-quarter net income of $72.4 million, or $1.71 a share, compared with $43.3 million, or $1.06 a share a year earlier. Revenue increased nearly 42% to $1.43 billion. The company attributed the higher revenue mostly to an increase in membership, with Medicare Advantage plans' enrollment up nearly 84% year over year. Unlike Enron, this company is making lots of money, and it doesn't appear that potential wrong doing was so pervasive as to completely cover up a company that was otherwise going bankrupt. Certainly, worst case scenario earnings are restated, fines are pressed, people go to jail. Also noteworthy is that the whistle blower may have been terminated from their position at Wellcare? If so, could this be a simple attempt by a disgruntled worker, or corporate cover up? Time will ultimately tell on this one, but I'd be willing to take a flyer on this stock at really low levels. By end of 2008, either this stock is much higher, as in triple digits percentages higher, or the company is going out of business, and I'd bet on the former rather than the latter...

2007-11-05T13:28:00.000-08:00

DIVX up 15% AH

I'll have you know that a 10-15% gain in less than 3 hours is not uncommon to me (RIMM and VMW were holdings of mine within the past month). You may think that my lack of blogging here means I don't bank coin. You would be wrong. I will quickly take these profits, as the markets love to give and take away.

2007-11-05T11:24:00.000-08:00

DIVX - This stock has been the pain in my side all year due to its incessant desire to obliterate itself into nothingness. Despite my opinions, I picked up a few shares around 2 PM EST. Seems that big of a decline was a good buying opportunity. This company is growing, and yet stock continues to go down. At some point this trend should reverse. Earnings will be telling... Rarely is it good to buy a stock with such a strong down trend, but I expect this piece of crap to get back to $14 pronto.

MVIS CC Transcript 11/1/07

2007-11-01T14:45:00.000-07:00

Okay... Here you go. The transcript. You're welcome.

Tiffany Bradford:
Thank you. I'd like to welcome everyone to Microvision's third quarter 2007 financial and operating results conference call. In addition to myself participants on today’s call include Alexander Tokman president and chief executive officer and Jeff Wilson chief financial officer. The information in today's conference call may include forward looking statements, including statements regarding projections of future operations, product development and production, applications and benefits, future benefits of contractual arrangements, market opportunities and growth and demand, as well as statements containing words like believe, estimate, expects, anticipates, targets, plans, will, could, would, and other similar expressions. These statements are not guarantees of future performance, actual results could differ materially from the future results implied or expressed in the forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements are included in our most recent annual report on form 10k filed with the SEC under the heading risk factors relating to the companies business, and there are other reports filed with the commission from time to time. Except as expressed required by the federal securities law, we undertake no obligation to publicly update or revise any forward looking statements whether as the result of new information, future events, changes in circumstances, or any other reason. I would now like to turn the call over to Alexander Tokman.

Alex.
Thank you Tiffany, and thank you everyone who has joined us this afternoon. We have sun in Seattle in November which is unbelievable; hopefully this call will be just as enlightening as the weather in Seattle.I'd like to structure this call slightly different than calls in the past. Again, we'll start with the summary of the third quarter operating results. Then Jeff will follow me with recapping of financials of the third quarter and year to date. And next, instead of jumping directly into Q&A, I would like to recap the opportunity that is in front of us. Giving update on rapidly involving markets and technologies, and then we'll close with the Q&A.

So let's being with the Operating results. Overall third quarter operating financial results are very solid as we completed several important milestones, that should allow us to move closer to the goal of commercializing high volume consumer and automotive products based on our proprietary engine called picop. As you are all well aware, we are pursuing products based on this picop platform, and these products will fall into three primary categories. Pico projection displays, automotive displays and eyewear displays. I hope that by now everyone is aware that picop is an ultra miniature projection module that is being designed to produce full color high resolution images, however at the same time be small enough and low power enough to be embedded directly into mobile devices. So we'll focus for a second on the mobile projection applications.

As you know, we have made a major announcement at the onset of third quarter about entering agreement with Motorola to develop pico projection display solutions for mobile applications. You’re also aware of the fact we'll initially work together to integrate the picop projector inside a functioning mobile device for demonstration purposes. To date, we have been discussing our supply chain partners that will be responsible for producing the core engine. But what about the final product? To get the accessory to market you really need to have a system integrator that has the scale and capacity to produce high volume products. It requires different skill and cost structure to be able to support such production. So it should be of no surprise to anyone, that we've been seeking such strategic partners and subsequent to the end of the third quarter, we have signed and announced an agreement with a large Asian consumer electronic manufacturer to integrate our pico projection display engine into a fully functional stand alone projector prototype. This agreement allows us to leverage extensive integration and manufacturing capabilities of one of the worlds largest suppliers of cell phones, personal media players, and digital cameras. The prototypes that we produce together are expected to be marketed to leading consumer electronic companies for private labeling and distribution for mobile applications.

Let's switch now to the automotive sector. As are aware, we have signed several contracts with global tier 1 automotive players in late 2006. One of these players is Visteon. Well, I'm pleased to say that subsequent to the end of the quarter, we have delivered first advance picop projection modules for the automotive heads up display to Visteon. The company, Visteon, plans to use these advanced HUD examples to demonstrate unique performance characteristics of our platform technology in order to secure contracts with their automotive OEM customers.

Let's switch focus now on to eyewear application. And we've made progress in this segment as well. We have delivered a demonstrator unit of innovative eyewear optical system to the US air force. This was done under contract that was awarded to us for a United States air force laboratory in 2006. The importance of this deliverable is that this initial eyewear optical system is expected to serve as the foundation for all new generation of full color eyewear display products from microvision.

Now let's switch topic onto topic currently in place, and I'm talking about bar code scanner. What about our new bar code scanner called ROV, whose sales announcement came during most recent summer. I'm pleased to tell you also that subsequent to the end of the third quarter we've begun commercial shipments of the new ROV scanner. This new product is designed to be simple to use, point and scan device that offers a broad range of barcode symbol decodes. It has large memory to hold more than 4000 scans, and most importantly it runs on inexpensive triple A batteries. It's made compatible with connectivity software with all major mobile computing platforms including windows, palm, symbian, blackberry, and windows mobile. All of this is required to be competitive in mobility markets we're going to target with this product.

On the financing side, we have completed the call, as you know, of the companies publicly traded warrants, raising 34 million to fund operations without an increase in fully diluted common shares. This gives us, Jeff is going to give you a more detailed recap, but we have 40 million plus on hand in cash and cash equivalents. We also have received external industry awards. Frost and Sullivan gave us an award for technology innovation specifically for business and design advancements in bi-directional mems scanning mirror that is the key components of our picop display engine.

In addition to the mentioned results, we continue to mature the picop technology the results of which you'll be able to see in the not too distant future. We focused also on strengthening the existing supply chain partnerships, all while lowering the cash burn from operating activities by 17% yoy. We also, and this is very important, have added a number of key business development and strategic sourcing resources to increase the capacity and depth in both functions, and the new employees that have joined microvision over the past 6 months have honed their respective expertise in companies such as General Electric, HP, MSFT, Polaroid, and Solectron. At this point, I'm going to pause and let Jeff give you an update on the financials, and will come back to the value proposition.

Jeff:
Thank you Alex.

(part of the following is copied directly from the earnings release, since it was apparently read nearly verbatim.)
For the nine months ended September 30, 2007, the company reported revenue of $7.5 million compared to $5.2 million for the same period in 2006 and $2.6 million for the three months ended September 30, 2007 compared to $823,000 for the same period in 2006.

As of September 30, 2007, the backlog totaled $5.7 million compared to $6.9 million at September 30, 2006.The company reported an operating loss for the nine months ended September 30, 2007 of $18.8 million compared to $21.1 million for the same period in 2006 and $6.5 million for the three months ended September 30, 2007 compared to $6.7 million for the same period in 2006.

**The improvement in the operating income was primarily due to improved gross margins on both contract and product revenue. We also had lower year to date SG&A cost.**

The company reported a net loss available to common shareholders of $13.8 million for the nine months ended September 30, 2007 compared to $18.6 million for the same period in 2006 and $4.7 million for the three months ended September 30, 2007 compared to $7.7 million for the same period in 2006. The net loss per share was $0.29 for the nine months ended September 30, 2007 compared to $0.60 for the same period in 2006 and $0.08 for the three months ended September 30, 2007 compared to $0.20 for the same period in 2006.

**The improvement in the net loss available to common shareholders, reflects the improvement in operating income as well as the reduction in interest expense from last year, and also we didn't repeat the cost of converting preferred stock like we did in 2006.**

Net cash used in operating activities was $5.1 million for the three months ended September 30, 2007 compared to $6.1 million for the same period in 2006. **We've previously discussed the goal of reducing the cash burn to approx 5 million dollars per quarter.** The company ended the quarter with $40.4 million in cash, cash equivalents and investment securities. Alex...

Alex:
Thanks Jeff,

So let's come back to the value proposition of the endeavor we're pursuing together. We at microvision are elated about the enormous opportunity that is in front of us because we believe we have all the necessary ingredients for creating something special in Redmond. What do you need to have to create something special? You need to have 4 attributes. First, enormous size of the potential market. Second, strong market pull and clearly defined and articulated unmet needs. Three, you need to have strong technology differentiation. And 4, you have to have singular focus and sense of purpose. So let me go over each one of these items briefly. Market size, there are approximately 1.2 billion handset that will be sold this year, with large percentage which are multimedia phones. There's a large install base of the mp3 ipod users, 100 million total, which at a quarter represent video capable devices. As you know, with the new introduction of apple's new portfolio product this number is expected to increase. There is about 50 million gaming devices that have been sold. 60-100 million digital cameras. All of these devices are considered to be mobile devices all of these devices have small screens that limit user experience. It is very conceivable to think that pico projectors could follow a very similar path and growth trajectory of LCD color LCD displays and digital cameras embedded inside cell phones. By the late of this, before the start of the new millennium, there were virtually no cell phones that had color LCD or camera capability, and look at us now, 6 - 7 years later, almost 80% of these cell phones are color LCD displays and they have built in digital cameras. Given the global move to broadband wireless, we think that our projector could be an enabler of a very valuable and compelling mobile display experience. If you just look at pure numbers and assume that 3 - 5 % of this addressable market of 800-900 users could place picop inside their mobile device it translates to 30-50 million units a year.

Let's talk now about market pull. So far we've been very very encouraged by what we've seen in the market. First, consumers, there's overwhelming belief that consumers want larger display experience from their small mobile devices. Several industry studies have confirmed this. Second, you see a trend in mobile devoices that are drastically impacting the performance of mobile displays and require a high resolution and low power and smaller size. It's clear that future mobile devices center around instant broadband access for all types of multimedia devices because the content today is rich, it contains multimedia application, television, web browsing, gaming, movies, etc. As the confirmation of this you’ve seen many players attempt to enter in this lucrative market space with their technologies. Bottom line, there's a lot to concur, and have a shot in this space, you need to have a technology that differentiates you from others. So what is the differentiators required to be successful. Let's talk about differentiation. We've been very bullish on collecting information from our customers, which includes cell phone manufacturers, consumer electronic OEM's and others. And all of them told us loud and clear it's all about size, power, and image quality, specifically the resolution. Let's talk about size for a second. To be considered an embedded product the display engine has to first fit inside the mobile device without major impact of the form factor of the device. Through the extensive consultations with our cell phone companies, we've been told that 7mm is the maximum acceptable thickness with total overall volume is 5 cubic cm. You know that the prototypes, our early prototypes, we already have shown, are very close to meeting these requirements. The reason why we can achieve such a small package, because our display engine is based on one tiny mirror that is used to create the image. By contrast, most of our competitors require panel or array of pixels to create the same image. Another significant advantage is the requirement of projection lense because of the uniqueness of our technology and the light sources we are using, we don't require a large projection lens. The other technologies, for the most part, do require projection lense that affect the size of the package. Let's switch the topic now to power. so once you get inside the handset, next the second goal is you need to make sure that whatever you put inside will work with typical batteries that are used today in cell phones. Our pico projector engine efficiently manages power by controlling the light sources and turning them on and off on a need only basis. The added benefit of managing the light sources in such a way is that minimally we generate very little heat. That significantly reduces the thermal issues on other components inside mobile devices. By contrast most competing technologies and systems require their light sources to be on all the time, and it creates some issues. If you look at the argument, you know, what is better, lasers or led's. In our opinion laser light is the only viable technology that enables incredibly small scent (?) and low power projector. One that can be actually embedded inside the cell phones, lasers as you know are much more efficient devices than LED's and as a result LED powered devices require more optics to collect and focus the light, leading typically to a larger engine. If you look at the image quality, while size and power put you inside or outside the mobile device, it is the display characteristics that consumers care about, and for this we look at several critical attributes. One is depth of focus, second is resolution, and finally depth and gamut of colors that you can see. If you look at depth of focus, the use models for pico projectors that are embedded inside mobile devices is the one where you want to use them anywhere at anytime to get instant gratification, so the infinite focus is almost a requirement for such applications because picop display engine allows the image to be created in a highly lit room, in a dark room, and dependent upon the light in one specific space, you can increase the image size from a lap top screen size all the way down to the 50" equivalent plasma TV, without refocusing. If you look at the resolution, the important characteristics about resolution is that most of our competitors today are focused on developing projectors that will offer about QVGA resolution. QVGA stands for 320x240 pixels, which roughly corresponds to about one quarter of tradition tv screens. So while QVGA technology is available in today’s cell phones it may be acceptable to view some of the larger photographs and low quality video we don't believe that it will be sufficient for viewing higher quality photos and video as well as web surfing, viewing documents and presentations. As you know, on our pico projections display engine, we're currently at WVGA resolution which stands for 848x480 pixels, which is close to DVD quality picture and we can support numerous devices including all known mp3 players, and some of the high end cell phones which allow to take tv video out. The important part about resolution is about the new trend in high bandwidth networks. Let's look at the growth path. One key advantage of our technology is that it offers a path to an increased resolution over time without a large impact on the engine size. We see this as a distinct advantage over any fixed panel display technologies which include LCD, DLP, (?). What greater resolution for these displays means larger panels with more pixel elements added. We believe that demand for increased resolution will continue to grow as 3.5 and 4G broadband mobile networks become a reality. On the color side, by using lasers instead of LEDs, light bulbs, we allow to generate colors that are not possible by other devices. And the colors extend well beyond the established NTSC color format. If I look now at 4th attribute for the success of this endeavor, and I'm going to come back to focus and sense of purpose, I don't think it has been a secret that since 2006 we have mobilized all of our resources to achieve not 30 but a single goal to accelerate path to market for high volume consumer and automotive products based on the pico projection engine. I think our results today suggest that we have been bullish at executing and completing these critical business milestones all while tackling a very difficult problem of bringing new technology to market. Hey, if you look we've almost doubled our engineering resources in one year to help to mature picop technology from a block diagram on a piece of paper to the advanced prototype phase we are right currently at. All of it while still reducing the burn rate by 17% year over year. Customers and supply chain partners have been affirmative and supportive of the strategy we've put together and we've seen results by new agreements we announced over the past year, and the new agreements will come moving forward. I want to close at this point and say that will have to expect this intensity to continue going forward from everyone of us at microvision, and at this point I will open for questions, for your questions.

Joel:
Can I ask a question, it sounds like you have gone over a number of the critical elements of the picop and your competitive position Alex. Does that mean that at least currently you don't, I was going to ask you do you see any new developments on the competitive front. You still feel very strongly that you are in a very unique and aggressive position in the small projector area?

Alex:
Joel, we have seen competition entrances from several players, as you know, including Texas Instruments, light blue optics have been talking about, Explay, and most of the efforts that have been focused by our competition, appears to be focused on the accessory product, so we expect some competition in this segment. We however consider the embedded engine to be the holy grain for future long term growth, and we're putting a lot of efforts to ensure we stay a few steps ahead of what we think or perceive the competition can do. However, you know, on the other hand, having the competition to me is always a good thing, because it brings the best out of all the parties involved, and I think it benefits the consumers and shareholders in the end.

Joel:
Absolutely. How about the power reduction, do you still see your roadmap to where you need to get. Do you still see the milestones where you continue to reduce power draw in order to really appeal to the eventual integrated monolithic...

Alex:
Absolutely Joel, you know, one of the difficulties in disclosure is that there's a lot of progress that's gone on inside that we can't communicate publicly at this time for various reasons, but I can tell you that the engineering team is extremely bullish, they have very strong power reduction roadmap and we've seen a lot of progress over the past I would say 3-4 months in reducing power to the levels where they need to be for the accessory and embedded product.
Recall that we said that we want to target the accessory for 2.5 hour continuous operation without recharging and we’re targeting the embedded module for the first generation to be 1.5 watts, which is what cell phone manufacturers have expressed to us for all of us to be successful.

