Editor’s Note: This article covers a stock trading with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
In my article about Microvision (NASDAQ:MVIS) on Thursday, I alerted Seeking Alpha readers to a juicy shorting opportunity. Those readers who jumped on the opportunity could have enjoyed gains of 10-15%. However, I believe Microvision is a good long term short. With its continuous cycle of hype/raise/spend money, its share count increases and value is driven down.
As I stated in the conclusion of my previous article, I would come out with a follow-up that would have more details about the pico projector technology and more information about Microvision.
Comparing Microvision's LBS Projector Versus The DLP And LCoS Projectors
Microvision's pico projection technology is based on Laser Beam Scanning (LBS). In my earlier article on Microvision, I discussed the high cost of LBS. Additionally, there are safety, brightness, and viewing experience issues with LBS.
Safety and Brightness: LBS projectors have serious safety concerns that don't apply to the other types of projectors such as the Digital Light Processing (DLP) and Liquid Crystal on Silicon (LCoS) processors. No one wants a high powered laser beam to accidentally blind their eyes. As a result, LBS projectors typically use a Class 2 laser, which limits the power at < 1mW. This power level translates to a dimmer image. A reviewer at mini-projectors.net compared the Microvision ShowWX (LBS) and the AAXA P4 (DLP LED)
the Microvision laser projector is a 15 lumen projector - with the lights on you see virtually nothing....it's extremely hard to watch a video on the Microvision projector. For those with sensitive eyes the beam scanning is actually noticeable which is annoying. For others like myself I find myself squinting at the image and anything short of a quick 10 minute clip becomes tedious and tiring.
Viewing Experience: This reviewer's same experience is also evident in this YouTube video. Look at how inferior the Microvision LBS pico projector is on the right, compared to the DLP pico projector on the left. The LBS is dimmer, grainier, and has that annoying beam scanning that keeps running down the screen.
Here is a demonstration of a LCoS (liquid crystal on silicon) Pico projector. It is also very clear and bright like the DLP, and without the beam scanning.
Why would someone choose to buy a pico projector that's dim and has a distracting beam scanner when they can buy a different kind that doesn't have these problems?
The following picture is a six pico projector comparison. The LBS projector on the upper left has a grainy, dimmer image than the LCOS and DLP images.
LBS Does Have Two Technical Advantages, Which Aren't Very Valuable
1. LBS does not require focusing, but that's only useful if you are projecting on a curved surface or constantly moving the video projection. Not too often is it needed.
2. LBS claims a higher resolution, but that's only by delivering a very odd 1920x720 image, with three times as many horizontal pixels as vertical ones. Very little video you'd want to play comes in that resolution, so it isn't compatible most of the time. DLP reaches a more practical 1280x720 image, compatible with normal HD devices.
There Is Declining Interest In Pico Projectors Right Now
Sony is now in "desperation mode" and is unloading its properties and ditching its PC business to focus now on smartphones, games, and cameras. The pico projector might be one additional gamble that it's trying out that may or may not succeed. I wouldn't be proud to be partnering with Sony if I was a Microvision shareholder. Sony has failed to execute for the past six years, and its shareprice is almost at 30 year lows. A partner like Samsung or Apple would be much more promising.
At the moment, consumer interest in pico projectors are on a downward trend. If you put "pico projector review" in google trends, it shows that interest in pico projectors has been falling since 2012. Less consumers are showing interest in different types of pico projectors. This is partially because of the popularity of tablets that are sufficient to show videos. Below is the chart from Google trends.
As shown above, interest in PicoP has reached its lowest point since 2009.
Microvision's Chronic Capital Raising
As I showed in my last article, Microvision has a dismal history of failures and broken partnerships. To sustain this level of cash bleeding over such a long period, the company had gone through a very large number of capital raises. Per CapitalIQ, Microvision did a whopping 20 public equity raises since its IPO for a total of $237 million, and 17 private placements for a total of $131 million.
Tenuous Financial Situation Make New Financing Likely. The company's balance sheet is quite weak. As of Q3 2013, it had $8 million cash and cash equivalent. Its net tangible assets have gotten lower and is now at -$1,652,000 as its have liabilities increased more than its assets. On average, the company burns $3.5 million each quarter from operations. That leaves the company two to three quarters to deplete its cash. So the company needs to raise capital again, soon. The following spreadsheet shows the company's inability to get close to profitability over the past few years.
Given the latest stock spike, and the company's low cash balance, a stock owner should be concerned about the high likelihood of a stock sale soon. After all, this practice is not new to Microvision. In the past, Microvision's stock price almost always declines by a significant percentage after each equity raise. Most dramatically, in 2012 after a 120% stock spike, the stock ended the month down 50% from its peak.