Jeff Opdyke, who writes the Global Growth Strategist newsletter ($895 per year, thanks very much) for the Sovereign Society, is teasing us about a small-cap way to get in on the “Cybornetic web revolution” … and lots of Gumshoe readers have been asking for an unveiling of this mystery that costs a bit less than nine hundred bucks, so here goes …
The pitch is pretty much textbook copywriter-ese — you take a huge new idea, then deftly move your excitement about that idea over to a small company that’s involved in the business that underlies that idea … here’s how he gets us juiced up in the beginning:
“There’s a ‘new web’ emerging across the globe. It’s not
‘social networking’ or ‘Internet coupons’… but it will change the
way we live, shop and do business online. Now, one tiny company
has quietly developed a breakthrough technology that promises
to kick off the next Internet gold rush.
“The old Web – what many people call the ‘information superhighway’ – is dying.
“It’s quietly being replaced with a more powerful, interactive, virtual Web experience that will turn today’s superhighway into little more than a bike path… and companies like Apple, Intel, IBM, Google, and Cisco are already pouring millions of dollars into developing it.”
And, of course, he goes on through a lengthy discourse explaining why this is such development, why the “cybornetic web” will change everything, and why it’s even been called a “no brainer” that the “cybornetic web” will be a part of the Ipad 3 when Apple releases it, probably later this year. He talks about how “life will never be the same” and that this will completely change how we go online.
So what is the “Cybornetic web?” Well, he describes it later on as being an immersive virtual reality web — with the key part of that being a new wave of 3D devices that allow you to interact more physically and intimately with information and entertainment.
So that’s the first seven pages of the ad letter, which I summarize as “3D is really important.”
Then we start to get to the meat of the ad — he can’t just tell us to buy RealD (RLD), the 3D movie tech company, because no one’s going to wear glasses to make a phone call or play Tetris, but he does mention how that stock soared, along with Imax (IMAX) (the two of them are the most publicized companies profiting from the resurgence in 3D movies). He doesn’t mention that RLD, after more than doubling this past year, then fell apart … IMAX has continued to do pretty well, for whatever that’s worth. And he mentions the coming wave of glasses-less 3D technology, including the instant response to Nintendo’s new 3D handheld gaming machine.
And finally, then, we get to where he thinks there’s actually profit to be made: The screens. Here’s an excerpt:
“Who stands to benefit most from the ‘Cybornetic Web’
“No one company has a monopoly on “Cybornetic Web”. As I said earlier, it’s difficult to determine who will be the winners and losers in this emerging trend.
“For every Amazon.com and Google that sprang from the Internet boom there was a Pets.com and a Mindspring that faded into Internet oblivion….
“So how do you know who’s going to come out on top and deliver you staggering returns that could make you rich?
“Well, the original Internet companies – or their successors – that are still thriving today are those that produced what I call the ‘technology enablers.’ They were tiny companies that few people had heard of at the time, but which developed the critical technologies that made the Web work faster, smarter or more efficiently.
“Cisco built ‘servers’ that offered companies and consumers a gateway to the Internet and racked up 6,600% gains… Acme Packet, which helps deliver voice, video and multimedia across the net, gained 2,547% in just the past two years… and Akamai who helps speed up the web for a better user experience which skyrocketed 7,359% since 2002….
“For the most part, we have computers that are powerful enough to handle the data flow of the “Cybornetic Web”, graphics that are advanced enough to manage the virtual reality for a more-realistic online experience and broadband that’s fast enough to move us between worlds in real time.
“But the reason why we don’t all have the ‘Cybornetic Web’ right now… is your computer screen.”
So what’s wrong with our current screens? Well, apparently the problems are those that will be solved with OLED technology — that’s Organic Light-Emitting Diodes, and it’s basically understood by folks to mean “LED’s without backlighting” … so you can have screens that are much thinner and much more energy efficient.
And, Opdyke tells us, the killer part is that OLED makes 3D even better … and therefore enables this “Cybornetic Web” of immersive experiences on your phone, tablet or TV:
“3D technology has an inherent flaw. The slow response time of LCD screens causes a ‘glitch’ that leads to eye fatigue and results in the nausea and dizziness that effect up to 10% of people – a number that is growing as 3D technology expands.
“But OLED resolves that problem. Its processing speeds are so fast – just nanoseconds – that it eradicates consumer concerns and the special glasses… which promises to spur 3D TV sales.”
When I saw that we were finally (this is down to about page ten now) talking about OLEDs, I figured that Opdyke must be pitching everyone’s favorite OLED stock, Universal Display (PANL), which I last wrote about when Nicholas Vardy teased it in April. That’s the company with many of the OLED and PHOLED patents, and a supplier to screenmakers like Samsung — and it’s dang expensive, even after getting cut in half in recent months.
But nope, today we’re looking at something different. Phew! I was afraid I’d spewed out all that verbiage just to repeat myself.