Joel:
Very good, can I ask you about next year, I mean do you fully expect to have an
accessory device as well as at least some preliminary distribution, perhaps a retail distribution in place before next years Christmas season.

Alex:
Well our goal has been to introduce the accessory product at the end of 2008, and the goal is still stands. We're still pursuing this objective and you will see it's not going to be a big bang theory; you're going to see some intermediate steps leading to this event, and intermediate steps including populating the market with a small number of the advanced prototypes and giving to our customers which can then use these samples to get feedback from their customers the consumers, so that we have all the necessary information to freeze the final design and ramp the manufacturing production of the product that consumers will want.

Joel:
But you do expect to see some revenue from the accessory device next year, am I correct in assuming that?

Alex:
Our goal, again Joel, our goal is to introduce the accessory at the end of 2008, and obviously as part of this goal we expect to see something on the revenue side, how much is unknown at this time.

Joel:
Understand. Last question, just a house cleaning Jeff, what’s the stock based compensation for the quarter.

Jeff:
For the quarter it was about $550000.

Joel:
Great and one final question, and then I'll get into the queue again. What about the, Alex, how are particular prospects in the queue, you talked about having 25 potential strategic partners, either handset players or accessory players, electronic players. How do they react now, or how have they reacted in the wake of the announcement of the Asian partner. I mean, do you think that helps you, are...

Alex:
Obviously, it's a good questions Joel, it obviously helps. Any time you see a large well known entity whose can be disclosed under NDE to a perspective customers, enters into this game and becomes our strategic partner, it adds further credibility that this is real. Yes it does help, and we expect to see good things in early 2008 as a result of this relationship.

Joel:
Very good, and we'll see you at CES in Jan, good luck going forward.

Alex:
Thanks Joel.

Daris:
Good afternoon guys. Alex just to follow up on Joel’s question on the competitive landscape, you mentioned that most of the players are targeting the accessory market, but TI who just a few weeks ago revealed its second gen. pico projector at SID mobile, they are planning to target both the accessory and the embedded. Can you share your thoughts on what implications this may mean for you, especially since they are planning to launch their product 1-2 quarters ahead of you?

Alex:
It's an interesting question; again I think it's great that TI entered this space because it confirms that this emerging market has a huge huge opportunity. And it also gives a formidable competitor for some of the applications. Again, I think competition is going to be good for us, not bad. In terms of what TI has disclosed I can't comment specifically on what they are going to introduce, we assume they are going to introduce an accessory product next year. In terms of going to the embedded solution, based on all the information we have at hand it shows that it's going to be very difficult to achieve this, not because it's TI, but because any fixed array matrix technology the size and resolution would be a big trade off and you really need to decide is the QVGA image acceptable to be embedded inside the cell phone, or do you really need a WVGQ or even HD once these devices become introduced given the fact that the growth of the global 3.5 and 4G mobile networks. So although we've taken everything that comes up at TI very very seriously, and actually it gives us additional motivational factors to look for second and third generation of the display engine that would give us likely ahead of the competition.

Daris:
Fair enough, I guess with TI though, their product is coming out 1-2 quarters ahead of you. You mentioned the technology aspect of it for the embedded side, what about the fact that their coming out ahead of you timing wise?

Alex:
Timing, whenever you introduce something it will create a new market. Timing is one of the important attributes, but it's not more important than having the right product introduced, so while again I can't comment on TI's introduction and configuration what they are introducing, we're sticking to our guns, we have very aggressive roadmap in place to introduce the accessory product, we believe we have some competitive advantages in several critical areas and we're going to continue following this path and not get distracted by what may or may not happen with competition.

Daris:
I guess maybe I'll ask my question a different way. As you talk to potential partners are you seeing TI there as well?

Alex:
You know, this is a great question and I do have an answer, but I can't share this answer externally because part of our disclosures we had with our strategic supply chain partners, we're not allowed to discuss these types of matters, but yes, it's not out of the question we may share the same strategic supply chain partners.

Daris:
Jeff, some house keeping questions. For backlog of 5.7 million, is any of it for the ROV product, and for opt ex. SG&A was sequentially lower this quarter is this level sustainable, and with cash burn now being 5.1 million, is that level sustainable.

Jeff:
Ok, backlog on ROV, there was some; there was not very much, very little backlog on ROV

Daris:
Less than $1 million.

Jeff:
Yeah

Daris:
Then from SG&A and cash burn standpoints?

Jeff:
SG&A, as Alex mentioned, we've added some poeple in the biz dev business development area and strategic sourcing. So I would expect that this level of SG&A would come up a little bit over the next few quarters.

Daris:
Will it return to what it was last quarter?

Jeff:
No, I don't think it will go back that far... just looking real quickly. No, I would not expect it to go back up to that level.

Daris:
So cash burn then will increase?

Jeff:
Yeah, I think it will fluctuate some obviously our targets will be around 5 million target. We always tend to have a little bit higher cash burn in the first part of the year. So logically might be able to say in for Q4 as you go into the first part of next year it will be a little bit higher then.

Daris:
Ok, thanks guys.

Dave:
High this is Chris on behalf of Dave, good afternoon gentlemen. Jeff, quick question for you, what do you think the share counts going to be next quarter.

Jeff:
Share count next quarter?

Chris:
yeah

Jeff:
I don't see any reason why it would change substantially from what it was this quarter.

Chris:
Ok

Jeff:
56.7 now, I don't see it changing.

Chris:
Ok, I was just wondering if there was anything... Um, so when it comes to your product in the embedded application. Can you talk a little bit about the value proposition to the wireless service providers? I understand the demand coming from the end user and how the handset manufacturers want to be involved but can you talk about the benefit to the wireless service provides.

Alex:
Sure Chris, it's quite simple. The based on the analysts market reports it's expected that video gaming and music downloads total market is going to be 6x from 7 billion in 2005 to 43 in 2010. Primarily driven by increase in video and gaming downloads which is the two applications that our facilitated by having an embedded projector inside of cell phones, so the emphasis for the mobile carriers and content providers is that to them they would love to have every cell phone to have embedded projector because if you do have one in say a cell phone, then more likely than not you would subscribe to mobile TV or other services. More likely than not you would be downloading films and other video too because now you would be able to watch it on a large screen anytime and anywhere so you are not limited or constrained to your living room like you were in the past.

Chris:
Ok, great. And then, just on the supply chain side, you seem to have lined most of your ducks up in a row here. Is the primary last hurdle we have to get over is the high volume production green laser and then you're off to the races from there, or are there other supply issues we need to keep an eye on?

Alex:
Anytime you assemble, architect supply chain, you have to look at every component and consider the importance, obviously the green laser carries more importance because the device is not available in commercial production today and this is why we place special emphasis on it, but we're monitoring every strategic partnership, at the light source level, at the picop level, and now at the product integration level. All of these pieces have to come together in order to have a product, it's not just sufficient to have the components being ready, but system integrators are not. But we're monitoring the progress, we have actually programs in place to monitor these progresses, so far we have been for the most part satisfied with the progress we've seen from the suppliers.

Chris:
Ok, and um, I actually just realized, what would be the diluted shares outstanding in the quarter?

Jeff:
Fully diluted is 66.6 million.

Chris:
Excellent that's it from me, thank you very much

Josh:
Hi Alex and Jeff, this is Josh for Jed who's traveling. Sort of a follow up to the previous questions, do you happen to have more specific timing for when a solid state green laser that doesn't require frequency doubling will be available?

Alex:
Ha ha... Josh, this is a noble prize question, but listen, all I can tell you is there are several companies around the globe who are looking who have development programs to actually produce solid state green lasers. For people who are not familiar with subtleties between solid state and frequency doubling green laser we're using today. Solid state has more selling characteristics amendable to the embedded projectors, it has better power efficiency, it could be made smaller, and it's simpler. To date, no one has indication that they would be producing this any time soon, at least within the next couple years, however there are several companies who have initiated programs to develop this capability probably within the next 5 years I would say.

Josh:
Great, and then another follow-up to that, noticed recently that Osram Toyota signed licensing agreement. Any idea if that agreement pertains to a green laser?

Alex:
To be honest with you, we're not in the middle of this specific agreement. Osram has been known to produce other than green laser components; they produce a lot of LEDs and other optical devices so it could be combination or subset of all of the above.

Josh:
Great, that's it I'll pass it on.

Chuck Bennett (with Janey):
Hello? Hello?

Jeff:
Yes

Chuck:
Yes. How you guys doing? Nice quarter. I had a question. I saw in a recent research report from Maxim that you had a slip in margins from 2013 to 2015? Any reasons for that?

Jeff:
I'm sorry where did you see that again?

Chuck:
It was a research report from Maxim, the young lady who was on there; she had a $7 price target. I don't know, it seemed like she had time machine. I don't know where she got these projections from; she projected all the way up to 2016, are you aware of this?

Jeff:
Yeah, I think that would be a great question to direct back to Daris.

Chuck:
Yeah, I don't know. Ok, I was wondering it seems pretty quiet over there, the only news I saw come out lately was insider selling up until I guess about a week ago. What are you looking forward going into year end, I know you have your CES technology fair like last year. I was kind of curious about maybe some kind of a buyback for insiders or something like that, I know that someone sold, nobody buys, kinda makes share holders nervous that have been sitting here for a long time, kinda quiet.

Alex:
You asked several questions. I'm not sure the latter portion, let me try to give you highlight the first question. I think you said we've been quiet. I hope people don't equate press releases to no activity inside, as I mentioned to you that I know that many of you are thirsty for a new juicy information on a weekly basis, and I truly wish I could say more about many exciting things that are taking place, but we do have contractual commitments that govern disclosures, nevertheless we intend to provide as much transparency as possible in the mean time and I think we've been doing that.

Chuck:
Nah, I understand that, it just seemed that two months back, before we got the warrants called there was an announcement every two weeks. I was kinda curious and I know salaries being what they are, I was kinda curious why maybe you for example Mr Tokman haven't bought any more stock since $1.50? I know someone sold, was that Jeff that sold? I don't know?

Jeff:
That was me, and again we have limited windows of opportunity where we can buy and trade on the stock, and that's an individual decision for each one of our officers to make on their own, and we don't comment on what the individual officers do.

Chuck:
I was a bit curious about...

Jeff:
I think we need to move on to the next caller here... Thanks

John:
Hi Alex and Jeff and congratulation on a quarter it looks like you're progressing fairly well. I have a question on the ROV product. This is really the re-emergence of FLIC, FLIC re-branded only with significant improvements?

Alex:
Ah, no John, this is actually, you can consider this a new product. We improved; last we focused on improving FLIC quality through minimal redesign so we don't have 50% returns upon shipment because of various issues. We achieved that objective with Flic, we actually reduced the quality related issues returned to sub 3% from originally we had somewhere between 15-20%. However 3% is still not enough to be considered where I come from a high quality product plus it lacks some of the basic features to be effective in the mobility markets we are trying to target, so part of the ROV objective was to create a product that would give us ability to penetrate mobility markets, second important goal of that program was that it's the first ever product that microvision developed through the new processes that we implemented so actually it's sold as a product not as a beta that is continuously being reworked in house. Third, we learned a lot by developing high volume mems capability, which we never were able to do in the past because we haven't sold more than hundreds of products containing mems device now we have ability to learn on the job how to produce high volume mems process that is essential enabler for us to support multi million unit opportunity associated with the picop display engine.

John:
Is that an important thing for your customers to see as well, not just for you to learn on the job but so that your customers that want to embed the engine in multiple devices that they now understand that you have that capability.

Alex:
The customer benefit comes from the fact that this product is going to be the three attributes that it provides that flic could not. First it's going to be, we expect it to be more reliable. Second, it's going to have more features and connectivity accessories to work with the operating systems that are currently installed on mobile devices. And three, it just has nice, better look and feel when it's held in ones hand than the previous product, and we get consistent feedback from our customers, this is indeed what ROV achieved.

John:
One last question and I'll sign off. What's the addressable market for ROV, and do you have any of that built into your forward cash burn projections. Any growth into the addressable market?

Alex:
This is a very good question, and I think this question asked 6 months from now, we can give you a better answer. This point in time, we just released the product to shipment, we're building right now the funnel, we will know a lot more in the 6 months what the true opportunity of this device is. A good question John, at this point speculation is probably not a best to answer to you. So within 6 months, ask us the same question, I'll give more educated answer.

Jeff:
John, to your point about the cash forecast, we've been very conservative on our estimates on ROV and cash projections.

John:
Ok thank you.

Tom:
Hi Alex and Jeff, this is Tom in Dallas. I have three questions. Alex, over the last several conference calls you referred to your football analogy and it's a very general idea of what targets you were hoping to achieve and comparative idea to the super bowl or whatever. But you didn't mention this this time, I'm not sure if this is because of the Seahawks record.

Alex:
Tom... Same analogy Tom, same analogy still stands. I'll let you finish your questions first.

Tom:
If you could just reaffirm what your targets on in that analogy format. Secondly, the HUD, is microvision expecting or hopeful, whatever qualifier you'd like to put to the issue, that the '10 model year, with whatever the manufacturer is your hopeful target to be at the retail customer level?

Alex:
Ok, what's the third question Tom?

Tom:
The other gentleman answered it with are you answered the ROV... I'm a little bit... I'm hearing that ROV is being delivered, in 6 months you'll know better the market acceptance, and fair enough.

Alex:
And the reason is, let me just finish ROV, the reason is because we targeting large customers, and it takes typically a few months for them to test drive the product and for us to understand what the update will be, so this is why it's too prematurely to comment. All we know that we have completed the beta evaluations and we've received initial feedback, had some problems, that's one of the reasons we didn't introduce the product in Q3, we introduced the product in October, because we wanted to make sure that the quality issues are addressed and that's the part of the beta evaluation cycle. So within the next 6 months we should have a good feeling on how strong this funnel can be, and then we'll communicate to everyone what we see as the future for this segment.

Tom:
Very good. I know you have those two front questions, and I'll add one more. Is it clear 5 million a quarter, 5-6 million a quarter is your expected burn?

Alex:
At this point in time, as Jeff mentioned, we're going to keep this burn rate similar to what you've seen for the third quarter for the 4th quarter, there's some anticipated increases in the beginning of next year, but we're going to try to maintain it around no more than 6 million for right now.

Tom:
Therefore with 40 million cash, would that arithmetic take you into '09?

Jeff:
Yes, that is correct.

Alex:
Let's come back to your two questions. let me start with, and I'll close with football analogy. Your question was you're still expecting to be part of 2010 models. It's a very good question, and it's a question we constantly working on with our customers which are global tier 1 automotive providers. As you know we have two agreements in place right now. One is with Visteon, another one with an unnamed tier 1 global supplier. We have deliverables that are part of these contracts. I've just communicated that we made the first important delivery to Visteon and the goal is now for Visteon to take these advanced automotive samples and solicit and get final commitment from their customers. It's very difficult to me to say what customers of our customers will be, the only thing we can do right now is focus on our contribution, make sure we are on time, and then help our customers to get their customers on board as soon as possible.

Finally let's come back to football analogy. I think what I said is that we were a 1-15 team in 2005. We went through a major rebuilding process in 2006. In 2007 we're going to content for playoffs. In 2008 we're going to contend for the championship game. And then 2009 we're going to contend for super bowl. Same strategy so it's intact, we're still pursuing the same.

Tom:
That's great Alex, and congratulations to the quarter. One follow-up on the HUD, are you able to give us a little feel for what lead time a end manufacturer needs therefore your customer would need a commitment by, a date, in order would it be June of '08 that would be the latest?

Alex:
To get... every customer is different Tom. Just generally, if I were to use general
guidelines, to get into 2010 model, I think our customers, global tier 1, has to have committed models by middle of '08.

Tom:
So in effect ROV and the HUD would come around the same time?

Alex:
No what I'm saying our customers glboal tier 1's have to identify fully committed customers with the automotives specified to be able to put them onto 2010 model.

Tom:
Ok, thanks very much.

Alex:
Let's see what haven't been said today. Hey look, again I'm going to repeat this again, and I know it's on your minds, I know that many of you are thirsty for juicy information, and that again, I want to stress this, I truly wish I could say more about many exciting things that are taking place internally. The team is operating at extreme extreme high rates. We have a lot of challenges to solve but we all united and there's a sense of purpose, we're trying to create something that's never existed before. The entire microvision team remains focused on achieving the milestones we've communicate to you, to our customers, and to our supply chain partners. I'm looking forward to seeing many of you in Las Vegas in a few months and hopefully you can see some of the fruits of what I have been talking about. Thank You.

