What's been said at Conference calls about STM?

By Guest writer, G.R.

Source: Seeking Alpha transcripts of MicroVision quarterly conference calls from 2Q 2014 CC to 1Q 2015 CC. “++++” denotes a break in subject matter in the transcript (i.e. not one continuous comment)

2Q 2014 CC

In June, we announced a collaboration with the second consumer electronic company on the Fortune Global 500 list to develop a display engine for an innovative smartphone product to be offered by this company. The new partner has communicated to us that it targets market introduction of the new product in the second half of 2015.

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Our business development efforts are focused on 4 main go-to-market coalitions that involve all the key stakeholders needed to enable a new market. In our case, the coalition includes display engine manufacturers, consumer electronic OEMs [Note: multiple display engine manufacturers and distinction between display engine manufacturers and OEMs, i.e. potentially STM as display engine manufacturer and Lenovo as consumer electronics OEM] and major retailers.

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Recall that in 2013, we begun development of supply sources from MEMS and other key components with some of the world leaders in their respective areas. [Note: Distinction that there are other key components besides MEMS and multiple “supply sources”, so MEMS might come from one and other components from other sources]

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And finally, product OEMs, we're developing products based on our technology, utilizing the engine of our partners, also need some of our market and technical support to help them to get to deliver products to market. So we have 3 -- we're working 3 fronts right now, our own deliverables and then we supporting our partners, both on the engine and the product side to help them to introduce the best possible products as soon as they're ready. [Note: Again the distinction between engine and product partners]

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Michael Latimore - Northland Capital Markets, Research Division

And then, on the new smartphone opportunity, if they want sort of products out in the second half of next year, would that suggest that you would see revenue on the first half of next year related to that?

Alexander Y. Tokman - Chief Executive Officer, President and Director

Typically, you're right, Mike. Typically, there is a lead time on a component before they convert it into engines before the products. So if they target product for the second half 2015, you need back probably 3 months to -- this is when we start -- we would start receiving something from the engine manufacturers, who will be receiving the orders from the product OEMs and OEMs, correct. [Note: AT “walks this one back” in Q3 CC transcript, that there will be no product revenue from F500 in 1H 2015]

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Unknown Analyst

Great. You also discussed a large volume capacity by the end of the year. Now is there 2 components? Are some of your partners going to supply all the pieces on their own? Or will you be a supplier in every case of at least part of the module?

Alexander Y. Tokman - Chief Executive Officer, President and Director

We will be a supplier in most of the cases because it's case-to-case specific. In some cases, we provide more; in some cases, we provide less. But we should be a part of every endeavor, whether it's engine manufacturer and, obviously, the engines from our partners will flow into products of others. So yes, we expect to be in every module. [Note: Clear as mud, IMO. See no reason IP can’t be the “in” for every module]

3Q 2014 CC

In June, we announced a collaboration with the second consumer electronic company on the Global Fortune 500 list, to develop a display engine for an innovative smartphone product that is planned to be offered by this company. To remind you, the new Fortune 500 partner has communicated to us that it targets market introduction of this product in the second half of 2015. We successfully completed the initial phase with this partner in Q3 [Note, this strikes me as a big “tell” that they were working with a pre-existing technology partner like STM as the engine manufacturer, or else how in the world did they complete the initial phase that quickly?] and are now moving into the next development phase of this program.

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The most important part from our side is to be ready with our MicroVision-specific component and enable the engine manufacturers, one of them who you already know and we announced [Note: And therefore at least one more unannounced], to be ready to provide their solutions to the product guys so they can basically start populating the retail channels.

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Jim Fitzgerald

This is Jim Fitzgerald sitting in for Mike Latimore. So my first question is surrounding the smartphone opportunity. Can you comment a little bit on what effect do you see that having on revenue in the first half of 2015?

Alexander Y. Tokman - Chief Executive Officer, President and Director

Remember -- recall that what I stated today and what we stated during the release of this information that the customer specifically told us that they are targeting second half of 2015, not the first half of 2015. We anticipate that until then, we're going to be in development phase and so no product revenue should be expected in the first half of 2015. [Note: NO PRODUCT REVENUE SHOULD BE EXPECTED IN THE FIRST HALF OF 2015 FROM F500 –this is “walking back” the Q2 2014 CC comments on 1H product revenue]

Jim Fitzgerald

Okay, perfect. Got you. And is there a contract in place for that opportunity?