Apparently this secret company from Opdyke that we’re trying to reveal for you is a supplier to the OLED business …
“…for us, it doesn’t really matter who sells the most OLED displays. I’ve found one tiny firm that will play a crucial role in making OLED display panels… that could easily soar no matter which company or which country ultimately sits atop the OLED market.
“I won’t explain all the technical details, but this company is an absolute crucial cog in the production of OLED technology.
“In fact, this company’s process offers such a competitive advantage that its clients prefer to remain anonymous as they try to get the jump on the competition and capture the largest share of the market.
“You see, it will allow OLED manufacturers to produce display screens at up to 50% less than current technology, while increasing by the number of displays each piece of glass yields.”
And yes, we finally get down to a few specific details that will help us zero in on this company for you:
“… the tiny company I’ve found is based in California and trades on the Nasdaq. Its market cap is less than 1/150th the size of Microsoft’s, making it just a fraction of the size of the big companies who are now snapping up its technology….
“Samsung’s Chief Technology Officer expects this to send the demand for smartphone displays soaring by 35 times in the next few years.
“And according to one industry insider, our little technology company is the one that’s likely to supply the technology to get Samsung’s new factory up and running….
“This tiny company I’ve been telling you about has already announced two large orders from Taiwan for their high-performance laser systems. A top executive in the company has announced that China will be driving the growth of their OLED division for years to come.”
And just to further whet the appetites of all the lusty little monopolists among us, he also says that it “has virtually no competition.”
So yes, I’m practically wetting my pants in excitement. Who is this little company? The Thinkolator tells me that it must be …
And just to warn you up front, I read their latest quarterly earnings release and there were at least eight acronyms and terms that I didn’t understand at all in the first couple paragraphs, so the paragraphs below might be considered to emanate from the village idiot. Or at least, the idiot of the village that’s full of semiconductor equipment makers.
Yes, that’s what Cymer is — a company that makes equipment for semiconductor manufacturers, mostly light sources (lasers and such, I reckon) for advanced … stuff. And such.
What I do understand just fine is that they made a truckload of money last quarter, but also told everyone not to expect another truckload this quarter — their revenue and earnings came in well above estimates, $158 million in revenue and $27.7 million in income, which equals 84 cents per share and moves the trailing PE to about 13. Which isn’t bad.
But then they also said that their next quarter should bring $130 million in revenue, and that the gross margin might be worse and that R&D and SG&A (those are basically the major expenses that don’t go into the gross margin) would both also be climbing substantially from this quarter. Either they’re lowballing us, or things are going to be pretty lousy this quarter — the Yahoo Finance summary of analyst estimates still lists an expectation of over $150 million in revenue, but it does also have earnings per share in the next two quarters falling dramatically. They list earnings expectations for the current calendar year as about $3, and next year at $3.50, so the forward PE is also right around 13.
Cymer sells their light lithography machines into all kinds of advanced semiconductor factories, so that’s a large part of their business, but what Opdyke is teasing here is their TCZ division, which was started about six years ago as a joint venture with Carl Zeiss (they now say its a “fully owned Cymer company”) — the machine that the two Taiwanese manufacturers ordered is the TCZ-900B Crystallization System.
Nope, I don’t really understand what that is, but it certainly has to do with making better, thinner, faster displays. You can click here to read up about it on TCZ’s website — here’s an excerpt, in case you’re not already feeling drowsy:
“Developed for creating highly uniform SOG (system on glass) grade LTPS (low temperature poly silicon) material of highest electron mobility and ultra smooth surface roughness, the TCZ900X presents an innovative production system for fabricating flat panel displays.
“Besides improving uniformity, electron mobility and surface roughness of the LTPS material, TCZ targets to provide display makers with industry leading productivity and yield. Utilizing proprietary light source technology of Cymer and the comprehensive optics expertise of Carl Zeiss, the TCZ900X has been designed to extend light source power, beam stability and process control to levels beyond those obtainable with laser annealing systems and -processes currently available in the market.”
Oddly enough, searching for “TCZ” on Cymer’s own website yields absolutely nothing — don’t know if this is intentional secrecy, or if they’re just letting this joint venture exist as its own system. They have sold their first few machines, but apparently it is literally just a few machines so far — their first one was sold last year, and they’ve had a few more orders, so I imagine it’s going to be a while before this takes over as a profit leader for Cymer — but they are excited about it. Here’s an interesting article from last year that explains their OLED technology almost in English (including the claim that it reduces costs 30-50%, and that the company has little competition), from xconomy.com — definitely worth a read if you want to dig into Cymer.
So there you have it — a company with a semi-secret division, using a technology I don’t understand, that is helping to advance the cause of the “cybornetic web” … and that Jeff Opdyke thinks could “deliver tremendous returns to shareholders who get in early.” Is it a stock you want in your portfolio? Well, it’s your portfolio — you tell me … share your thoughts with a comment below.
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