2007-10-31T15:11:00.001-07:00

If your portfolio isn't up at least 20% in the past 2 months, you're in the wrong fucking stocks.

2007-10-31T15:01:00.000-07:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year are looking so far this year and compare them to my own stock picks for the year. Again, with the exception of DIVX, I am by far superior to Cramer and his money losing ways...

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

Sep Update

2007-10-01T07:08:00.000-07:00

Nearly all stocks on the list were up this month, it was a good time to be in the market... Looking forward, have to look at retailers, especially those the hold the hot christmas items. Of course, the hottest items this christmas are likely to Apple products, so you have to own apple. I already have an iPhone and 3 or so iPods, but wouldn't reject a new iPod nano or iPod touch. Also gamestop will rise going into the end of the year, video games should be a major seller, the introduction of Halo 3 being huge, and rock band coming out in november, and guitar hero 2 on Oct 29th. All are likely to be huge sellers. ATVI will likely see a jump from the guitar hero release...

Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - June $ - July $ - AUG $ - SEP$ - Current $

GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38 - 507.07 - 522.70 - 510.50 - 515.25 - 569.97

ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58 - 115.17 - 104.88 - 103.08 - 99.39 - 110.69

TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54 - 34.80 - 31.90 - 33.24 - 31.35 - 33.58

CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75 - 36.23 - 34.60 - 34.11 - 32.36 - 35.18

VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23 - 76.28 - 73.86 - 66.84 - 68.51 - 66.92

CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24 - 56.49 - 55.47 - 53.35 - 57.04 - 60.14

ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45 - 63.81 - 61.45 - 60.75 - 58.50 - 61.65

TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41 - 6.26 - 5.79 - 5.61 - 5.63 - 6.35

GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61 - 229.71 - 216.75 - 187.03 - 176.01 - 215.41

SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91 - 179.85 - 169.50 - 136.51 - 143.56 - 127.52

KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00 - 18.57 - 18.23 - 19.70 - 17.16 - 17.63

MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92 - 71.80 - 70.14 - 66.21 - 69.41 - 69.67

SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02 - 28.83 - 26.24 - 26.50 - 27.55 - 26.20

NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33 - 86.19 - 73.62 - 77.00 - 72.75 - 78.69

NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71 - 127.92 - 125.63 - 123.54 - 129.02 - 130.00

MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61 - 151.25 - 165.87 - 150.82 - 129.02 - 147.73

CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75 - 535.25 - 534.36 - 555.02 - 554.80 - 593.70

MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40 - 36.49 - 38.63 - 41.50 - 36.15 - 32.67

DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16 - 15.80 - 15.00 - 13.49 - 13.94 - 14.80

LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56 - 5.87 - 5.85 - 5.17 - 5.23 - 4.64

HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20 - 39.89 - 42.98 - 40.36 - 44.91 - 57.21

ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00 - 19.13 - 18.67 - 17.28 - 19.49 - 21.61

HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77 - 36.44 - 34.50 - 35.81 - 34.59 - 38.40

BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28 - 88.09 - 41.59(split) - 36.50 - 34.77 - 37.94

CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23 - 87.52 - 85.28 - 94.10 - 103.99 - 117.61

UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50 - 47.88 - 45.65 - 61.41 - 65.01 - 60.67

APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30 - 47.44 - 58.43 - 59.07 - 58.67 - 60.50

GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72 - 83.78 - 38.80(split) - 37.01 - 36.37 - 41.24

MVIS $3.07 - 3.59 - 3.38 - 3.75 - 4.23 - 5.59 - 5.00 - 5.10 - 4.79 - 4.59

AAPL $83.80 - 84.74 - 87.06 - 93.65 - 99.47 - 118.40 - 121.26 - 133.61 - 138.48 - 154.63

2007-10-01T07:04:00.000-07:00

2007-09-03T19:39:00.001-07:00

Aug update...

2007-09-03T19:30:00.001-07:00

Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - June $ - July $ - AUG $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38 - 507.07 - 522.70 - 510.50 - 515.25
ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58 - 115.17 - 104.88 - 103.08 - 99.39
TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54 - 34.80 - 31.90 - 33.24 - 31.35
CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75 - 36.23 - 34.60 - 34.11 - 32.36
VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23 - 76.28 - 73.86 - 66.84 - 68.51
CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24 - 56.49 - 55.47 - 53.35 - 57.04
ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45 - 63.81 - 61.45 - 60.75 - 58.50
TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41 - 6.26 - 5.79 - 5.61 - 5.63
GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61 - 229.71 - 216.75 - 187.03 - 176.01
SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91 - 179.85 - 169.50 - 136.51 - 143.56
KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00 - 18.57 - 18.23 - 19.70 - 17.16
MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92 - 71.80 - 70.14 - 66.21 - 69.41
SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02 - 28.83 - 26.24 - 26.50 - 27.55
NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33 - 86.19 - 73.62 - 77.00 - 72.75
NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71 - 127.92 - 125.63 - 123.54 - 129.02
MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61 - 151.25 - 165.87 - 150.82 - 129.02
CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75 - 535.25 - 534.36 - 555.02 - 554.80
MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40 - 36.49 - 38.63 - 41.50 - 36.15
DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16 - 15.80 - 15.00 - 13.49 - 13.94
LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56 - 5.87 - 5.85 - 5.17 - 5.23
HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20 - 39.89 - 42.98 - 40.36 - 44.91
ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00 - 19.13 - 18.67 - 17.28 - 19.49
HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77 - 36.44 - 34.50 - 35.81 - 34.59
BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28 - 88.09 - 41.59(split) - 36.50 - 34.77
CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23 - 87.52 - 85.28 - 94.10 - 103.99
UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50 - 47.88 - 45.65 - 61.41 - 65.01
APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30 - 47.44 - 58.43 - 59.07 - 58.67
GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72 - 83.78 - 38.80(split) - 37.01 - 36.37
MVIS $3.07 - 3.59 - 3.38 - 3.75 - 4.23 - 5.59 - 5.00 - 5.10 - 4.79
AAPL $83.80 - 84.74 - 87.06 - 93.65 - 99.47 - 118.40 - 121.26 - 133.61 - 138.48

2007-08-01T07:43:00.001-07:00

The intriguing stocks in the list this month are ATI, GS, SHLD, SBUX, NYX, DIVX (how low can it go), and MVIS...

Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - June $ - July $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38 - 507.07 - 522.70 - 510.50
ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58 - 115.17 - 104.88 - 103.08
TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54 - 34.80 - 31.90 - 33.24
CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75 - 36.23 - 34.60 - 34.11
VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23 - 76.28 - 73.86 - 66.84
CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24 - 56.49 - 55.47 - 53.35
ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45 - 63.81 - 61.45 - 60.75
TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41 - 6.26 - 5.79 - 5.61
GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61 - 229.71 - 216.75 - 187.03
SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91 - 179.85 - 169.50 - 136.51
KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00 - 18.57 - 18.23 - 19.70
MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92 - 71.80 - 70.14 - 66.21
SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02 - 28.83 - 26.24 - 26.50
NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33 - 86.19 - 73.62 - 77.00
NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71 - 127.92 - 125.63 - 123.54
MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61 - 151.25 - 165.87 - 150.82
CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75 - 535.25 - 534.36 - 555.02
MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40 - 36.49 - 38.63 - 41.50
DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16 - 15.80 - 15.00 - 13.49
LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56 - 5.87 - 5.85 - 5.17
HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20 - 39.89 - 42.98 - 40.36
ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00 - 19.13 - 18.67 - 17.28
HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77 - 36.44 - 34.50 - 35.81
BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28 - 88.09 - 41.59(split) - 36.50
CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23 - 87.52 - 85.28 - 94.10
UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50 - 47.88 - 45.65 - 61.41
APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30 - 47.44 - 58.43 - 59.07
GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72 - 83.78 - 38.80(split) - 37.01
MVIS $3.07 - 3.59 - 3.38 - 3.75 - 4.23 - 5.59 - 5.00 - 5.10
AAPL $83.80 - 84.74 - 87.06 - 93.65 - 99.47 - 118.40 - 121.26 - 133.61

2007-08-01T06:59:00.000-07:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year are looking so far this year and compare them to my own stock picks for the year. Again, with the exception of DIVX, I am by far superior to Cramer and his money losing ways... Clearly, by now I would have switched out of DIVX for a better position, but for the sake of following picks for an entire year, it will remain...

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

Microvision CC Transcript 7/31/07

2007-07-31T22:35:00.000-07:00

(MVIS CC was crudely transcribed, please leave any errors and/or corrections in the comments and I will correct them...)

Jeff Wilson:
Thank you. I'd like to welcome everyone to Microvision's second quarter 2007 financial results conference call. In addition to myself participants on today’s call include Alexander Tokman president and chief executive officer.

The information in today's conference call may include forward looking statements, including statements regarding projections of future operations, product development and production, applications and benefits, future benefits of contractual arrangements, market opportunities and growth and demand, as well as statements containing words like believe, estimate, expects, anticipates, targets, plans, will, could, would, and other similar expressions. These statements are not guarantees of future performance, actual results could differ materially from the future results implied or expressed in the forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements are included in our most recent annual report on form 10k filed with the SEC under the heading risk factors relating to the companies business, and there are other reports filed with the commission from time to time. Except as expressed required by the federal securities law, we undertake no obligation to publicly update or revise any forward looking statements whether as the result of new information, future events, changes in circumstances, or any other reason. I would now like to turn the call over to Alexander tokman

Alex
Thank you Jeff.
Thank you for joining us this afternoon. The agenda for today will be as follows. We'll start with the Operating results, I'll provide some color on some of the more important developments, Jeff then will provide the financial summary, and we'll close with the Q and A session.

Recall ah, I looked at the last quarter transcript, and the last statement from me was that, uh, we told you that we were getting ready for the SID and we're going to delight you as well as our customers by the progress we expected to see in the second quarter. Well the results are in, and I'm pleased to say that we've made significant progress in all important areas of the business. Including new business development, technology and operations, and financials.

Let me just begin with the business development are first. Our business development efforts during the second quarter resulted in several new customer contracts, including the joint development agreement with Motorola, as well as new development contracts with aerospace and eyewear applications. Motorola development effort was announced subsequent to the end of the quarter, uh focused on developing pico projector solutions for mobile applications based on our core technologies. We were also awarded a 3.2 million contract by the US air force to provide a lightweight see through full color eye wear display prototype. We strongly believe that this solution would be beneficial to armed forces and also serve as the first necessary step on the way to the consumer application. We also signed a new commercial product development agreement with a leading transportation company to develop a picop based display solution for aerospace applications. Let me now touch on some of the developments on the technology and supply chain front. We've shown progress in both the areas. First, we developed and successfully unveiled at the SID conference a new wide angle picop display that we believe better addresses consumer needs. This wide angle pico projector was developed based on direct customer feedback, and it creates a full color WVGA image with approximately 4 times the viewing area of our previous SVG display. While stay maintaining its original sleek form factor. We also completed and announced a successful integration of a green laser from Osram opti semiconductors. And as you previously we have announced similar type of compatibility with corning and novalux green lasers. We also during this quarter formally introduced orlikon optics as one of the high volume manufacturing partners for picop after originally announcing this joint development effort at the end of last year, we have been collaborating with Orlikon to optimize the design from manufacturing of the opt mechanical engine, and as you know we are targeting this for the consumer and automotive applications. Infocom served as the platform for this formal announcement. Finally we introduced a new barcode product based on our core mems technology. ROV, our new laser based bar code scanner, incorporates core mems scanned beam technology and was introduced earlier at the Microsoft mobile and embedded defcon conference. The scanner was developed for use with mobile applications to provide a simple and affordable point of scan capability to our customers. The initial feedback on beta units has been positive. Before Jeff covers a summery of the financials. Let me just touch up on it. We exercised the right to call publicly traded warrants raising in the process over 34 million dollars to fund our continuing operations. All of it without an increase to the companies fully diluted common shares outstanding. And our quarterly and first half financial matrix have approved in every category over the same time last year. And Jeff will outline these two next.

Jeff:
Thank you Alex, Um just going over the first six months results. For the first 6 months ended June 30, we reported revenue of 4.9 million dollars compared to 4.4 million dollars for the same period in 2006. And for the quarter we have revenue of 2.7 million dollars compared to 1.9 million for the same period last year. As of June 30, our backlog was 7.7 million dollars compared to 1.5 million for the same time last year. On the operating loss for the 6 months was 12.3 million dollars compared to 14.4 for the same period last year. And for the quarter we had a loss of 6.3 million compared to 7.8 million for the same period last year. Also on the net loss available for the common shareholders, we reported a loss of 9 million dollars for the first 6 months of 2007 compared to 10.9 million for the same period in 2006 and 2.2 million for the 3 months ended June 30 compared to 11.2 for the same period in 2006. The net loss per share was 21 cents for the first 6 months of 2007 compared to 40 cents in 2006 and loss of 5 cents per share in 2007 compared to 38 cents for the second quarter of 2006.The net loss available for common share holders for both six months periods include gains from sales on our investment, Lumera. We have a gain of million dollars in 2007, and 7.3 million in 2006. One of the other big swings was the non-cash expense associated with the liability accounting for the warrants issued to the former note holders. For the 3 months ended June 30, we had an expense in the current quarter of 1.9 million dollars in 2007, compared to a gain of 1.2 million last year. And for the six months period, we had an expense of 2.6 million dollars in 2007 compared to a gain of 3.1 million last year. As we've discussed in the past on the warrant... the liability accounting for the warrant move inversely to our stock price. As our stock price goes up, we record additional expense associated with those warrants. On another note, we ended the quarter with 17.2 million in cash, cash equivalent, investments securities, included in that 6 million from the conversion of 2.3 million of the public warrants. Subsequent to the end of the quarter we received an additional 28.1 million from the conversion of additional 10.6 million warrants. Alex...

Alex:
At this time, I think we're ready to open for questions...

Q&A:

Joel:
Thank you very much. Good afternoon Alex and Jeff.

Guys: Afternoon, Hi Joel.

Joel:
It's very gratifying to see the balance sheet look so pristine now obviously in the wake of the warrant exercises, in getting some of those awful derivatives off the books, so congratulation in that regard. Also, uh, having all that additional liquidity is certainly very, must be also gratifying. But obviously most of us our concerned about the technological and business development issues going forward Alex This is obviously most of us are going to want to ask. When will we get an indication of some of the critical metrics and commitments, and involvement with the Motorola deal and how can we measure that in terms of milestones going forward, and in addition to that it would make sense I would think for you to hurry up and court another partner or two so that you can play the partners off of against each other. I've had stocks in the past where a large company like Motorola has signed an agreement and has delayed significantly and really screwed up a companies operating model, so any clarity you can provide in that area would be valuable. And also finally, Jeff, is there anyway we can forecast these stock based compensation issues, they are very lumpy. That's all I have for now.

Jeff:
I'll take that last one first, on the stock based compensation. Going forward now, as I talked about, their based on the Black-Schultz value of the warrants, and the Black -Schultz value varies with the stock price. And so they're very difficult to predict on a go forward basis. You basically have to do modeling of the stock price.

Alex:
Joel, let me come back, you asked several different questions. Most of them I believe everybody wants to get answers to. Let me provide as much clarity as I can, staying within the bounds. So let’s start with Motorola. So basically you all know that based on the press release that we will be working with Motorola to develop a pico projector based solution targeted at mobile applications that will be leveraging our pico projector. The first step in this development effort is to integrate our latest version of the picop inside a functioning mobile device for demonstrating purposes. Why is this important? This is the first necessary step before you go to productization and commercialization. Because you need to get valuable feedback from the end user so you can ensure long term success of something. Unfortunately I can not give you the timing of the development with Motorola independently of the I can tell you as I mentioned earlier. Our target independently of the development with Motorola is to introduce an accessory product by the end of 08 and an embedded solution in the first half of 09. I hope this will cover your question on Motorola. The second question was, about new contracts and what is the time and viability of these. Based on what you've just seen most recently specifically the agreement with Motorola, we're not precluded with working with other customers on similar applications. And we're currently in negotiations with several handset manufacturers, and consumer electronic companies. And we expect to enter additional agreements in the future.

Joel:
Thank you Alex. One quick follow up on that. Might we see something at CES in January that might involve both you and Motorola?

