Augmented Reality: How To Profit From This New Market Darling

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Includes: ALSO, EA, GOOG, ISRG, VUZI
by: John Ennis

So, Google Glass is out there and running, at least for 1,500 people who can prove that they are cool enough for the maven's at Google to award them the right to buy the trinket. What they offer is a way to insert information into a consumer's daily life that seems very unique and potentially very lucrative.

There is augmented reality art out there for a while now, there was an augmented reality show held at the Metropolitan Museum of Art in 2010 that showed what this software could do. MOMA wasn't part of the exhibit. The exhibitors put together an art exhibition at the MOMA with software that allowed the "works" to be viewed through a smartphone when they pointed it at the right place.

Becks beer ran a campaign in the summer of 2011 to drum up interest in its product. Green boxes, were placed in London, Miami, Milan, New York, Rome and assorted other locations.

Now, when you pointed your tablet or cell phone at the cube, you were treated to art. May not sound like much to you, but take a look at this video, you start to see just where this could end up.

Though it seems like an imaginary world or a world of the insanely rich, but it's not. It is a possibility that will be coming to a pair of glasses in the not too distant future. The way that we see our world and interact with it will undergo a dynamic shift that will make the dawn of the Internet seem like the dark ages. This phenomenon is known as Augmented Reality and is the same technology we've experienced in films like Terminator as well as in new apps for the smartphone on an almost weekly basis. This not-so-new technology is finally coming out of its shell and the future is looking bright. As an investor, I am looking forward to some exciting returns from its many applications.

Jumping on Board

The Augmented Reality industry is on a full out, high-speed run in innovation cranking out some new and exciting products this year alone. Augmented Reality (NYSE:AR) is gaining much of its momentum with Google's (NASDAQ:GOOG) new Project Glass, announced in 2010, that will allow users to put on a smart pair of glasses, which is essentially a smartphone that is worn like a pair of glasses, activating prompts through voice commands. Google produced some real cool videos. Just search "google glass" on youtube.com. Other companies on board the AR train include Qualcomm, Inc. (NASDAQ:QCOM) and Nokia Corporation (NYSE:NOK) that has entered the arena with smaller AR projects now on the market. Some of the big boys like Apple, Inc. (NASDAQ:AAPL), which has a patent for a Video Telephonic Headset, and Microsoft Corporation (NASDAQ:MSFT), which is exploring the design of augmented reality lenses to be used in facial recognition applications for police and military agencies, are recognizing the huge potential in AR.

Augmented Reality Affect on Darlings

A brief look at just a few of the possible uses that can drive revenue in Augmented Reality include some of the more basic functions that are right around the corner, like providing users the ability to manage email, SMS and calls with enhanced settings and control. I read this, in its simplest sense, as wearing a pair of glasses and using eye movements and voice commands to access these functions while viewing and hearing the data as any necessary additional information is simultaneously brought right before my eyes or quickly accessible through further commands.

This is just the tip of the iceberg, though. When you consider sporting events, concerts, gaming, gambling, military, educational, and medical, you can see how those experiences will be made possible through the use of 360-degree cameras that have been around for years. Developers of apps will build large sales streams through the entertainment business with users purchasing one-time applications (tickets, if you will), for a variety of experiences, such as sitting courtside at a basketball game, a concert or any other event of interest. The experience will be completely different to even the best flat-screen, 3D technology today as users will be fully immersed in the experience. Whichever direction they look, the angle and view will change just like being there.

First in Line

Thus far, it has been Google that is winning the race of getting a sensational AR product to market. Google Glass, the new smart glasses, is due to come out the end of 2013. Registration for the glasses has closed, but after the initial roll-out, Google says it will have plenty to go around. Google Glass will work as a standalone device having most everything it needs to function including GPS and a processor that runs a custom version of Android. However, it will need an internet connection requiring it to be tethered to a smartphone or connected to the internet through a Wi-Fi connection. This obviously gives Google Glass some clout in the competition with Apple products leaving Apple users wondering how they too can get in on using a pair of the glasses. One company, NYC-based Infinity Augmented Reality Inc. (OTCQB:ALSO), is developing the first AR software platform delivering a full AR suite that connects universally with digital eyewear, smart phones and tablets as well as employing a full spectrum of cutting-edge technologies such as location, image, voice and facial recognition software.

For investors it is important to be knowledgeable of disruptive technologies. Therefore it is important to learn all you can about augmented reality. However, I can assure you that it is wise to watch for this sector to start garnering heavy attention in the near term. It may be prudent to get in early before the release of Google Glass.

Searching for other Companies Effected by Augmented Reality

Intuitive Surgical (NASDAQ:ISRG)

This camera or image technology is only now advancing. Businesses using and relying on robotics can only be enhanced by the use of AR technology. For example, Intuitive Surgical, headquartered in Sunnyvale, CA, with more than 2,362 employees worldwide, designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories. It's the da Vinci surgical system that translates a surgeon's natural hand movements, which are performed on instrument controls at a console, into corresponding micro-movements of instruments positioned inside the patient through small incisions or ports. The technology of AR can certainly enhance the efforts of this company. Intuitive's stock just ten years ago was $5 a share and reached a 52 week high of $594, with the current price at $491. This industry will continue to grow and will be aided with Augmented Reality as the physician will be able to watch the procedure from the robot's point of view and add his or her expertise based on the findings that would not have been obtained without the use of AR. Therefore, I expect the share price of Intuitive Surgical to grow as more robotic applications are developed over the coming years.

Electronic Arts, Inc. (NASDAQ:EA)

An example of a company that could well be negatively affected by AR is Electronic Arts, Inc. (EA). The company develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, tablets and electronic readers, as well as the Internet. It provides games and related content and services in various categories, including action-adventure, role playing, racing, and first-person shooter games. This is a company, once a market darling, that can be adversely affected by AR. As the new applications of AR are revealed and gain traction it could hurt the traditional game manufacturers. The company's stock ten years ago was $59 a share and reached a 52 week high of $594. The current price is $17. I anticipate a major weakness and would avoid this stock unless they make a major acquisition in AR.

Other

T-Immersion is a French company working with augmented reality doing some amazing work. But alas, Total-Immersion is a private firm that sells no stock.

Vuzix (NASDAQ:VUZI): is a more established company, but it appears to be struggling a little bit, with stock priced down from $9.75 to $4.10. I wouldn't want to be competing with Google and Apple hardware so I'd avoid this one.

Infinity Augmented Reality: These folks appear to be a hot new startup with some pretty nifty ideas. This one is very tempting. They appear to have a solid team on board and the price of the stock right now is about $0.50. The ideas are tempting and potentially very lucrative. Gradually becoming a heavy hitter with an all-star team of leaders including ten-year veteran of the Augmented Reality industry, Helen Papagiannis, Chief Innovation Officer, Infinity AR is quietly making noise. Ms. Papagiannis has presented her interactive work and PhD research at global conferences and invited events including TEDx. A classic risk vs. reward play with potential for great risk and reward.

Risks

Micro cap stocks are highly risky and are harder to predict than their larger counterparts traded on NYSE and NASDAQ. Currently Infinity AR and Vizio are microcap companies. These stocks are considered highly speculative and should only be purchased with the understanding there is significant risk of loss of ones investment.

Disclosure: I am long OTCQB:ALSO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.