Today it’s a repeat pitch from Lou Basenese that graces our pages here at Stock Gumshoe… he’s talking up an “iPhone Killer” idea, a notion we’ve certainly heard teased many times. This is how he gets the idea into our heads:

“Kill the iPhone, you say?

“Few companies have the guts to kill an iconic… admired… refined… brilliantly conceived… historically significant… multibillion-dollar business… ON PURPOSE….

“See, by strategically killing, say… an aging business model… a declining product… an outdated design… a tired brand… a fading trend… Sears, Dell, Blockbuster, America Online, Kodak, MySpace, and Yahoo could’ve stayed perched atop their kingdoms.

“It’s called ‘creative destruction.’

“If you’re an investor, I urge you to pay close attention.

“Because in the weeks ahead, Apple could do what Sears, Dell, Blockbuster and the others failed to do — if all goes as expected…

“Apple will commit the single greatest act of creative destruction ever…

“I believe Apple is planning to kill its iPhone, ON PURPOSE.”

This is an ad for what Basenese calls his flaghip publication, Lou Basenese’s Digital Fortunes (currently being sold at $99/yr, 30-day refund period), and it’s essentially a pitch about Apple’s long-rumored augmented reality glasses or goggles.

Most rumors indicate that this is not going to be a big business for Apple anytime soon, but there are lots of people working on glasses and goggles and AR/VR projects at Apple, they have had some events to discuss those projects, and it’s possible that tests and prototypes will lead to products fairly soon — the big news recently is that Apple actually did a demo of their Augmented Reality/Virtual Reality (AR/VR) headset for its Board of Directors, which Basenese doesn’t mention because this isn’t really a new teaser pitch, it’s just a repeat of his ads from last year with a new “launch date” in the headline.

That announcement makes it more real, for sure, Apple is still a very secretive company (though not as buttoned down as it was under Steve Jobs), and they don’t show things off to the Board until they’re pretty close to being ready. That has led some pundits to speculate that the initial release of this latest Apple device could come by the end of 2022… though most acknowledge that there are still technical hurdles for them to leap, and next year is more likely. Apple typically doesn’t rush out designs that they’re not happy with, which is why they typically aren’t ever first to market, despite their dominance of so many consumer electronics categories these days.

I’d say that a product launch for Apple Glasses (or whatever they’re called) on July 28 is extremely unlikely. It’s possible that Apple will talk about its vision for Augmented Reality at its Worldwide Developers Conference (WWDC) next week, they’ve registered the “realityOS” name for a possible launch of this new platform, and will obviously need some software on board to make the hardware compelling, but the most informed tech journalists seem to expect the first hardware to come out in 2023… and that Apple will keep things as close to the vest as possible until then.

Still, augmented reality for the iPhone is also proceeding, and is enabled to a large degree by technology that’s already in the iPhone and that gets improved with each iteration, like better laser sensing and better cameras and displays, so we’re heading toward AR/VR even if there isn’t necessarily a big event next month when that world will change dramatically.

So… what’s the stock that Basenese likes for this? Here’s more form the ad:

“I’ll reveal the best stock to own as Apple prepares to kill its iPhone. I expect a single share to go a long… long… long way… because it accomplishes something truly powerful…

“It grants you ownership in a company, but not just any company…

“I’m talking about ownership in a thriving company… a company radically expanding its customer base… a company hiring the best talent… a company on the leading edge of a revolution… a company growing profits every quarter… a company with 10-bagger potential… like I just said, a company exactly like Apple in 1980!”

OK, that’s a nice passel o’ hype, but not many clues… does he drop any hints for the Thinkolator?

“It’s a tiny company making an indispensable part for the iPhone Killer.”

Mmmkay, what else?

We get a bit about that secret meeting Apple had about “killing” the iPhone…

“Apple called a ‘secret’ meeting at its Cupertino headquarters.