Alex:
I can't again Joel, I can not refer, answers specially related to the agreements with Motorola. All I can tell you, look at our history. I you look at the past CES in January of this year. If you look at what we did at SID. Our goal is delight you every time we're going to come to these large trade shows. And so far, if the history is any predictor of the future you can see that we've been delivering. So expect something from us at CES, I can't tell you what it is yet at this time.

Joel:
Thank you very, by the way, I don't want to discount congratulations on making your target before the end of summer on a major deal, that's a very very good news. Thanks very much I'll get back in the queue.

Alex:
Thank you Joel

Chad:
Hi, thanks, and congratulation on signing MOT. Couple questions. Um, first off Alex, aside from this MOT deal, I was wondering if you could maybe give us um little bit of general perspective on, hypothetically speaking in terms of signing these types of deals, would there be NRE's that are involved, and how would the revenue share go in developing the product, again not speaking directly to MOT, but just in general terms.

Alex:
Good question Chad. Typically there's no one, there's no deal that's identical to the other because the business model's so different depending upon what each party would contribute to the table. In some case we would expect to provide full pico projector display engine. In some cases we would provide subsets of it because a given OEM partner may have already built an electronic solution specifically for the video processor especially if our device will be embedded inside their device. And finally there is also some interest to get some critical components from us no one else has to date. Based on what I described to you, we expect to have all 3 different flavors of deals and again I can't go into detail on Motorola, but our goal is to pursue common solution, and common solution is to provide full display engine that serves the need of multiple customers. In terms of NRE question. Again, the amount typically differs depending on the objective timings, and scope of the deliverable, but yes, typically NRE is integral component of a deal that we sign. And again, the amount is what's going to differ, depending on how far or how close we are to a specific productization effort; also it's going to depend heavily on anticipated volume from a given partner. So for a longer stability and higher estimates from a given partner, we may be willing to take less of an upfront investment for a guarantee on a larger volumes later on.

Chad:
Great. And then, just looking at the cost of an embedded solution. Do you feel confident that you can get around 50 dollar type of price point, 2 to 3 years out given the road map the laser providers are giving you?

Alex:
Well this is a tough figure that you just specified. If you are referring to the standalone accessory, keep in mind that we have been deriving our target based on existing consumer models, if we stick to a consumer segment for a second, and ... anticipated to be anywhere from 400-200 obviously in high volume, from there we use the common known metrics on margins for the OEMs and their dealers, and derive for the transfer price is supposed to be and the transfer price would be higher than $50 based on this analysis. All this would be high volume; maybe 5 years for an introduction, the expectation is that we could reach the figures you just mentioned. And they would be primarily driven by a reduction in prices on the green laser as well as the blue laser.

Chad:
Great, I'll pass it on thanks.

Bob:
Good afternoon gentlemen, how are you?

A,J: Good, Good afternoon.

B:
Congratulation on all of your milestone achievements. Wonderful, keep up the good work. My one question is. In order for Motorola to embed the IPM in cell phones, the IPM needs to be repackaged. Can you give us an update on how the progress is going on the repackaging?

Alex:
Bob, listen now. Let me start first with a rebuttal. We never said this was going to be an embedded solution. We had explicit agreement with Motorola the details of the specific development are not disclosed so we haven’t' specified whether it's embedded, accessory or any other permutation. However, general question, if you're asking what are we going to do with the final pico projector and how we're going to embed it inside the final envelope of a given customer, that is the subject to each of the development agreements that we are seeking to answer, So it would differ for the most part, depending on the configuration of a device we trying to part of. If it's a cell phone, from OEM 'X', they're going to have one type of layout, however most of them will have to adhere to a shortened form factor requirement that are predicated by our design and most of them are so far have shown willingness to adjust to our form factor limitation.

B:
Very good, thank you very much Alex.

Joe:
Hey Alex Jeff, congratulations on the Motorola deal.

Two quick questions for you. One, Can you address your organizational development as far, you know, any additional staff you have brought on, or are thinking of bringing on, business development or other areas. And two, can you give us, most of your contracts that you've announced or deals you've announced in past the other party has remained a little secretive for competitive advantage, can you give us a little color on why Motorola was willing to go ahead and put their name out there?

Alex:
Ok Joe, two separate questions. Let me being with the first one. Organizationally, when I came in, I think at the end of 05, our composition was we had about 117 employees and about 56 engineers. As you know this organization is moved by our technical talent and our ability to innovate. A year later, so we are today and today we are essentially composed of 130 employees just around 130 employees of which 80 are engineers. So we took a great measure of reducing SGNA and improving our position on the development side to get us faster to market. In terms of the BE talent. I've been a great envy BE team over the past 6 months, and we have new people on board who are already contribute to various important projects. Second question is related to, uh, I believe to Motorola, and uh, please rephrase your question, because I remember it was about Motorola...

J:
You have an unnamed aerospace contract, why would Motorola willing to go ahead and give their name?

A:
Fair question, you know, I told you many many times not you specifically but during the earnings call, it's very uncommon for a large company to disclose their intentions early in the development process. Large companies typically take low risk approach, get all their ducks in a row, and then 3 or 4 months before commercialization they do a big launch. Motorola decided to do otherwise. I think it's a tribute to the technology, I think it's a tribute to their innovative spirit, and I believe it.. You will not see many of these announcements or from other smaller companies where a large partner is typically ready to introduce their name this early in the process. We're pleased and we're going to be sure that this project is successful as far as we're concerned, and we know Motorola is also very serious about it.

J: Thank you guys

Will:
Hi guys, great job, sounds like the turnaround, etc, is in full process. Just a, as you clean up the balance sheet here, I just want to know how you guys think about the cash burn going forward. Clearly the deal that everybody is talking about how should we think about that going forward in terms of requiring resources, particularly cash, from the company?

Alex:
We're double team this so I'll begin and Jeff will finish. Basically if you look at our balance sheet, as reported, our operating burns around 6 million plus, down from last year same time. Our goal is to further reduce this, despite the fact that we just we have a large amount of cash to take us into 2009, we still going to meticulously how we spend this cash, and ensure that extends as far as possible, and only spend on the important activities. Jeff do you want to add anything.

Jeff:
As we have in the past, we're going to monitor our cash requirements and the market, and look at that at the appropriate time.

Will:
Is there any change in resources going forward?

Jeff: I don't think we expect any significant changes in the short term. Obviously as we get closer to product introduction you'll have to continuously monitor that. But certainly over the short to mid term I wouldn't expect anything.

W:
Ok thanks a lot.

Randy:

Good afternoon fellas, I'll add my seconds and thirds to the great work you're doing. Hey my question is to uh, speaks to the progress being made by your 3 or 4 partners in the integration of the MEMS technology with the laser technology in particular the green laser. And can you give us some flavor, some color, Alex as to the timeline that you thought that might be achieved, if you said it in the past I don't recall what it is.

A:
Good question Randy. Let me just from the end, if you assume that our targets for commercializing standalone pico projector at the end of 08 and embedded in the first half of 09. If you start working backwards, it means the supply chain needs to be fully ready at least 3 months prior to that event. Which means that the design of manufacturing activities have to be completed and validated sometime by the middle of the year, and the design of various configurations of this pico projector need to be frozen sometime early in 2008. There obviously risks, this is the real world this is not a ? world. We realize there's a lot of risk that may inhibit us in adhering to this timeline. But what we are doing rigorously we are identifying these risks proactively and engaging our supply chain partners to resolve these issues before they become an issue, so we are working right now on several critical items that may inhibit us a year from now we already identified these and we engaged fully engaged our green laser partners as well as OEMs for the opti mechanical engine to resolve these issues to mitigate the path and risk to market.

R:
Ok, would you, could you comment on, I know its risk, talking about risks, a risk in anything you say in response to this question. Are you satisfied with the progress to date coming out of those sources.

A:
I'm a difficult person to be satisfied. To honest, I'm never satisfied, unless it’s something that's bullet proof. SO am I satisfied with the progress, I am to this point with the progress we're making. The engagement from the supply chain partners has been exceptional. When the problems do occur, they immediately respond and we solve these together. At this point I feel pretty good, and again we monitor this on a weekly basis. So things can change, but at this point we feel strong about where we're going and we feel comfortable that we can solve most of these issue before we commercialize these products.

R:
Ok Good thank you. And a second question if I could. I don't believe you commented on anything relevant to HUD on the automotive market. Could you give us an update knowing the form factor and power constraints that you see in the smaller applications like hand held mobiles is not anywhere near as critical in that environment, so can you give us an idea of where we are in that endeavor.

A:
Absolutely, as you know, we have to date two existing development contracts with the automotive tier 1 integrators. One is with a company Visteon, and we are executing per defined deliverables, and we so far we're on track to what we're committed to deliver to this specific customer. The second customer has been unnamed to date. And we're focusing on the different application of the pico projector. This specific customer is seeking to integrate a tiny projection display inside the instrument cluster board to improve the user friendliness of the cockpit and we're progressing nicely in this area also. Obviously we encountering challenges, but so far we've been able to solve anything that came our way and we feel comfortable we can take these projects to the next step.

R:
Ok Good. And did you ever give us a timeline when that might be a real instrument in whatever automobile company you wind up dealing with.

A:
The only timelines we've provided were given to us by the customers, and they target 2010 car model. And again 2010 car models depending on where you introduce it in US 2010 models go out in market in 2009, in Asia and Europe it's 2010. Right now our partners are seeking pulling customers of this technology for them as the list gets firmer and we understand whether these end customers located in the states Asia or Europe we'll give you more color and more clarity when this is going to be available.

R:
All right, good. Last question if I might. You visited; I think you commented on the last call, during the SES conference earlier this year, with a significant number of parties that have an interest in your technology, our technology. And yet we've heard of 2 or 3 or 4 relationships or 5 whatever it is. But the number was much larger in terms of meetings, have you seen any other things now that people are more aware of the technology that are surprisingly and surprising and interesting applications of the technology, not to say that you don't have enough on your plate already, but other things that we can be kind of dreaming about that might have cropped up in the last six months as the result of those meetings.

A:
Absolutely randy. There's ... Our team, actually have a pretty creative team inside microvision on marketing and engineering teams, and we have several new exciting applications we're thinking of in the areas of gaming as well as other entertainment areas. Customers obviously come back with their ideas. Most of the time, to be honest with you, it's already something we have considered, and we just try to validate it and solidify the applications better understand the workflows, so we can design a product that is best suited for a specific customer demographic group.

R:
Ok, well thank you very much, and I look forward to the next call and another quarter of great progress.

A:
Thank you very much sir.

Jeff:
Good afternoon. Just to follow up on that. I thought that you I have a couple questions, that you had signed an agreement with a Japanese electronic company in the past.

A:
We stated that we signed one of our OEM partners is a large Asian manufacturer, not Japanese.

J:
As far as the green laser is concerned. I just want to clarify this. You announced that you completed integration of it. So how much further work needs to be done with the green laser for a pico projector is it complete or is there a lot more work that needs to be done with it?

A:
You know, we announced, that we made pico projector compatible with Osram green laser. I told many times in the past that our success is heavily predicated on building contingency paths and so were not relying on a single source supplier on critical components because we become very dependent on their success. And what you have heard from us so far, an acknowledgement by our supply chain partners, we took the initial important step in making sure that their components are compatible with our design and now we're in the process of completing the final details designs on the components and the engines before you start ramping the manufacturing capacity and commercializing. SO we're in development stage. I always told everybody that, you know, you have several stages before you get to product; you get definition phase, design phase, development phase, manufacturing phase, commercialization phase.

J:
At least you have a prototype that you know that works at this point.

A:
That's correct.

J:
Ok. Now you haven't talked at all about your bar code scanner business. And since we got all these other things on the plate, what is the game plan with this division.

A:
Well, as I mentioned, we mentioned our new bar code scanner, that is based on the first on our core technology. We excited about the initial feedback on this product. There is huge untapped market that we're trying to address in the mobility space, that requires a simple to use inexpensive device for data capture and transfer. Our, you know, we have been developing a funnel of large customers a typical profile of a customer could be something a company which is 4 or 5 billion in revenue that typically ranked on the top of the list as a Microsoft reseller, hp platinum reseller, etc. The growth plan is to integrate ROV with key mobile application providers.

J:
I guess I just get concerned that you put too much effort into that division when these other applications I think over the long term will give you such a greater return for the investors.

A:
Well, Jeff, if you paid attention to what I spoke in the past couple of earnings calls, we’ve actually done something already about this. We’ve developed capabilities in India at a company called ? where we source most of the development and support of the barcode scanner from India.

J:
Oh that's right, yeah

A:
And that's a step to which I think you are alluding but we've already done that.

J:
HmHm, Ok. And how many shares of Lumera do you current have now?

Jeff:
About, 237000 shares.

J:
23700 shares, ok great. Thanks very much

A:
No problem

Jeff:
Hi guys again like everyone else. Great news about signing Motorola, and about meeting your milestones, I just had a couple of quick follow ups. I think, um, you said that you had a goal of introducing an accessory product is it the beginning of 08 and embedded product in 09

A:
No, accessory was end of 08, and embedded early 09

J:
End of 08 early 09, ok great. Um, just wanted to verify. Was the 6 million plus cash burn, was that for the first half of 06 or was that for the second quarter.

A:
The second quarter.

J:
Ok, so that's what I thought. SO it seems like, um, with your lumera stock remaining, and 45 million of cash. Do you guys feel confident now that you guys have liquidity to get you through to first products being introduced?

A:
We have, pleased that we have liquidity to take us into 2009, at the current burn rate as we mentioned, Jeff mentioned earlier, we have a efficient running room, however, as we get closer to commercialization, we may look at other options to further enhance or go to market strategy, we may need some cash to do things we haven't planned today.

J:
Ok, but for right now, liquidity, you have it through into 09 is that correct?

Jeff:
Through 2008

J:
Through 2008 OK

Jeff:
If you just extrapolate the burn rate, yeah you'd get into 2009, but we're saying we're comfortable through 2008.

J:
OK, great. Thanks guys, that's all I had.

Brian:
Good afternoon guys, thanks for taking my question. Just some housekeeping, a lot of the questions have been asked, but in terms of the share count. Jeff, can you update us in terms of where we are to date now that the warrants have come in on a basic share count. And then if we were to kind of extrapolate, go forward, to when we finally do get to profits, what would the fully diluted share count be? And basically just trying to figure out, what's the appropriate kind of market cap valuation that we're looking at right now. And then, just as a clarification Alex, I think you said that your target, not necessarily from Motorola, but the target from the company in general is to get your first product out into the market by the end of 2008 for the picop. Just wanted to clarify to make sure that's the first time we should be thinking of actually seeing product revenues.

Alex:
Yes Brian, let me start with your last question, and Jeff will
Yes, we're targeting the standalone picop projector for the end of 2008, so that is correct

Jeff:
On the share count. The current share count is about 56.6 million shares outstanding that's after the warrant conversions complete. We have about 5 million shares in employee and board options. And about another little bit under 5 million in other private warrants, to say with previous financing. You have about another 10 million shares in the fully diluted number, which brings you to just right at 67 million shares.

B:
Ok great. And then the employee options, are those all in the money at this point?

Jeff:
Most of them would be. There might be a few that are not. But for the most part yes.

B:
Ok great. Just one final one. In this situation where you're giving NRE's in kind of a co-development type of role, how does it equate in terms of expenses you're getting the revenue in, you're spending a little bit in terms of the R&D effort towards that. What typically does an NRE flow through in terms of an operating profit generation?

J:
If you look at our financials, historically we've had a gross margin on the NRE contracts of between 40-45%.

B:
Is there any operating expenses that are assigned to those also?

J:
Of below the line like SG&A?

B:
Yeah, operating expenses.

J:
No, those no. Not specifically no.

B:
Ok, great. Thanks guys

Jake
Hi guys, I'm a little new to the story, could you tell me how much cash you have on hand right now?

Alex:
Well if you look at the press release you'll see we ended the quarter with 17.3 million in cash and investments. And subsequent to the end of the second quarter we converted the remaining warrants for addition 28.1 million,

Jake:
So you looking at 45 million?

Alex:
We also spent some between end of second quarter and today.

Jake:
Ok. I have a question, I've been to your website for the picop projectors, and I was wondering if you had an idea of how much one of these items would cost per consumer?

Alex:
It's going to be strictly driven by an application and a price is going to be established by an OEM, but our initial studies, direct user studies, have shown that a $300 device with functionality that exhibited by what we would be described today would be desired by about 90% of the participants in these studies who took this test.

Jake:
You could use this as a regular TV, or you could hook this up to your cable boxes, right?

