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Hello gorilla hunters,

I think I may have spotted one! I was alerted to Microvision's presence and potential through news of their partnership with CREE. Encouraged by Cree and GE's confidence, I decided they were worth a look. I've decided to attempt a gorilla analysis, with the full understanding that MVIS is nowhere near being an established gorilla. But if sentiment from this board is any indicator, hunting a gorilla is more fun than seeing one sitting in a zoo. I am using several previous analyses for my format, as I have not yet read the GG book (too much college). I do intend to read the book when I have the time, and of course would appreciate any corrections that stem from my non-gorilla-educated state at this point. So here goes:

Overview:
For years the display market has been dominated by Cathode Ray Tubes (CRTs). But just recently, flat panel displays have seen an increase in popularity and market share. However, in 1992 the Human Interface Technology Lab at U of Washington developed at display that, instead of using a view screen, projected the image directly onto the retina using only light sources. Scanning a full color image using reds, greens, and blues, directly onto the retina is the basis behind Microvision's technology. Currently Microvision develops high precision micro-optical scanning systems and related technologies that enable the development of personal display. The devices that employ this technology are called Retinal Scanning Devices (RSDs). As the potential applications for RSDs are numerous (see next section), MVIS plans to commercialize its technology throrugh development of products with OEMs (original equipment manufacturers), where MVIIS supplies the personal display technology.

Markets
This is one of the exciting parts about RSD's. There are many markets that are "ready" for MVIS's RSDs. The largest ones are listed below, with estimates for size, and a quick explanation.
The defense and aerospace industries are where MVIS already has delivered on several development contracts for the defense industry (Army & Air force are two i found). Estimates place the value of available market oppotunity for high performance displays in defense and aerospace to be 4.3 billion dollars! MVIS has also collaborated with Boeing on an advanced cockpit display using their RSD tech.

There are also significant possiblities in the medical field. In fact on May 11, MVIS RSD was used in its first "live" neurosurgery. And to show this was not just an isolated incident, according to the MVIS 99AR there are over 55,000 surgical suites that drive high demand for new, better visualization technology. Possible applications in the medical/healthcare field include=: Neurosurgery as previously mentioned, cardiac/abdominal surgery, and ophthalmic screening (vision tests). A significant partner to MVIS in this area is Carl Zeiss Inc.

Another huge potential market for MVIS is in mobile computing. The industrial market will benefit greatly from the increase in mobile computing capabilities, specifically those related to displays. Already MVIS has demo'ed displays that can tap into the industrial market and its 20 million people doing information-driven tasks. Portabale and transparent RSDs would enable organizations to improve upon productivity, precision, safety, and overall profitability. Along these lines, MVIS is involved in a consortium where their wearable RSDs are being tested in industrial applications. Partners include: Siemens, Ford, Volkswagen, Audi, and DaimerChrystler.

Last, and perhaps most exciting is the growing global market for personal wireless displays. A few more quick numbers here. Of the projected 1 billion internet subscribers in 2004, 750 million will be using mobile terminals to access electronic information. Key to this area is the company's develpoment of its Mechanical Resonant Scanner (MRS). This technology allows MVIS to further miniaturize its scanning devices.

Other, more speculative markets include the entertainment industry. For example Virtual Reality and gaming. Also, the CEO had a really cool quote where he talked about wearing an MVIS display inside stonehenge or the colosseum, and full-color realistic images of people from the respective eras. Like a real-time gladiator match right in front of you. Brings to mind the holodec for you trekkies out there.

Still doubt the potential for MVIS technology?
"Microvision's partnership has afforded us the opportunity to achieve and reraach new milestones in our light source developmment efforts...and will help us expand our technology for inclusion into new state-of-the-art applications including mobile Internet handsets and other applications"
Neal Hunter, Chairman and CEO of CREE

Customers
This one's looking to be somewhat difficult, as MVIS has not commercially released any products. But here is some data from their 10K.
82% of sales are to the US Government, thru research contracts, most regarding cockpit displays.
18% of sales were to commercial enterprises. MVIS has a lot of government contracts in the works, and is just beginning to creep into the consumer/industrial/professional/healthcare industries and their huge potential market values.

Competitors
There are quite a few competitors, as there is with any discontinuous innovation (first use of money phrase:) From what my roomie explains of GG and from my readings, there is a whole established "value chain" (i think thats the word) for the CRT and now flatscreen displays. MVIS and its RSD technology clearly threatens this. Also there are entrants in the miniaturized CRT and flat panel display arenas from Sony and TI. However, despite the big names, the RSD quality and precision is superior to the alternatives (at this point in time). The 10k states that "The company believes RSD tech could deliver images of a quality and resolution substantially better."

