Uni-Pixel Investors Getting Fooled Again

| About: Uni-Pixel, Inc. (UNXL)
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Unfortunately, investors have fallen again for Uni-Pixel's (NASDAQ:UNXL) tomfoolery. We believe that Wednesday's press release was Uni-Pixel's weak attempt at hiding the stunning news that they have yet again failed to meet production and revenue targets. Whereas this past summer, Uni-Pixel blamed the delay on Windows 8.1, this time Uni-Pixel offered no excuses. We believe it is clear that UniBoss, now repackaged as "InTouch Sensors Powered by Kodak," cannot be manufactured and that Uni-Pixel has another failed product on its hands.

Like the nearly 70% drop this summer from a high of $38.70 to a low of $12.30, we expect a similarly dramatic fall in the share price as investors realize that Uni-Pixel has failed with the launch of another product. Uni-Pixel investors do not want to be left holding the bag (or broken TMOS, Opcuity or DiamondGuard) and should discard their shares of UNXL.

Another Misleading Press Release

Investors have clearly taken Uni-Pixel's press release on September 25, 2013 (here) as positive, taking Uni-Pixel's stock price up more than 15%. However, it is clear from the press release that Uni-Pixel has again dropped the ball with InTouch Sensor. In fact, we think Uni-Pixel has essentially come out and said they are nowhere close to launching InTouch Sensor. Investors should be very wary.

Uni-Pixel has missed their shipment deadline

First, it is clear that Uni-Pixel will miss the crucial October 1 shipment deadline and that the Company has once again delayed shipment and commercial roll out of UniBoss. For months, Uni-Pixel has said that in order to get product on the shelves for the all-important holiday season that the Company needed to start physically shipping product to suppliers by October 1, 2013. On the 2Q 2013 conference call (here), Reed Killion said, "For us, the drop dead date to ship product would be in October, October 1."

In the Wednesday press release, the Company makes no mention of imminent product shipments by October 1. Instead, Uni-Pixel only offers a vague timeline for a "commercial rollout of InTouch Sensors… over the weeks and months ahead." We believe that is a clear signal from Uni-Pixel that they will be unable to meet their "drop dead date."

Uni-Pixel has failed to receive product qualification and certification

Why will Uni-Pixel be unable to ship product by the October 1 deadline? It is because Uni-Pixel has not been qualified or certified for production. On the 2Q call, Williams Financial analyst Cody Acree asked, "Reed you mentioned going to issue a press release as you receive those qualifications and moving towards production, did I hear that correctly that you will come to the market with the press releases, is that correct?"

Reed answered, "Yes."

The announcement of "production level process qualification and data collection to support and achieve ISO 9000 and ISO 14000 certifications" was supposed to be a positive catalyst for Uni-Pixel, along with product shipment by October 1st. The fact that Uni-Pixel has not issued a press release regarding successful product qualification and ISO certification shows Uni-Pixel is nowhere close to production.

Uni-Pixel no longer expects revenues in Q4

Lastly, a subtle change in wording shows Uni-Pixel is moving the goalposts yet again on investors. Through their history, Uni-Pixel has been very clear about the importance of revenue generation. In the 2Q 2013 press release, Uni-Pixel stated, "We continue to be on track for generating production revenue in the fourth quarter of 2013."

CEO Reed Killion reiterated that goal and said, "Our goal is production level shipments and revenue in Q4."

Now, the Company makes no mention of fourth quarter revenues and instead simply states, "We remain on track to begin commercial production in the fourth quarter of 2013."

We think it's curious that Uni-Pixel no longer mentions revenues. In fact, there is not one single mention of the word "revenue" in the entire press release. Why was there such a clear change in wording? What is Uni-Pixel trying to hide from investors?

Eastman Kodak is an unreliable partner

We also find it curious that Eastman Kodak CEO Antonio M. Perez is prominently quoted in the press release and supposed to add gravitas. This is the same CEO that led Kodak into bankruptcy while grossly missing financial targets.

For example, in 2008, Kodak CEO Antonio Perez promised revenues of $7.7 billion to $8.3 billion for fiscal year 2009. Kodak missed the mid-point of that target by $400 million and came in at $7.6 billion, which was below the low-end of the revenue range.

Kodak 2009
(Click to enlarge)

The story repeats itself in 2010. Kodak issued guidance of $7.5 billion to $7.7 billion of revenues, and missed their target by another $400 million.

Korean 2010
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Then in 2011, fresh after 2 consecutive years of revenue misses, CEO Antonio Perez issued 3-year forward 2013 revenue projections. He forecasted that total revenues would grow approximately 1% from 2010 levels and reach $7.4 billion by 2013.

Kodak 3 year target
(Click to enlarge)

It should not be a surprise that Kodak failed to meet his projections.

Two months before Kodak declared bankruptcy in January 2012, the Citi analyst covering Kodak expected 2012 revenues of $6.2 billion and $6.4 billion in 2013, which was well below Kodak's original forecasts. That is a miss of nearly $1 billion!

The inclusion of comments by Kodak CEO Antonio Perez was supposed to bolster Uni-Pixel's case. However, astute investors should look to his performance while at the helm of Kodak to judge his credibility.

The Competition Has Passed Uni-Pixel By

Meanwhile, during these "delays," competitors have quickly surpassed Uni-Pixel, entered the complex touch screen ecosystem and received actual production orders. For example, Shenzhen O-Film Tech recently announced orders from 6 major PC vendors for a low-cost ITO replacement touch panel. The article can be found here. According to DIGITIMES, the major PC makers include Hewlett-Packard (NYSE:HPQ), Dell, Lenovo (OTCPK:LNVGY), Asustek Computer, Acer and Samsung Electronics (OTC:SSNLF), and the orders are for notebooks, tablets, and smartphones. Eager holiday shoppers will find many O-Film products, but they will not find any Uni-Pixel products on the shelves this Holiday Season.

Moreover, it's not solely small competitors like O-Film Tech. Just last week, Sharp (OTCPK:SHCAY) and Microsoft (NASDAQ:MSFT) displayed their own versions of large, metal mesh, touch screen panels at the Touch Taiwan and International Display Manufacturing Conference. At the conference, Sharp showcased 20", 32", and 70" touch panels, and Microsoft highlighted a 55" touch display that Microsoft made with Corning. These aren't small competitors by any means. Not only is UNXL falling behind, but it is also clear that UNXL has to compete against behemoths in the competitive touch screen space.


So let's review:

  • Uni-Pixel has not received production qualification and ISO certification. They promised a press release and have not issued one yet.
  • Uni-Pixel also promised fourth quarter revenues. However, based on Wednesday's press release, Uni-Pixel will miss their "drop dead" deadline of shipping product by October 1, which will be impossible to meet since they have not been qualified or certified.
  • UNXL believes having quotes from Kodak CEO Antonio Perez gives them cover. We know Antonio Perez's track record when it comes to financial projections.

As the saying goes, fool me once, shame on you. Fool me twice, shame on me. Investors will again be wearing egg on their face.

Disclosure: I am short UNXL. 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.