Alex:
You could, think of it as a projection terminal that could be connected to a variety of devices that output video. Yes, it could be one of the applications.

Jake:
Ok, I think you probably could get a lot more for it than that. Another question, I was looking at and studying the technology of cell phones, and I was really interested in the device maybe going into a cell phone, I guess some of these other people are too. What time period would you probably give a rough estimate when you could get maybe the chip small enough, where it actually would fit into a handheld device.

Alex:
Our target been consistently communicated our target to get inside a device such as cell phones, first half of 2009.

Jake:
Did you do anything special to convince Motorola to make this announcement on their handheld device?

Alex:
I can't comment on Motorola. But independently of Motorola, this is what we said is our target and although the risks are there, we have been consistently reducing them on the way to commercialization. So we still are standing by this target.

Jake:
And this is a non-exclusive deal is that right?

Alex:
I can not comment on the details, but what I can tell you is that we are not precluded to work with others on similar applications.

Jake:
Ok, and uh, I guess that's it. I appreciate it, thanks so much.

Alex:
Thank you

Joel:
Thank you very much, very quickly Alex and Jeff. Any in your discussions with Motorola and considering this agreement and the collaboration here, have you talked with operators and Motorola customers, either in advance of striking an agreement or during recently in terms of interest of trialing either an accessory device or a embedded form factor?

Alex:
Short answer is yes Joel. Since middle of last year to be honest with you, when we met the value chain for the mobile space, we quickly realized we need to get engaged tightly with the mobile carriers. And we have done this over the past 9 months we've seen strong interest from global mobile carriers, specifically in Asia and in Europe, and we're just beginning to see a pull from within the United States.

J:
Is it accurate to presume that if you do have a demonstration unit whether it's an accessory form factor or ideally a handset form factor, some of these operators would be excited to trial that, wouldn't they, in some regard.

A:
If you use apple iPhone as an example, and apple's deal with Verizon, I would say yes. Because think about this, it's a revenue generator for the mobile carriers in the US. If you rack and stack all the global mobile operators and call your right upper quarter stars and your lower left dogs, and then you have cash cows, then all the mobile carriers from the US, have fallen into a dog category, they suffering from the existing competition, and they fighting for these customers with very little pull, and they need differentiation. And the differentiation comes in the form of a tiny projector whether it's connected to a cell phone or embedded into a cell phone which allows you a right to subscribe to mobile TV and download content that typically you would not download because you can't see it on the 2 inch screen.

J: SO speaking of the iPhone, are you talking to apple?

A:
We have list of about 25 target customers and that have been containing apple. Yes.

J:
OK Congratulations. Good luck going forward guys. Bye bye.

A:
Thank you.

Closing remarks:
Well, uh, what can I say, I hope that all of you have followed us in 2007 and even before since the beginning of 2006 you can concur that our go to market strategy, the progress and the results we've made have resonated well with markedly customers suppliers as well as yourself. If you take a look briefly at our first half report card, we have cash to fund the operations going into 2009 from 34 million conversions of our public warrants, we're debt free, we have simple cap structure, very strong backlog, we've matured and improved our core technology, a tiny pico projector. We've broadened support from our supply chain partners, most recently announcing Osram and Orlikon developments; we've signed our first consumer OEM, Motorola, after inking Automotive, Aero, and Air Force contracts early in the year. All of which serve as a strong validation point that what we're doing is something people start taking very seriously. We executed very successful computer electronic and society of information display shows, and most recently you've seen we now have two analysts covering us. We expect this list to grow. Looking forward then to second half of the year. Our goal is to continue to build on the strong momentum that we have started in the first half, and to continually delight you with new progress in all key areas. This involves continue with strengthen the existing customer funnel and look for new partnering opportunities, deliver customer commitments on the existing contracts, evolving and maturing the picop technology platform, evolving and maturing our global supply chain that was architected in mid 2006. All of these areas are tightly linked together and each serves as the enabler to accelerate the path to market for high volume consumer and automotive products for us. I just want before I close, I just want you to know there's a team in Redman, about 130 people strong today, that's giving 110% addressing very tough issues to make good on the commitments that we've made to you, our customers, and to each other. On behalf of this team I'd like to thank you for your continued support.

2007-07-13T06:41:00.000-07:00

This month is looking spectacular for me. Look at my previous blog entry. Thus far all but 4 of those stocks are up. The exceptions are KONA (business expansion the next few years should double or triple the size of the company and make for sustainable profitability), MVIS (awaiting announcements, any announcements, seriously, just announce something), SBUX(why am I so addicted to their vanilla lattes, selling crack is not a valid business model), and SHLD(have you been to one of those new Sears stores that they put in the old KMarts? I didn't see a single thing I wanted to buy there. It's almost like going to a garage sale and seeing a bunch of useless stuff that you can live without. When I think of sears, I think hand tools, appliances, and lawn mowers. Seriously, there are very few things beyond that I would ever buy from them. Electronics can be bought cheaper elsewhere, and their clothing lines just look like crap. An idea... Sears should buy JCrew).

I don't know why I don't have AAPL on the list since I follow it closely too, so I'm adding it...
Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - June $ - July $ - Current $
AAPL $83.80 - 84.74 - 87.06 - 93.65 - 99.47 - 118.40 - 121.26 - 134.07

2007-07-01T18:37:00.000-07:00

Mastercard is kicking butt and taking names...

Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - June $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38 - 507.07 - 522.70
ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58 - 115.17 - 104.88
TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54 - 34.80 - 31.90
CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75 - 36.23 - 34.60
VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23 - 76.28 - 73.86
CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24 - 56.49 - 55.47
ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45 - 63.81 - 61.45
TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41 - 6.26 - 5.79
GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61 - 229.71 - 216.75
SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91 - 179.85 - 169.50
KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00 - 18.57 - 18.23
MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92 - 71.80 - 70.14
SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02 - 28.83 - 26.24
NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33 - 86.19 - 73.62
NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71 - 127.92 - 125.63
MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61 - 151.25 - 165.87
CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75 - 535.25 - 534.36
MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40 - 36.49 - 38.63
DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16 - 15.80 - 15.00
LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56 - 5.87 - 5.85
HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20 - 39.89 - 42.98
ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00 - 19.13 - 18.67
HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77 - 36.44 - 34.50
BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28 - 88.09 - 41.59(split)
CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23 - 87.52 - 85.28
UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50 - 47.88 - 45.65
APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30 - 47.44 - 58.43
GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72 - 83.78 - 38.80(split)

And I don't know why I don't have MVIS on the list since I follow it closely too, so I'm adding it...
MVIS $3.07 - 3.59 - 3.38 - 3.75 - 4.23 - 5.59 - 5.00

2007-07-01T18:33:00.001-07:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year are looking so far this year and compare them to my own stock picks for the year. With the exception of DIVX, I think my stocks are kicking butt...

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

2007-06-15T08:08:00.000-07:00

Bought more MVIS at 5.19. Carry on...

2007-06-08T08:04:00.001-07:00

Who knew MVIS would continue going up when the CEO states a strategic deal should be done by end of summer, 10% of the float is short, and their annual share holder's meeting is next week. Well, yeah, I guess it does make sense this would keep going up. This stock has single handedly pushed my portfolio value up over 100% for the year this week. I could sell in May and go away with a 100% gain for the year, but more news is coming, and this stock will continue to rise...

2007-06-04T17:26:00.000-07:00

This past month has been a large money making month. Huge gains were had in MA, BWLD, and CMG.

Tickr - Jan $ - Feb $ - Mar $ - April $ - May $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38 - 507.07
ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58 - 115.17
TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54 - 34.80
CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75 - 36.23
VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23 - 76.28
CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24 - 56.49
ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45 - 63.81
TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41 - 6.26
GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61 - 229.71
SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91 - 179.85
KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00 - 18.57
MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92 - 71.80
SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02 - 28.83
NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33 - 86.19
NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71 - 127.92
MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61 - 151.25
CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75 - 535.25
MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40 - 36.49
DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16 - 15.80
LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56 - 5.87
HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20 - 39.89
ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00 - 19.13
HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77 - 36.44
BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28 - 88.09
CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23 - 87.52
UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50 - 47.88
APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30 - 47.44
GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72 - 83.78

2007-06-04T17:04:00.000-07:00

Taking this opportunity to update and take a look at how Cramer's stocks of the year are looking so far this year and compare them to my own stock picks for the year.

Here's Cramer's picks...

AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...

AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

2007-05-30T11:45:00.000-07:00

MVIS, as I write, is up 9.6%. If you are not in this stock, well, I just feel sorry for ya. Chatter is circulating that an accessory product may be announced in June. Given that this announcement alone would be significant, and a cell phone announcement is what we really want, if we get the accessory announcement first, and then a cell phone deal follows soon thereafter, there will likely be a significant spike in the stock price. (The math regarding future earnings is compelling).

Side note: It's looking promising that my portfolio will hit triple digit gains pretty easily this year. (Perhaps within the next month or so).

2007-05-29T08:14:00.000-07:00

I haven't updated this blog recently, if for no other reason then because transcribing the entire MVIS CC was quite a bit of work, and I can't personally provide as good of information as you'd get from reading that transcript. So, read it again, study it, it's good information that will make you money.

In looking at my portfolio, it's value is currently up 55% for the year. I'd tell you how I've done this, but I don't feel like explaining quantum physics to a drooling toddler. Just know I'm smart, and that I've ONLY invested in stocks that I have previously mentioned on my blog.

Microvision CC Transcript 5/9/07

2007-05-10T10:49:00.000-07:00

Thank you tiffany, thank you ladies and gentlemen for joining us this afternoon, hopefully it will be productive session.

I'll start with the operating results.

CES, consumer electronics show in January was a nice spring board for us into 2007, which surprised many when we revealed an ultra thin full color projector display engine that is small enough to be embedded in portable handheld devices including cell phones. As you know, this introduction resulted in significant interest from global handset manufacturers, as well as extensive industry and media coverage. And we build on this momentum end of first quarter. The first quarter efforts were specifically focused on continuing this rapid advancement of our core technology platform that is at the heart of the commercialization of picop based products. We have made visible progress on 3 important fronts. First evolving the technical roadmap, second we architect the global supply chain that is necessary to take this product to market, and finally winning new contracts with the transportation and government partners. We also furthered negotiations with consumer partners, all of which are necessary components of accelerating path to market for our exciting high volume consumer and automotive products. Architecting supply chain is never an easy task as you know, when your partners start to acknowledge their participation it serves as a very strong validation point that you are going in the right direction. And as you know both corning and novalux formally announced their strategic relationship with us and the belief that in the value proposition that picop projector bring to consumers world wide. Both companies have achieved very important milestones in accelerating the development of green lasers and we are very happy with their progress. As you know green laser serves as an integral component of our proprietary platform and its one of the enablers to get the products to market.

We also formally announced the cooperation with our first global tier 1 partner Visteon. To produce a series of advanced heads up displays. Visteon is expected to use these units to demonstate the unique performance characteristics and inherit robustness of our technology to their customers. And to refine a final product specifications. We have also signed new deal with a second global tier 1 automotive integrator to develop a picop based display application specifically focused on the information cluster display. We also announced most recently commercial product development agreement with a world leading transportation systems integrator to design a picop enabled solution focusing first on aerospace applications.

The overall development on the platform has been very positive, we progressed the development focusing on further miniaturization and power reduction of our tiny display engine. And as you know the customizable picop is designed to suit a variety of consumer OEM and transportation product requirements. Most recently subsequently the end of the first quarter we introduced our new bar code scanned called ROV. This new laser bar code scanner for the first time utilizes our core technology which is MEMS, and it serves as a monumental forward progress for us because through the introduction of this new product we have learned a lot and this knowledge is going to be leveraged heavily for all the future work we are doing on picop related to the high volume consumer applications.

Most recently, actually yesterday we announced we received a new 3.2 million dollar contract from the US air force to provide a lightweight see through full color eyewear solution. Under this contract we will develop small and ergonomic display solution that will enable military personnel to get information and to provide a display that is light enough and ergonomic enough to be usable in various environments.

Throughout first quarter we continued to establish the credibility with customers and we were able to build a very strong backlog for 2007 looking forward. Jeff will talk about this more in a moment, but currently our backlog represents 10 million plus which consists of the previous backlog and the most recent win with the US air force. At this point I'm going to pause and let Jeff to give you a brief overview of financial results

Thanks Alex, for the first quarter we reported revenue of 2.2 million dollars compared to 2.5 million dollars in the same period in 2006. As Alex just talked about we ended this quarter with a backlog of 6.9 million dollars compared to 1.4 million dollars. When you add the 6.9 that we had at March 31, plus the 3.2 we announced yesterday, we have a backlog of over 10 million dollars. For the quarter we had operating loss of 6 million dollars, compared to 6.7 million dollars the same period last year, its significant to note that our operating loss in this quarter this quarter than it was last year on lower revenue and that’s the result of the cost cutting we went through last year. On the net loss available for common shareholders was 7 million dollars for the quarter compared to an income in the first quarter of last year of 331000 dollars. If you recall in the first quarter of last year we recorded a gain of 7.3 million dollars on the sale of shares of lumera common stock that wasn't repeated this quarter.
For the quarter we had a net loss of 16 cents a share, compared to a income of 1 cent per share a year ago. We ended the quarter with 7.3 million dollars in cash and cash equivalent and 8.8 million dollars worth of investment security, those investment securities of course were the 1750000 shares of lumera common stock. We made the last payment on our notes in our convertible notes in March, and those shares were released as collateral. Subsequent to the end of the quarter we did sell 758000 shares of lumera stock for about 4.1 million dollars. We continue to own 992000 shares of stocks that are worth about 4.4 million dollars. Alex...

This moment we will open for questions, let’s have a productive Q & A session...

First question comes from Joel Achramowicz, from MDB capital group. Please procede.

Thank you Doug, good afternoon gentlemen.

Good afternoon Joe.

Joe:Alex and Jeff, just a couple of house keeping things, so that including the new contract that 10.2 million billion in backlog versus, what did you say was the previous...

Jeff:At the end of the first quarter of last year we had a backlog of 1.4 million dollars. So...

Joel: How about the end of 2006, was that in the 10k?

Jeff: It was... Um... We would have been around 7 million dollars at the end of the year.

Joel: Ok great. What were the stock based compensation for the quarter.

Jeff: The total stock based compensation was about, I want to say, 400000 dollars.

Joel: About 400?

Jeff: Yeah

Joel: Great

Jeff: It's about the same level as it was last year.

Joel: OK, and um. Uh... Could you give us, I mean, would you expect to book, or bill, a good deal of that backlog sometime this year.

jeff: Generally the contracts are one year contracts. There's one that’s a little bit longer, that we talked about in the K. But essentially we would expect to ??? with that in the next ??? months from now.

Joe: Ok, thanks Jeff. Alex with regarding your discussions, um, ya know, with respect to strategic partners, I know you were just at AEA, and I forgot to ask this question. In your estimation, were you to strike a deal of some kind, what would be the character in your mind, of that kind of a deal. Would it that you'd be able to communicate with us. Would it include clarity in regards to milestones in the contract, what needs to accomplish in order to get to market, and when that might occur, and whether or not the company or the perspective partner is investing in overhead and non recurring engineering into that process along with you in order to work together towards a market driven product. Could you just give us some thoughts on that.

Alex:Absolutely Joe. Your probably asking the same question that many people want to ask. So... It's my desire, and our desire to create and announce deals that describe the details and milestones including the commercialization of high volume products specifically related to automotive head up display and pico projectors whether they are embedded inside the cell phones or serve as an accessory to video output devices. Unfortunately, many cases larger companies had to go through a diligent process internally before they are ready to announce all the details of the deal. This is driven by 3 factors. Number 1, they don't want to spook the competition. As you know there's a heavy competition, if you just focus on the cell phone space, you know that the top 5 cell phone manufactures always trying to innovate and improve their market partner position while nokia is trying to hold on to its own leading position. Any announcement from one of these would serve as a warning sign to others, and they try to keep this under wraps as much as possible.

Secondly, they don't have all the details worked out about in terms of how they're going to go to market with this application, and how they're going to reach their customers and shareholders. So its premature of them to give the details of the deal if they're not ready, they don't know all the details at this specific time. And all of these contribute to what you see coming from us in announcements, the announcement that don't have quite the details that all of you want to hear, but it's all based on the desire of the customers not really microvision, if it was up to us, we would put all the details on the paper and we would gladly discuss this with all of you. Everything we focus on right now, is targeted on the commercialization of these products, and this is why add the addition secrecy, because this is the real deal. Once a large company is investing large amounts of resources, not only microvision, but also internally, which is most significant. They want to make sure they check every detail before communicating globally. We're persuing every deal with one goal in mind, to identify all the steps leading not only to development of this product but also commercialization. And unfortunately, what you've seen so far from announcement that list in development stage, which are necessary components leading to commercialization.