Alexander Y. Tokman - Chief Executive Officer, President and Director

That's correct. We have agreement in place. It's a smaller scale agreement than what we've done with Fortune Global 100 customer because we are contributing less. So it's a less investment -- resource investment on our part but yes, we're under agreement. Correct. [Note: Very interesting this comes out only in Q/A. Heavily implies money changing hands at this point is very small, not “material”, or would have had to be called out more specifically in official quarterly reports. This goes hand-in-hand with less than 10% of the company working on it actively (as opposed to supplying rights to 20 years of intellectual property as main contribution).]

4Q 2014 CC

Last June we announced a collaboration with the second consumer electronic company on the Fortune Global 500 list to develop a display engine for an innovative smartphone product plan to be offered by this company.
We have made significant progress and advancement on the display module development with them and they communicated to us that they target second half of 2015 for market introduction of their product.

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Mike Latimore - Northland Capital

So I guess, as you look out over the next year or so. How do you think about sort of license revenue versus component revenue? What kind of mix are you thinking about there?

Alexander Tokman - President and CEO

License for us is just component. It’s a case specific, Mike. For example, Fortune Global 100 agreement may entail component sales and licensing. Another agreement could entail sale of the components where licensors will be potentially built in into component pricing. So it’s really -- you can predict at this point in time.

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They [Note: Sic, obviously “We”] are obviously working with smartphone manufacturer. [Note: This one strikes me as important because he’s actually committing to it being a smartphone manufacturer (e.g. Lenovo would be an example), and not just a smartphone accessories manufacturer (e.g. some sort of add-on sled)]

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Alexander Tokman - President and CEO (in response to Randy Hough)

Sure. Sure. So we have to prioritize. Just to give you example so everybody understands and make sure it’s clear. We put 90% plus of our resources in past two years to make Sony a successful, 90% plus. [Note: This means that they completed “initial phase” with the F500 in record quick time with 10% or less of the companies resources –another huge “tell” that they had to be working with a pre-existing engine manufacturer partner]. If we did not do this, we would have not been successful. So, we have to manage cash and we’d have to focus on vital few. Now that we transition and we've done a lot of heavy lift to support our Fortune Global 100 customer, we have resources become available for other opportunities.

But in addition to what you said, yes, our list has been -- we prioritize kind of top five and top five list changed over the past two years because some companies slowed down, some companies accelerated from the second top five and we moved them into the first top five. So what we announced with the Fortune Global 500 companies, for example, they were not on their original top five list but they moved in top five list once we realized they have very exciting application and we are serious about moving forward.

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Q1 2015 CC

Last June, we announced a collaboration with a second consumer electronic company on the Fortune Global 500 list, to develop a display engine for an innovative smartphone product, planned to be offered by this company. We have made significant advancements on the display module development with them, and continued supporting them throughout last quarter.

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Henry James - State of Michigan

Now, with respect to the Fortune 500 company, my understanding is, that they are developing their own module, and so my question is, would they require a licensing commercial agreement related to that?

Alex Tokman - President and CEO

Henry, it’s a great question. Its too early for us to comment, because we are still in development. Once we complete the commercial agreement, it will be determined, what specifically we supply, and how the transaction will take place. Sometimes, we have situations where we have royalty, as in the case of Sony sometimes. We provide more components. We actually build in royalty into the component's price, so it will be determined based on a commercial transaction, and once we get close to this, we would be bale, potentially to provide more information.

Henry James - State of Michigan

Okay. I mean, as far as you know, is their timing still for second half of 2015?

Alex Tokman - President and CEO

First of all, we are very excited about working with this customer, and our goal is to be ready to support them in the second half with what we would provide to them.

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Note: Explanation for why the Notes are focused on STM –

Linked In of Microvision Director of Supply Chain Management, August 14, 2014:

“April 2011 – Present (3 years 5 months)Redmond, Washington
Start up company specializing in proprietary patented PicoP laser projection engines featuring 1 mm MEMS electro magnetic powered scanning mirror (MEMS die and higher level assembly process) controlled with two custom ASICS that tune proprietary designed RGB Laser module up to 2,000 raster patterns a second.”

“Directly responsibe for 2 Generation’s Business and Operations NPI program management issues with ODM partners that manufacture the MEMS die and perform final assembly of the Product. First generation launched and successfully sold 30,000+ units to Pioneer Corporation in 2012. Currently in launch process of next generation with new die fab (ST Microelectronics MV) and assembly partners. Includes day to day management of 2 in Asian theater team members.”

Reference to ST Micro later deleted after it gained public notice and was commented on at financial message boards.

Thank you Geo for your help!