The Value Chain
Unfortunately, there is no real value chain in place. Right now, MVIS gets contracts to produce devices with certain specifications (and has delivered 100%). However all indications point to a definite development of a value chain around MVIS's "propietary architecture." I can't figure out if it is open or not, but my buddy became quite frustrated when trying to explain it, so I'll regretably have to forgo the "proprietary open architecture declaration", but I'll try to describe and let you come to your own conclusions. It's pretty simple actually, MVIS plans to enter into developmental agreements with OEMs. It will work with formulating products based on RSD tech in different industries with different OEMs. For example a couple for the medical market, a couple for the industrial market and so on. Eventually, the goal is to have MVIS providing the "display engines", and the OEMs producing and distributing the finished product. Looks like a value chain to me.

Financial Information
This is where it kind of gets ugly. But keep in mind this is a company pushing a technology that is basically in its infancy. Or at very least toddlership (is that a word? ack! digression!). Anyhow...
Price (5/26): 22$/share
Market Cap: 234.30 million ($234,300,000)
P/E: Infinity, as in negative earnings
EPS: -0.48 for quarter ending march 31 (doh!)
Debt/Equity Ratio: 0.2
Total Current Assets: 33,968,300 (as of march 31,2000)
More financial information can be found in MVIS 10Q at Edgar.

Gorrilla Characteristics
This is where it gets a little tricky for me, but I'm gonna give it my best and hope for (constructive!) criticism/corrections on stuff that I will inevitably botch.

Is there a discontinuous innovation or a proprietary open architecture?
Oh yes! The VRD (Virtual Retinal Display) technology which leads to the RSD is very discontinuous. It presents a whole new way of viewing information! As far as being proprietary and open, here's my take. It definitely is proprietary, as MVIS has an exclusive license from U of Wash. to use the VRD tech. Also, MVIS has many of its own patents protecting at the technology's system, component, and process levels. Meaning the whole process is pretty much locked down as far as I can tell. But, based on the definition of open presented in a post by the venerable MikeBuckley, it is open as well. Because while the OEM's MVIS will enter into an agreement with will not be able to manufacture the "RSD Engines" themselves, they will be able to manufacture and market devices that utilize the technology in many different market areas as stated above.

Does it have the potential to grow into a mass market phenomenom, become a standard?
Opinions may vary on this one, but i think it definitely does. While it could be argued that the markets mentioned above are niche markets, I think the big one is the portable wireless information device market. A market size of 750 million potential users (and that's only for 2004) certainly would seem to qualify it as being in a mass market, and a phenomenom in and of itself nontheless!

Are there high barriers to entry and high switching costs?
Oh yah. MVIS has progressed by far the most in the RSD market. In fact, they ARE the RSD market. And their strong Intellectual Property portfolio ensures that they will remain as such. Regarding switching costs, while the MVIS line of RSD's will provide an incredible increase in viewing quality, they will not be dirt cheap. The quality of the device and its accompanying relative price will deter switching.

Are there value chains present?
I already did this one above. To restate, no, not at the moment, but development will occur as enumerated above.

Have they crossed the chasm?
More gorillaspeak. My roomie is rambling on about going bowling, so I can't spend long on this one. Wait, bowling alley he says <me LOL>. His explanation is consistent with a cool little picture he's showing me in the book. So apparently they have crossed the chasm. Which is good. (I'm gonna get nailed on this one) The tornado is a ways off, as their EPS obviously has not shown any growth representative of a weak little thunderstorm, much less a full blown tornado.

Summary and Analysis
MVIS is not a gorilla. They clearly are not in a tornado. But, I thoroughly believe they (much like ELON, another company i'm beginning to explore) are establishing the framework to become one. All of the markets are in place, the product development is moving along. Each new annoucement of progress brings increased excitement. The technology is there, and is definitely for real, as is evidenced by the bigtime investments from CREE and GE. Also, the defense and aerospace industry requires advanced technological products that allow give them a decided advantage in fighting to maintain our freedom. In other words they do not use second rate tech. It is just beginning to see its first uses (neurosurgery), while at the same time other uses are being continuously explored. I believe RSD will fundamentally change viewing of information, and as I said earlier, RSD is MVIS.

Resources
All of the information was garnered from either the 99 10k, 00 q1 10q, 99 Annual Report (very cool), MVIS corporate overview, or a business week interview with the pres/ceo. I'm sorry I can't provide links, but in all honesty that is where I got the info, from the IR packet sent to me by MVIS.

So in closing I think MVIS is definitely a prime gorilla candidate, but still needs to pass quite a few tests before getting hairy. At the same time, I think it is in excellent position to pass those tests, and am watching eagerly as it progresses through the technology adoption life cycle (another GG term!). I hope I've amused, enriched, or informed, and look forward to hearing takes from some of the stalwarts (BruceBrown, Mikebuckley, Tinkershaw, TMF Fuz or anybody else with an informed or curious opinion!)

Now I just gotta read the book,
Phil.
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