Joel: Very good. Have you been trying at all, this might be a good juncture for the company to get some, maybe some more public visibility. I mean is that something you think is helpful or detrimental to ??? I mean like, maybe trying to establish some coverage among some of the major periodicals in describing the picop and how important and revolutionary it could be.

Alex: Ya know, you're asking a good question. There's a ages old question. It doesn't matter who you know, it matters who knows you. And I believe we have been exposed enough to people to know who microvision is. Because most of the customers we negotiate with today have pursued us, as opposed to us going after them. This obviously gives you and us a hope that have something they want, and in addition to the destructive technology that we always possessed at microvision, now we have credibility, now we have clean balance sheet, now we have debt free aspiration. All of this facilitates closure of these deals much more rapidly than we would be able to do in the past. Again, as I mentioned to you, I'm not going to avoid and dodge the questions. I told all of you during the last earning call, the goal is still to sign a large consumer OEM before the end of summer. It still stands as a goal to myself and everyone at microvision.

Joel: And one final.. is it possible, that you could strike more than one?

Alex: Joel, you know (giggle)... of course it's possible, and believe me when I tell you, that we're not just focusing on one specific deal.

Joel: Very good, good luck going forward

Alex: Thank you

Host: Your next question comes from the line of Randy Huff, from pro equities, please procede.

Randy: Hey guys, congratulation on all the work you've done in the past 12 months. Really impressed. Just to, Alex, clear up maybe, or Jeff maybe clear up one point with me. How many shares are outstanding at the end of the period, fully diluted?

Jeff: 66 million

Randy: Ok 66

Jeff: The actual outstanding is about 42-43. Then you've got about 17 million the warrants, of which 12 million are the publicly traded, and about 5 million in employee options.

Randy: And.. If you would Jeff, glad you mention that, 17 plus 42 is our 66, or sixty...

Jeff: Add all those together you get six, sixty seven.

Randy: Somewhere around there, ok. Um, what... Review for us real quick the exercise price on the warrants.

Jeff: On the publicly tradable warrants. They're exercisable at 2.65 and callable at 5.30. Must be 5.30 for 20 days I think it's after June 6th.

Randy: And you can force conversion above 5.30?

Jeff: Yeah, we have to be above 5.30 for 20 consecutive days, and it has to be after I think it's June 6th, June 5th, then we can force conversion.

Randy: Ok, good.

Jeff: It's about 35 million dollars in proceeds.

Randy: That's what I was driving for, I'm glad you gave it. I though you would leave it us to calculate, thank you, saved me the time. Well get hot... Um... Ok on the technical side. Alex, could you give us any feel, you talked in the past about the path to, to uh, to uh, to touchdown to the endpoint if you will with respect to the footprint and power consumption, uh, metrics for the Pico (pronounced Pike-o) projector and uh, I don't recall the exact timeline, but it seemed to me like you had hoped to reach that objective by the fall. Can you give us some insight into how that path is progressing?

Alex: Absolutely Randy. So we've done one of the most difficult parts, we've developed an optimechanical engine with our 2 strategic ODM partners, which is what we demonstrated at CES earlier this year. The focus of this year is to further miniaturize the electronics and also reduce power. And these two prerequisites get inside the handset. We've done tremendous progress internally on the design and now we are developing new partnerships with electronic design houses who will be developing these ?? components for us that will go inside picop engine. The goal is to do a lot of heavy lifting by the end of the year. And have something interesting to show to you at CES

Randy: Which is when, march of next year?

Alex: January of next year

Randy: January. Uh yeah. Ok.

Alex: But you will not have to wait until CES to see incremental improvements from us and as you know we're getting ready for society for information display, is going to happen in a few weeks. We anticipate to delight some of you with some of the progress we've made.

Randy: And where's that being held?

Alex: Long beach California.

Randy: Ok. With respect to a possible OEM provider of cell phones, is it safe to say. I know you can't be to specific on this, but so give me a little latitude in the question. But I would imagine that its difficult to sign one of them up unless they're certain roadmarks that are met along this path to miniaturization and reduction in power and what have you. Can you give us any feel for where you have to get before there's realistically a good shot at getting one of those signed? Is it still the summer idea, or is it not... or are you already far enough along to that would not be a gating issue.

Alex: This is a very good question Randy. What… we actually have the technology passed with most of our customers. We actually convinced almost everyone that what we have will meet their ultimate requirements, and that is the precursor for them to even sit down with us around the negotiating table to talk about commercialization strategy. So we, for the most part I fell comfortable with what our technology team did in miniaturization of the picop and then convinced them, uh the technical teams from our prospective customers, that we're in good shape in that department. You know, the discussions right now are related to commercialization strategy. Are you going to take it out, what is the how do you divide IP, how do you divide license fees. All of these necessary details you need to conclude before you sign a long term deal. Did that answer your question?

Randy: yes, yes. And so, if I could put that in a one liner. It's not a gating issue at this point in terms of a technological gate that needs to get through that's holding up any progress.

Alex: That's correct. At this point, this has not been a gating item for us not to be able to sign a deal.

Randy: Ok, all right good. Thank you very much, I'll get back in the queue.

Alex: Thank you Randy

Your next question comes from the line of Matt Phillip from Lehman Brothers. Please proceed

Matt: Hey guys, when do you expect the ROV to hit the market and what is your anticipated unit cost?

Alex: (Haha) Loaded question.. how about I'll give you the easy answer first. We're targeting to release ROV to market in Q3 this year. We target specifically mobility customers, recall last year and early this year I told you that we view mobility sector as the highest growth opportunity for Microvision and ROV has been designed with the mobility market in mind. In terms of the cost structure, we expect it to be a profitable product, again you know guys, I came from general electric, and where I come from anything less than 40% contribution margin is not considered to be a good product.

Matt: OK, thank a lot.

Your next question from the line of Jed ??? with ??? please procede.

Jed: All right thanks, I guess a similar question on the picop alex. I was wondering if you could give us an idea of what the target price point or ASP of the product will be in volume and what needs to happen in the supply chain to actually get there. Thanks.

Alex: Hey Jed. Obviously you probably asking about the cell phone application so I'll focus on that because it puts probably the most stringent requirements on cost and price of pico projector. We again, were told by most of the interested parties from the cell phone space. At introduction we have to be no more than 100 dollar transfer price. Given this top down target, we have been developing and architecting the supply chain, and developing our cost models to be consistent with this top down requirement. At this point in time, although we don't have all the information, we feel pretty good about how the components would be cost reduced, obviously the two biggest cost factors are the green and blue lasers. And we are heavily engaged with 3 green laser manufacturers, and with the blue laser manufacturers on negotiating the prices upfront and including them in the development and go to market strategy with us, in anticipation of this exciting application.

Jed: Great, and is blue ray helping the cost curve of the blue lasers?

Alex: Not yet, Jed, not yet. But we hope soon it will.

Jed: All right, thanks, I'll pass it on

Your next question comes from the line of David ?? Please procede.

David: I have a question. Have you been able to land a contract... Probably reiterating what someone said but, a contract with either one of the cell phone companies, Sprint, or regarding the laser digital technology with any of the automotive companies. And you've probably given this information but I missed it and is there any solid tie-ins. And my second thought is, regarding the gentleman who recommended the chicken and the egg theory, but I think if you disseminated to the general public via magazines, etc, the technology, the public demand may, you know, sway some of the purveyors to get on board so to speak, by the inquisitiveness of the general public. So those are my questions, where you stand with those. And one more application, I'm thinking in terms of the cell phone projector, maybe in minivans, maybe considered a safer implementation you know, when kids watch from the back seat, it could be projected in some way, and certainly on trips, when there's no electricity or something like that, utilize the cell phone implementation that way, you know, rather than a television that maybe is not as reliable etc. Thoughts on all these things...

Alex: All right David, let me try to summarize, I think you bring in 3 questions. First, a little background, or summary on our agreements with the global tier 1 and consumer electronic OEMs. I think the second question was we should use PR to educate the public. And the third questions was proposing new applications for the automotive. So let me start with the first one.

Yes, we have in the transportation sector, we've signed 3 contracts. One is with Visteon, to develop commercialized automotive head up display. The second is with global tier 1 partner to develop an application for the instrument cluster display based on pico projector, which will extend to other applications including entertainment. And third was a deal we striked with a system integrator for the transportation industry focusing on the aerospace applications. We have several dialogs in progress with consumer OEMs including cell phone manufacturers, mobile carriers, and content providers. And we will update you on the progress in these areas as soon as they become available.

In regards to your second question, using PR. We've been using PR pretty effectively. If you've been looking at the most recent press coverage, we have been covered by CNN, Business Week, Wall Street Journal, New York times, various publications. So we have been extensively utilizing and spreading the message, and I believe it resonating well with consumers, based on the feedback we receive.

In regards to your third question, and the application of pico projector inside the car for the kids. Again, that is one of the areas of growth for us, there's a lot of LCD displays, packaged inside cars and planes and other transportation devices, that could be potential replaced by a much smaller, power efficient device we're developing so this is definitely an area of interest and we're pursuing it.

David: Do feel that either one of a coupling of these contracts is going to put you in the black in the coming year, or would that be safe to assume.

Alex: We always have historically have told everyone and we're still sticking by the same message, we expect to be profitable once the first high volume consumer product hits the market. Right now, our revenues consist of contract revenue, with some contribution from the bar code scanner. We... the break even path and rapid growth will happen as soon as the first high volume consumer product is introduced.

David: One more question, are some of your clients, or eventual purveyors, either in the cell phone or the automotive are they willing to pick up some of your development cost in association with the projects?

Alex: Absolutely, David. One of the anties that people have to pay for earlier entry into this is co-fund (?) some of what we do so the contract we announced already come with the monetary value to us to help to co-fund the development roadmap, and will continue going forward.

David: Ok, well thank you very much.

Your next question comes from the line of Joe Shiller... Please proceed

Joe: Hi Alex, congrats on what appears to be continuing improvement. It looks as though, and correct me if I'm wrong Jeff, that you get 24% sequential revenue growth, and that's sort of up from the 4th quarter. And that's up from virtually nothing in the third quarter. IS that driven both by contract development and bar code scanner revenue.

Jeff: It's driven by both, but it's primarily on the contract side. The growth piece of it.

Alex: It's basically the backlog that we built in the second half of last year with the general dynamics contract and Visteon.

Joe: Ok, did the... the question I have is as I understand it the sell cycle for bar code scanners lengthened somewhat, and I think its because the evaluation progress was longer because there was greater interest from potentially bigger players. I'm just wondering if that's a business that in the back half of this year might ramp up a little more rapidly, starting second quarter and maybe third and forth quarter in particular.

Alex: We definitely counting on this. We shipped right now twice as many units as we recognized in the first quarter. And we hope we'll catch up and start recognizing the amount that we actually planned in our operating plan to count as revenue for this year.

Someone: Just wanted to elaborate this a little bit. The reason we shipped so many more than we recognized, is a lot of these deals in the mobility market will be sales through ??? sales. So we're supplying units to our distributors who will then be selling to end customers. So we're seeing an up tick in that activity.

Joe: Ok, so it's not because you're still getting s??? return rate.

Someone: Exactly.

Joe: thanks for clarifying that. That last question is that the accessory product that you expect to go to market with, as essentially a validation of the technology before you sign an embedded deal or while you're working on signing an embedded deal. Would you consider that to be a potentially high volume product? And I'm asking that question in the context to your answer to the when do you get profitable.

Alex: It's good question. It's still going to be function of what is the sale price. Average sale price of the accessory OEMs would be able to get for this specific product. I've spent time with several business wigs from several global consumer OEMs, and each one has a slightly different price of volume curve, and if we can, you know, if we can get a product that they could sell under 299 or 199, volume is counted in millions. If you stay around 599 then volume is in hundreds or thousands, so we're working very diligently with everybody in our existing supply chain to ensure that the cost integrity is maintained, and we can introduce a viable product that could be sold in high volume. So for the accesory. again, if you leverage across two or three customers you may get the necessary volume to get your desired price.

joe: Great. Just one last question. Do you expect that you can be in the market not necessarily in volume, but in the market with that product sometime in the end of the first quarter, maybe in the second quarter?

Alex: No, we target the commercial introduction of the accessory in the second half of '08.

Joe: Ok, so that's going to be second half as well. And you... the embedded pico the goal is to be at least in the market in small numbers in Christmas of '08?

Alex: That's the ultimate target, I would call it a stretch target, only because we're at the mercy of somebody else's development commercialization. When we pass and deliver on our commitment. Our OEM customers still have to deliver on their commitment. And that represents more risk. So stretch goal is Christmas. most likely I'd say embedded solution comes in in first half of 2009.

Joe: Ok great, thank you.

Your next question from the line of William... Please proceed...

W: Congratulation on great progress on these contracts. I was just wondering, which I actually call the ??? contracts before the big meal. But what I was asking... could you... in the aero for instance, what size of markets are addressing in the aero market, and in the heads up display vs. the dashboard display, could you reiterate the dashboard display adding to the market size on the automotive side, and will the automotive products come to market before the pico commercial embedded products, etc. Could you give me a little review on that?

A: Let me try, you have a several questions, I'll try to separate, let me reiterate what you're asking. First you want to know more about I believe the aerospace market.

W: Well, I was just wondering what the size of that market really is, once you have a successful prototype, and what kind, how many units, you know, kind of give us an idea of what that market size really is.

A: Aerospace, the size of the markets that we're targeting is smaller than automotive. However, the price and the margins on each of the display products on pico projector would be much higher so the overall product low volume times greater far great margins and average selling price, would view as pretty solid business case, and that's one of the reasons we entered into the agreement because we feel it would be a nice complementary business. In terms of automotive to market versus the picop embedded. The second deal that was singed was the global tier 1 that was to develop a picop based application for the instrument cluster display. Is predicated on safety, today the drivers are inundated with a lot of information and most of it is sitting in front the center console. So any time you take your eyes off the road you get into accident. 50% of the time thats what happens. Automotive OEMs are interested in reducing this, they're also interested in putting a lot cooler features inside the dashboard there's a conflict of interest. How do you solve this? You want to have reprogrammable flexible display that could be smaller enough to place inside the dashboard to provide color rich images, and this is why they are interested in pico projectors. The market opportunity is even more exciting than even heads up display because you only need one HUD per automobile and you may need several pico projectors for the same auto. So there's a great growth opportunity there and that's why were excited about the second deal that we recently signed.

W: So you really created a bigger market now, you have two products. You're looking at these automotive do you believe will be in 2008?

A: No, most likely William because of automotive commercialization cycle is far longer than consumer commercial space, so typically the people who we are dealing with right now are targeting late 2009, 2010 models. However, we need to complete everything that we need to deliver by the latest middle 2008. So we actually much more constrained on time on the automotive deliverables than on consumer because the lead cycle is much longer.

W: Are you getting any feel on how Visteon is kind of response they are getting from their customers, and if there's anything going on there we would hear about that?

A: Absolutely, ya know, they're talking with 3 global automotive OEMs and they have made solid traction with 2 out of 3, and right now they are working on establishing which one they are going to go to market with first, and which specific model we are going to put this heads up display on. As soon as this information becomes available we will immediately communicate this to you so you are updated.

W: So their clients are really getting interested in signing to take on this product?

A: Absolutely. One of the signs of recognition and acknowledgment is the fact that remember Visteon initially came in as non-named announcement, just like everything else. And Visteon felt that they progressed far enough and gathered enough traction to formally announce their relationship with Microvision at the consumer electronics show. We expect this trend to continue with other.

W: Thank you very much.

Your next question comes from the line of Art... Please procede

Art: Good afternoon gentlemen. Two items I'd like to ask about. The first one is in surveying the competitive landscape; I know in technology competitive situations change rapidly, is there anything that has changed rather for the better or for the worse in terms of the competitive landscape, vis a vis, new or improving existing technologies. Then I'll have a follow up question after that.

A: Sure, we continue to receive further and further validation that the areas where we are targeting are of interest to many players globally. Most recent announcement by several players shown the new small projectors they claim they can be embedded inside portable devices, this is a further validation. I'm not going to dance around it, TI most recently announced that they have something very small and compact that they think could be a solution. If you have however followed TI's announcement you that their technology is based on the DLP chip, and there is some fundamental constraints in size, power, and performance that TI needs to overcome to get inside the handset, even though we never take competition lightly, we feel pretty good about the ability to get inside the cell phone well before anyone else does.

Art: And does the DLP have the ability to produce an image as visible in outside light conditions as a laser?

A: I believe what was shown by TI was a projector with a higher brightness; however, it was far lower resolution. So what cell phone manufactures have mandated, is that if you want to get inside a portable device you need to have an engine that is less than 10mm thick, and 10mm for you who are not familiar with metric system is what. I'm not familiar with conversion rate. It's one third of an inch. And if you look at TI's description their device is about one inch, so its about 3 times thicker than it needs to be to get inside a cell phone. It also draws about 5 watts of power, while we are targeting an engine that will draw 1.5 watts of power, going down to 1 watt. So we feel we're on the threshold of getting inside the cell phone. Although other people are claiming that they're capable of doing this, we feel good about our position for this specific application.

Art: And in terms of the significance of the power consumption. 1.5 vs 5. What does that mean in terms of your average battery life.

A: It's pretty much viewing it 10s of minutes vs. viewing it an hour or and hour and a half or more. And the reason we're able to achieve this, is a very simple reason. Everybody else, including DLP, including TI, they drive their light sources, in this case lasers, all the time. We only turn on the lasers when we need them to be turned on. So for example. If you're looking at an image, whereby half of it is covered with green grass. For half of these pixels, our technology will only turn on the green lasers, while keeping the red and blue off. TI has to keep all three lasers turned on constantly despite the fact that they only need green. So what happens then is that the other two that are staying on, the energy gets converted into heat, and therefore very power inefficient.

Art: Ok, very interesting. And my follow up question. You gave me a couple of clues to the answer on this one, but in terms of the value proposition, potential value proposition improvements, with microvisions platform vs. others, some of the additional product areas that might be applicable to our platform technology that might be coming about and then you also mentioned that as I see it the value propositioning increases by being able to have an increase in the unit sales by getting the supply chain cost down, and then potentially, it sounds like I just heard multiple picop components per vehicle on the head up display type. Is there anything else that is improving in terms of the value proposition?

A: Everyday as we mature our technology and business roadmap, we become more and more attractive to customers and investors and I think you can attest to what has been happening with most recent announcement and fact the stock has been pretty strong. So I think you know, every time you're going to see a progress update from us, it's going to be consistent with what we said in January of 2006, and we just basically completing one at a time. The goal is to do what we said we were going to do, and I think we have been consistent with this proposition.

Art; Alright Alex. thank you very much

Your next question from the line of Brian... Please proceed.

B: Hi Alex. I just have two questions for you and maybe for Jeff. The first being about financing. I was wondering if it was possible, if there was any provision to make an offer to existing warrant holders to maybe exercise those early at a lower warrant conversion or something so you could limit dilution and you could satisfy immediate cash needs.

J: Short answer is no. There's no provision for putting that type of offer in place.

B: Ok. My other question is, earlier Alex, you discussed sort of when you're in negotiation with partners, the separation of IP, and I was wondering if you could elaborate on what that looks like in the deals and how IP gets separated between the two.

A: Brian, it's different from deal to deal. It involves components such as who is doing what, who is delivering what, and how you gonna divide supply chain. So giving you a standard answer is different from deal to deal, and this is probably not a good time to cover.

B: Ok, I respect that, those are my only two questions, so thank you.

Your next question comes from the line of Bob... Please procede.

B: Good afternoon gentlemen.

A: Good afternoon Bob.

B: You are you... Given the apparent ever increasing number of market applications for the picop, can you sort of paint us a picture of the TAM by application in order of priority in your go to market strategy?

A: Sure, let's start with probably most compelling the ??? cell phones. So you have a billion handsets. So in 2006, this is expected to increase in 2007 of a billion cell phones, there's about 750-800 million represent our addressable market, because they include those phones that are capable of playing video clips, surfing the web, etc. So they are called feature rich phones. So if we take a very conservative business case, and take 3% of that addressable market of 800 million that represents 24 million handsets, and if that is a conservative estimate of what could be done. In the area where there is today and in the near future where there is very little competition you have to agree this is a compelling business case.

On the accessory side, there is numerous applications. Today there are 100 million ipod user install base. There is a large percentage of those are video ipod. Everyone who has used ipod will attest that it is not very easy to watch a video or movie on that small screen, so each one of these users becomes a target for buying an accessory that would plug in, for example, into ipod and could extend a small image into a high definition screen that could be viewed from short or from long distance resulting from a desktop size screen to a plasma size display.

This technology total...??? to be integrated into digital cameras. And actually digital camera business is a facilitating technology to us, because 70 % of cell phones are expected to have digital cameras. Most of them are in extent of 3 Mega pixels, so now you have the ability to capture imagery whether its still or moving, and you can display it immediately. So this is, in our society where immediate gratification really counts this is a perfect application.

In terms of heads up display there are 60 million vehicles out of which our addressable market would take in a small subset, and we say we will target the automobiles that are priced 30k or above, so this represents about 25% of the total automobile market. And if you take a subset of this, the HUD business is measured somewhere initially hundreds of thousands of units a year going down to several million units a year. And who know, you know. HUD could perform as well ABS breaks, recall that when ABS breaks were introduced, they were introduced on high end models, specifically as a high end feature. Today it is a basic safety feature, and we believe HUD is going to become just ...

Finally color eyewear. This is really a dark horse. A lot of people want to use it, no one to date has been able to come up with the acceptable solution that gives you nice picture quality, while makes it easy to use, and is cool enough to wear. The coolness factor is what is killing right now the eyewear market, because nothing is really cool enough to put it on and you can walk around with it. We are trying to address this by utilizing our small picop platform that will be embedded with special optics inside fashionable eye glasses. So, again, I can't give you exact dimensions in this market, but it could be very high.

Did I answer your question?

B: Yes, you did very well. Thank you very much.

That concludes our Q & A session...

Alex: I believe and hopefully you can concur that our go to market strategy progress and results have resonated well with market leading customers, suppliers, and the investment community. The facts don't lie. We secured several new product development agreements with key strategic commercial and government partners, we increased the acknowledgment and public support from the strategic supply chain partners. And the stock has been strong. What can I say more. Myself and the team our energized, and looking forward to 2007. We're making solid progress on all fronts toward commercialization of the innovative high volume products. We're debt free. We've simplified our cap structure. We have a very strong backlog, and looking ahead the goal is to continue the strong momentum in the second quarter and beyond. We're diligently getting ready for the society of information display at the end of May, and I'm looking forward to updating you on the new on positive milestones that bridge us closer and closer to our ultimate goal. Thank you.

2007-05-09T04:26:00.001-07:00

Alas, the DNDN stock is tanking in premarket trading. Down about 60%. I feel good, because I got out of this stock yesterday. Something didn't feel right about it, and I ended up getting out with a slight loss. Much better than having a sixty percent schlacking... Per my previous note, the FDA indeed delayed a decision. That's clearly one of the worst case scenarios, but given that it is approvable, there's a distinct possibility that this stock will see a 60% jump up sometime in the future (which would actually be more of a 100+% jump).

2007-05-07T12:54:00.000-07:00

As I speak, DNDN is down down (sorry, I had to do it) about 8%. Looks like the stock is taking a good long looking at jumping into the eternal abyss of negativity. Here's to a quick and painless fall... Unfortunately, this kind of jump is just par for the course. It could easily be up just as much tomorrow. Here's hoping the FDA does anything but postpone its decision, asking for more time.

2007-05-04T18:43:00.000-07:00

DNDN

I took a small position in Dendreon this week. It's been working out EXTREMELY well. I fully expect this stock to drop into an unending eternal abyss, and never return, which is why I didn't put much into it, but thus far I have been pleasantly suprised.

2007-05-02T06:23:00.000-07:00

Just wanted to update and take a look at how Cramer's stocks of the year are looking so far this year. And compare them to my own stock picks for the year. Looks like I'm pulling ahead. Hell, did Cramer have a monkey throw darts at a list, or what?

Here's Cramer's picks...
AAPL - LVLT - NYX - MO - GS - CSCO - SVNT - RAD - HAL

Here's my picks...
AAPL - MVIS - HANS - ATVI - ATI - GOOG - DIVX

2007-05-01T06:13:00.000-07:00

Microvision Unveils New MEMS-Based Laser Bar Code Scanner

REDMOND, Wash.--(BUSINESS WIRE)--Microvision, Inc. (Nasdaq:MVIS): a leading developer of scanned light beam technology, announced today that it has unveiled a new laser bar code scanner, incorporating the company’s unique MEMS scanning mirror technology. Displayed at the Global Microsoft Mobile and Embedded DevCon (MEDC) Conference in Las Vegas, May 1 – 3, the product, named ROV™ Scanner is a fashionably sleek, hand-held, Bluetooth enabled laser bar code scanner aimed at mobile workers who need simple and affordable data collection solutions on the mobile platforms of their choosing.

Microvision’s pocket-sized ROV Scanner is expected to be released and available for sale through a variety of global distribution channels in the company’s third fiscal quarter of 2007.

The new product, noted for it’s simplicity and affordability, provides reliable ”point and scan” capability, offer a broad range of bar code symbol decodes, boasts onboard memory to hold more than 4,000 scans, and runs on inexpensive AAA batteries. To further support mobile workers, the scanner can be operated using rechargeable batteries and has rubberized grip points to keep the scanner securely fitted in the users’ hand. Also available for the ROV Scanner is connectivity software for all major mobile computing platforms including Windows®, Windows Mobile®, BlackBerry®, Symbian® and Palm®, to enable complete mobile data capture solutions.

“Microvision has long been recognized for its innovation in MEMS-based display and imaging solutions,” stated Ian Brown, Microvision’s Vice President of Sales and Marketing. ”We set a bold technology strategy in 2006 to align our core scanning technologies around a new platform that could be manufactured in high-volume and integrated into many display and image capture devices. Incorporating our proprietary MEMS scanning technology into Microvision’s own line of bar code scanners is a perfect example of executing on this strategy. With the Microvision ROV Scanner, powered by our MEMS scanning technology, we are excited to deliver our next generation of simple and affordable bar code products that enables price sensitive data collection, with outstanding reliability and performance for our customers.”

Microvision stated that the company is working with a number of select pre-launch customers prior to full market release. The Microvision ROV scanner is designed to collect data in both simple business environments, and more demanding mobility environments such as construction, field services, transportation, professional services, hospitality, government, retail, manufacturing, and healthcare.

Microvision believes the ROV Scanner with Bluetooth will be particularly attractive to the global community of developers, Information Technology and business professionals who are looking to innovate and scale their mobile data capture applications and solutions.

Preliminary details on the ROV Scanner may be viewed at www.microvision.com/rov.

2007-04-30T17:20:00.000-07:00

This past month has been pretty boring, but here's the status updates of the stocks I've been following. VLO KONA and GILD being the most impressive of the bunch.

Tickr - Jan $ - Feb $ - Mar $ - April $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50 - 471.38
ATI $86.95 - 102.21 - 101.92 - 106.70 - 109.58
TIE $28.95 - 33.01 - 34.20 - 35.88 - 34.54
CHK $27.75 - 29.37 - 30.68 - 30.88 - 33.75
VLO $48.96 - 55.83 - 58.26 - 64.69 - 70.23
CERN $46.33 - 49.17 - 52.10 - 54.45 - 53.24
ECA $44.15 - 48.25 - 48.88 - 50.63 - 52.45
TIVO $5.18 - 5.64 - 5.89 - 6.30 - 6.41
GS $199.08 - 213.09 - 201.20 - 206.50 - 218.61
SHLD $167.55 - 177.41 - 177.71 - 180.50 - 190.91
KONA $21.14 - 19.99 - 15.65 - 15.35 - 18.00
MO $87.67 - 87.45 - 84.53 - 87.73 - 68.92
SBUX $35.26 - 34.31 - 30.61 - 31.05 - 31.02
NYX $94.87 - 99.24 - 82.98 - 93.64 - 84.33
NMX $120.77 - 129.38 - 128.94 - 135.69 - 129.71
MA $99.53 - 112.00 - 106.91 - 106.24 - 111.61
CME $524.05 - 573.17 - 547.40 - 532.96 - 516.75
MXE $26.19 - 26.82 - 26.82 - 31.49 - 38.40
DIVX $23.08 - 22.51 - 20.23 - 20.04 - 20.16
LVLT $5.60 - 6.11 - 6.42 - 6.13 - 5.56
HANS $34.04 - 39.29 - 34.79 - 37.90 - 38.20
ATVI $17.34 - 17.41 - 16.93 - 18.94 - 20.00
HAL $29.23 - 29.62 - 31.73 - 31.75 - 31.77
BWLD $54.98 - 51.14 - 56.83 - 63.70 - 65.28
CMG $55.47 - 59.71 - 61.24 - 62.10 - 65.23
UA $49.35 - 46.78 - 46.35 - 51.30 - 50.50
APOL $41.49 - 43.00 - 47.52 - 43.90 - 47.30
GILD $64.21 - 71.03 - 71.12 - 76.50 - 81.72

2007-04-23T06:09:00.000-07:00

How MVIS is still on the naked shorts list is beyond me...

Microvision Secures New Contract To Develop Laser Projection Display for a Commercial Transportation Sector Customer
Monday April 23, 8:35 am ET

REDMOND, Wash.--(BUSINESS WIRE)--Microvision (NASDAQ:MVIS - News), the leader in light scanning technologies for display and imaging products, announced today that it has entered into a commercial product development contract with a world leading transportation sector systems integrator. Details of the contract were not disclosed for competitive reasons at the request of the customer.
ADVERTISEMENT

Under the agreement, Microvision will work with this world leading system integrator to initially design an innovative projection-based display solution for an aerospace application based on Microvision's ultra miniature laser display projector platform.

"In 2006 we defined and implemented a common technology platform strategy which resulted in a flexible display engine, PicoP(TM), that can be leveraged into many high-value applications in the broad transportation market segment," stated Microvision President and CEO Alexander Tokman. "Our unique display engine offers many inherent advantages, such as improved safety which is the focus for this specific program. Increasingly, prospective customers are endorsing Microvision's display platform strategy and we are thrilled that it is resonating with our partners focused on commercial display applications."

2007-04-20T06:15:00.000-07:00

I have to admit, I like being right. GOOG was/is still a good stock, despite the legal dillemmas. This stock will likely revisit its 52 week high very soon...

2007-04-18T17:15:00.000-07:00

My current portfolio is doing so well, there's no reason to change anything, but if a gun was pointed at my head this minute, I'd buy some Google stock. They report tomorrow, and the bad news in Yahoo really points to Google benefiting by further growth in ad clicks. GOOG is at a high multiple, sure, but they are growing at such a page that it is warranted. Deals with clear channel, Dish, buying double click, this is all good news for Google. Sure, everyone is down on them because of their legal woes, but GOOG has talented individuals that can solve problems. Surely they can put their heads together and resolve any of these legal issues too.

2007-04-16T10:40:00.000-07:00

Just noticed that I haven't updated this blog in 2 weeks. But that's simply because I haven't made any trades in 2 weeks. I'm happily raking in dough... Without changing anything, the value of my portfolio is now up 32.13% for the year.

2007-04-04T08:47:00.000-07:00

Was crunching the numbers this morning, and it looks as though my portfolio is up 20.64% YTD.

2007-04-03T14:06:00.000-07:00

I am feeling fortunate today as I got out of ADY before earnings yesterday. The stock got obliterated to the tune of -16% today. Getting rid of this turd helped me focus on more lucrative endeavors, such as watching the rest of my portfolio explode to the tune of 4.9468% thanks to healthy positions in NYX and MVIS. GS didn't fare too poorly either, but was clearly dragging down my gains like a fat kid running the mile.

Update

2007-03-31T07:34:00.000-07:00

A look at the stocks I've been tracking... A majority of them were up this past month, with nice gains in VLO, MXE, NYX, HANS, and BWLD.

Tickr - Jan $ - Feb $ - Mar $ - Current $
GOOG $481.30 - 480.70 - 449.44 - 458.50
ATI $86.95 - 102.21 - 101.92 - 106.70
TIE $28.95 - 33.01 - 34.20 - 35.88
CHK $27.75 - 29.37 - 30.68 - 30.88
VLO $48.96 - 55.83 - 58.26 - 64.69
CERN $46.33 - 49.17 - 52.10 - 54.45
ECA $44.15 - 48.25 - 48.88 - 50.63
TIVO $5.18 - 5.64 - 5.89 - 6.30
GS $199.08 - 213.09 - 201.20 - 206.50
SHLD $167.55 - 177.41 - 177.71 - 180.50
KONA $21.14 - 19.99 - 15.65 - 15.35
MO $87.67 - 87.45 - 84.53 - 87.73
SBUX $35.26 - 34.31 - 30.61 - 31.05
NYX $94.87 - 99.24 - 82.98 - 93.64
NMX $120.77 - 129.38 - 128.94 - 135.69
MA $99.53 - 112.00 - 106.91 - 106.24
CME $524.05 - 573.17 - 547.40 - 532.96
MXE $26.19 - 26.82 - 26.82 - 31.49
DIVX $23.08 - 22.51 - 20.23 - 20.04
LVLT $5.60 - 6.11 - 6.42 - 6.13
HANS $34.04 - 39.29 - 34.79 - 37.90
ATVI $17.34 - 17.41 - 16.93 - 18.94
HAL $29.23 - 29.62 - 31.73 - 31.75
BWLD $54.98 - 51.14 - 56.83 - 63.70
CMG $55.47 - 59.71 - 61.24 - 62.10
UA $49.35 - 46.78 - 46.35 - 51.30
APOL $41.49 - 43.00 - 47.52 - 43.90
GILD $64.21 - 71.03 - 71.12 - 76.50

MVIS news...

2007-03-27T04:15:00.000-07:00

Microvision to Develop Innovative Displays with a Global Automotive Tier 1 Supplier

Update

2007-03-26T18:39:00.000-07:00

NYX, MVIS both soared higher today, and my entire portfolio was up 3.7406% today. NYX is going to go back to 100, investing in this stock is a no brainer. If you're not in it you don't like making money. As for MVIS, they are showing off this stuff this week, at the CTIA wireless show in Orlando and in Chicago at the national conference on highway safety. Every time MVIS shows off their PicoP projector the stock jumps significantly. The real catalyst in this stock though is the agreements with OEM's, at least one of which is expected the first half of this year. The stock should continue to rise as other OEM's sign on. This is a significant turnaround story for a company whose stock is dirt cheap.

2007-03-23T20:55:00.000-07:00

Here's a quick look at my major holdings this week. ADY, NYX, GS, and MVIS.

From the microvision blog http://microvision.blogspot.com/

"One of the things we spend a lot of time on is competitive analysis. Certainly over the time I've been at the company, I've been very focused on understanding our technology's competitive position in our three primary areas of development: miniature projectors, wearable displays, and automotive displays. You might say I'm just drinking the Kool-Aid but it's clear to me that we have something that can potentially disrupt a variety of markets, and delight millions of people along the way. Traditional flat panel, fixed-pixel technology just can't do what we can. And I think people are going to want what we're putting together.

Our scanned beam images have nanosecond response time. About a million times faster than any LCD screen. The effect is stunning. I see images from our PicoP nearly every day, but the effect it has is still powerful, still kind of surreal, even a few months from the initial 'WOW!'

There's just nothing else like it.

Having such a tiny projector, that can deliver images with high-brightness, rich colors and satisfying resolution opens up a whole lot of opportunities, from personal projection to eyewear displays to vehicle HUDs and automotive instrumentation. And we're very methodical about the way we go about eliminating the obstacles to advancing our product roadmap.

The goal is to come to market in 2008 with high-volume products that have our display engine inside. That's what we're working on, every day."

MVIS CC

2007-03-13T13:54:00.000-07:00

I like Tokman's tone. Whether he's right or not about the future of the PicoP, he is indeed confident, and I like confidence in a CEO. His confidence is evident in his declaration that he sees a contract with "at least one" OEM in the first half of the year. We will likely see commercial availability of the product in 2nd half of 2008. This would first be an external projector (accessory with own power supply), probably won't see embedded projector in phone available till '09.

Mini-projector as embedded device has little to no competition. (As Tokman was told by his prospective partners.) There is increased competition in the accessory space. But MVIS is looking for the ipod form factor, a small enough accessory to fit in your pocket.

Handset market, 75-80% of cell phone market are feature rich market, which is where pico projector is headed. Just a 3-5% penetration would equal 24 million handsets. In addition, ome may want the ipod-like accessory as opposed to the handset. For their HUD product they see 1-5% penetration as many as 3 million autos.

MVIS

2007-03-09T10:47:00.000-08:00

MVIS is on fire! As of late, I haven't made many trades, thus the inactivity. While I could blog about potential trades, there's really no reason. Stick with MVIS and you'll make some money. Just wanted to rub it in (to anyone that isn't in MVIS) that my position is up 12.5% in the past week.

Update

2007-03-01T12:11:00.000-08:00

Checking in on the stocks I've been watching. Here's the list of where they started, and where they are today...

Tickr - Jan $ - Feb $ - Current $
GOOG $481.30 - 480.70 - 449.44
ATI $86.95 - 102.21 - 101.92
TIE $28.95 - 33.01 - 34.20
CHK $27.75 - 29.37 - 30.68
VLO $48.96 - 55.83 - 58.26
CERN $46.33 - 49.17 - 52.10
ECA $44.15 - 48.25 - 48.88
TIVO $5.18 - 5.64 - 5.89
GS $199.08 - 213.09 - 201.20
SHLD $167.55 - 177.41 - 177.71
KONA $21.14 - 19.99 - 15.65
MO $87.67 - 87.45 - 84.53
SBUX $35.26 - 34.31 - 30.61
NYX $94.87 - 99.24 - 82.98
NMX $120.77 - 129.38 - 128.94
MA $99.53 - 112.00 - 106.91
CME $524.05 - 573.17 - 547.40
MXE $26.19 - 26.82 - 26.82
DIVX $23.08 - 22.51 - 20.23
LVLT $5.60 - 6.11 - 6.42
HANS $34.04 - 39.29 - 34.79
ATVI $17.34 - 17.41 - 16.93
HAL $29.23 - 29.62 - 31.73
BWLD $54.98 - 51.14 - 56.83
CMG $55.47 - 59.71 - 61.24
UA $49.35 - 46.78 - 46.35
APOL $41.49 - 43.00 - 47.52
GILD $64.21 - 71.03 - 71.12

Ouch

2007-02-27T18:56:00.000-08:00

My rear is hurting from the massive probing it took today. I'd say my losses were around 5%, but that's understandable, considering I tend to hold only a few stocks at a time, and take lots of risks. I've never seen a day where short ETF's were some of the top gainers. SMN, QID, TWM, SDS, DXD all making gains of about 8-10%.

I'm keeping my eyes open though for opportunity. I'd love to see MVIS go back down to 3 or less.

On days like these I just remind myself that Google didn't stop making money because its stock went down. People didn't stop going to Starbucks. And these stocks will continue to go higher, just might want to sell and re-buy the stock at a lower price.

2007-02-23T17:20:00.000-08:00

ATI - Allegheny continues to slowly tear it up. This stock can't be stopped, they recently announced an increase in capital spending of 50 mill to develop further titanium sponge capacity. This company will likely tear higher all year as they continue to see revenue growth due to the increased capacity and continuously strong demand for specialty metals. I anticipate the growth may be slower, but I wouldn't be surprised with 150 by years end.

HANS - Company reports earnings on the 27th. The distribution plan in action, what kind of guidance will the company provide for the upcoming year?

SINA

2007-02-21T11:33:00.000-08:00

Sina is still a good investment, if I had the balls, I'd hold this thing all year.

Investor's Business Daily's "New America" column mentioned Sina Corp (NASDAQ: SINA) positively, saying Sina is the top search engine in China, beating both Google Inc and Yahoo Inc (NASDAQ: YHOO). With e-commerce gaining momentum in the country with a larger population than any other, Sina and analysts have very high hopes for increasing advertising sales in the next two years.

Yes, I'm back, I had a long weekend in Chicago, and then I got sick. Ick.

MVIS

2007-02-15T14:54:00.001-08:00

Microvision's Gleam Lights Up A Big Screen

How about a cell phone embedded with a tiny projector that displays an image the size of a laptop screen or as big as a plasma TV? Microvision (MVIS ), which develops high-resolution displays and imaging systems, unveiled a prototype of such a device in January at the Consumer Electronics Show in Las Vegas. Corning (GLW ) and Novalux developed the green lasers incorporated into Microvision's ultra-thin, miniature, full-color projection displays, says CEO Alexander Tokman. He is in talks with the major cell-phone makers for partnership deals. "The mini projectors created tremendous buzz," says Peter Conley, managing director at MDB Capital Group. "The market for the laser-based displays in micro form is huge, as the cell-phone market is still basically untapped," he says. Joel Achramowicz, an analyst at MDB Capital, rates the stock a buy and expects Microvision to partner with a handset maker by summer. He sees the stock, now trading at 3.16, doubling in a year.

KONA GETS SCHLACKED

2007-02-13T18:44:00.000-08:00

Ok, so KONA is getting schlacked. They've stated that due to construction delays that earnings may be less than initially anticipated. They also blamed lower revenues on the weather. I guess with as small a number of stores as they have this may be true. I'm starting to think this story is more of a 2008 story than it is a 2007 story. They will open 6 stores this year, but most towards the last half. If I were going to buy this stock I'd wait until then. But overall, the reasons I like the stock are still the same...

I see that MAMA is HOT. Not my MAMA or your MAMA, but the MAMA that has extended its deal with YAHOO to provide targeted search traffic to Canadian Yahoo. MAMA has tripled its user base over the past 12 months. This stock has sky rocketed since August, when it was 86 cents. Has gone as high as $8.60 on Dec 21.

Speaking of hot mama's...

KONA

2007-02-12T16:40:00.000-08:00

Since I'm much more of an investor than a trader, I anticipate little to no new activity this week, with the possible exception of some stocks like MVIS. ONXX makes me wish I were a big time trader though, going up nearly 100% on news of their cancer drug Nexavar and it's successful phase 3 trial.

Kona Grill reports tomorrow after the bell. The stock got schlacked today, down 4+%, but I don't think that's based on any actual news. This could just as easily pop back up 5%.

The Penis song... (Delightfully tacky, yet unrefined family entertainment starring Brad Pitt and Ed Norton.)

2007-02-09T15:32:00.000-08:00

I sold my SINA and have since swapped into Goldman Sachs. NYX has been dropping ever since I got into it, I've really got something to learn about timing entries. I see Microvision is dropping like a rock, so I may purchase more next week. That PicoP is a sweet item of technology. These bros will have to start bringing along a PicoP with that natty ice and game cube if they expect to hang with me...

SINA!

2007-02-08T08:32:00.000-08:00

Call me stupid, but I had nearly 1/6th of my portfolio in SINA. And after earnings it took off like a kid all jacked up on mountain dew. So I'm feeling pretty good right now. I may sell a bit to lock in some profit... at the moment it's up 13.5%! Woohoo!

AH Update

2007-02-07T13:40:00.000-08:00

Further evidence that content companies are king right now. The comcasts and dish netowrks of the world are on fire
DirecTV DTV +4.71% Up an additional 2.56% after close.
Disney DIS +.28% - Up an additional 1.61% after close.

Updates...

2007-02-07T12:17:00.001-08:00

Updating picks from yesterday...

Aastrom Biosciences Inc. ASTM +2.14%
Acme Packet, Inc. APKT +5.36%
Akamai Technologies AKAM +2.96%
Devon Energy DVN -1.25%
News Corp NWS +1.66%
Riverbed RVBD -.45%
Sina SINA -3.66%
DirecTV DTV +4.71%
Disney DIS +.28%

2007-02-06T18:47:00.000-08:00

Aastrom Biosciences Inc. (ASTM) reports earnings on Wednesday. Like I've mentioned a couple weeks ago, I don't like stem cell stocks, but if you're gonna get nutty and own one, this is as good as any.

In recent news, Aastrom Biosciences said that it has received orphan drug status from the Food and Drug Administration for its proposed therapy to treat dilated cardiomyopathy, a severe disease of the heart. The designation means that if approved, the therapy would enjoy seven years of market exclusivity.

A CSCO competitor APKT reports tomorrow...
Acme Packet, Inc. (APKT) develops session border control solutions for network service providers. It offers Net-Net OS, 4000, 9000, PAC, and EMS equipment and software platforms, which provide critical control functions to enable interactive communications, such as voice, video, and multimedia sessions across Internet protocol network borders.

This would be an interesting play on the CSCO gain, it was up nicely today, and may report similar good news tomorrow.

Akamai Technologies (AKAM) has gone up over 100% in the past year, and is reporting tomorrow. I think it's far better to be on a moving train than to get in its way. This stock will continue going higher.

Other stocks reporting that I find interesting due to the likelyhood of good reports...
Devon Energy DVN
News Corp NWS
Riverbed RVBD
Sina SINA
DirecTV DTV
Disney DIS

Since News Corp owns myspace, I think it's time for another myspace hotties video...

The Uneduated Investor Buys NYX

2007-02-05T16:52:00.000-08:00

Purchased some NYX today as the stock went down. The stock will easily get back to 100, so anything under 100 is a gift.

With Google dropping like it has lately, I'm feeling the pain. But the stock WILL end the year higher, so the further down it goes, the more you HAVE to buy.

If you've never played Guitar Hero... Here's what you're missing.

Next Week

2007-02-03T15:47:00.000-08:00

A couple of stocks I'm following for earnings next week...
Anadarko (APC) is expected to report earnings per share of $1.26 for the fourth quarter.

Principal Financial Group Inc. (PFG) is expected to report income of 88 cents per share for the fourth quarter.

AAPL stock is boring me, and I'm no longer in it. Maybe in June I'll gain interest.

At least pictures like these maintain my interest a little bit.

I also like action (hehe), and these stocks showed major action...
NYMX NYMOX PHARM CORP (44.72%)
AVZA AVIZA TECHNOLOGY, IN (35.59%)
AZL ARIZONA LAND CL A (31.44%)
SCUR SECURE COMPUTING C (29.93%)
ISRG INTUITIVE SURG INC (17.57%)
ZICA ZI CORPORATION (16.50%)
NEXT NEXTEST SYSTEMS CORP (16.08%)
DMRC DIGIMARC CORP (15.87%)
REV REVLON INC (13.74%)
BRLC SYNTAX-BRILLIAN CORP (13.09%)
NPLA INPLAY TECHNOLOGIES (12.82%)
HEM HEMOSENSE INC. (12.58%)
CYAN CYANOTECH CORP (12.54%)
EVVV EV3 INC.(12.20%)
TBV TIENS BIOTECH GR USA(12.04%)

Update

2007-02-02T07:44:00.000-08:00

Checking in on the stocks I've been watching. Here's the list of where they started, and where they are today...

Tickr - Start $ - Current $
GOOG $481.30 - 480.70
ATI $86.95 - 102.21
TIE $28.95 - 33.01
CHK $27.75 - 29.37
VLO $48.96 - 55.83
CERN $46.33 - 49.17
ECA $44.15 - 48.25
TIVO $5.18 - 5.64
GS $199.08 - 213.09
SHLD $167.55 - 177.41
KONA $21.14 - 19.99
MO $87.67 - 87.45
SBUX $35.26 - 34.31
NYX $94.87 - 99.24
NMX $120.77 - 129.38
MA $99.53 - 112.00
CME $524.05 - 573.17
MXE $26.19 - 26.82
DIVX $23.08 - 22.51
LVLT $5.60 - 6.11
HANS $34.04 - 39.29
ATVI $17.34 - 17.41
HAL $29.23 - 29.62
BWLD $54.98 - 51.14
CMG $55.47 - 59.71
UA $49.35 - 46.78
APOL $41.49 - 43.00
GILD $64.21 - 71.03

Google Grows Like a Giant, Moves Like a Mouse

2007-01-31T15:12:00.000-08:00

Google beat earnings estimates, which we kind of all expected. But the world was expecting some drastic upward or downward movement. Not suprisingly to me, though, the stock is trading in AH at only $3 less than it opened the day. If you liked Google before earnings, you should still like Google now, if you didn't like it before, you shouldn't like it now. The report did nothing to change anyone's opinion. I believe this stock will easily hit at least 600 before the end of the year.

ATI is still in bull mode. They could be helped by Intel's plan to build a new line of hafnium chip, of which ATI is a major suplier. Oil refineries and pipelines may be recasting and rebuilding items using ATI's materials that are resistant to the corrosive affects of oil and gas. The aerospace industry continues to fly. Stay long ATI. (sounds like a good motto)

NYX - Tokyo alliance while not monetarily beneficial as of yet, may pay off in the long run, and seeing the stock under 100 makes me want to buy more.