“A meeting that filled its on-campus, 1,000-seat, Steve Jobs Theatre to capacity…..

“Code-named ‘N421,’ credible sources believe the device’s highest purpose is…

“To kill the iPhone.”

That was an internal meeting back in 2019, reported by The Information and then re-reported by lots of others as the rumors spread, and all indications are that it was the first big internal meeting about their planned VR headset, which at the time was expected to come as early as 2022 if they got it right, and the more important AR Glasses, which most people didn’t think would be ready for launch until 2023 at the very earliest.

Even last year, when this pitch started circulating, odds were pretty good, said Bloomberg, that anything introduced in 2021 or 2022 would be a high-end virtual reality device that’s mostly a placeholder to allow software developers to create products and some early adopters to build interest (and, of course, since this is Apple the timeline could easily shift, and the product could be scrapped if it’s not good enough or not ready to wear the Apple logo). But almost all of the reporting is based on rumors and decisions not yet made, so who knows.

Back to Basenese:

“I expect Apple to be wildly successful in its creative destruction of the iPhone…

“And I also believe that ‘N421’ will replace it…

“Owning a few shares of Apple is both worthwhile and prudent.

“Yet Apple is only the tip of the spear.

“See, whenever a creatively destructive act is occurring — like Amazon replacing malls… Priceline replacing travel agencies… Wal-Mart replacing mom-and-pop shops… Home Depot replacing lumber yards… Uber replacing taxis… drones replacing tanks… or GPS replacing maps…

“The destruction has so much raw power….

“It tends to push every company in the industry to new highs… especially the smallest firms.”

So that’s what we’re being pitched here, some smaller company that has something to do with providing components or technology to Apple (and others) for AR/VR projects.

And yes, the immediate marketing push from Basenese is that “Apple will reveal its plan to launch the iPhone Killer… at its next earnings call on July 28.”

Last year’s version of this ad speculated that the announcement would be at the next “product event” for Apple — the last date we were teased was September 8, 2021, and there was, of course, no such “reveal” during the next Apple iPhone 13 release event last year.

As far as I can remember, Apple has NEVER made a product announcement during a quarterly earnings call — so that seems extremely unlikely. I expect Basenese is just looking for a date that he can use to provide an artificial deadline and some urgency, since ads without dates and deadlines tend to not do as well.

Not sure why he didn’t use the WWDC conference for Apple developers, that’s taking place next week, virtually again, and there’s always some rumors about that software-focused conference (and it has often included announcements about upgrades to the Mac computer lineup). It’s not impossible that WWDC will include some AR/VR news, even if actual hardware announcements are unlikely, but it’s at least far more likely to be an important “product announcement” event than Apple’s next earnings call.

What other hints do we get? Here’s more from the ad:

“… the iPhone Killer’s paradigm-smashing feature… the feature Apple thinks you want… you need… you’ll soon become dependent upon… and you’ll use for the rest of your life…

“I call it ‘spatial awareness’ — simply put, it’s N421’s ability to recognize and interface with everything happening around you… thus allowing for a fully immersive, visually-enhanced feedback loop.”

Basenese said that the augmented reality demonstrations Apple gave to employees in 2019, and the improved chips and better batteries they’ve developed since then, make it possible to take the next step to those “N421” augmented reality glasses.

More from the ad:

“I call it ‘Holo-Core’ technology… because it a) gives users a fully immersive, 3-D, hologram-like experience, and b) Tim Cook referred to the technology as ‘core’ to Apple’s future back in 2016.

“To be clear, Holo-Core isn’t a standalone device.

“It’s one of iPhone Killer’s seven main parts… yet it’s also iPhone’s Killer’s only irreplaceable part… and thereby it’s iPhone Killer’s most important part.”

And then we get some hints about the company itself, and, of course, a reminder that even if Apple isn’t first, the technology is likely to keep moving foward:

“… even if Samsung… or LG… or Huawei… or whoever else… releases their own versions of an iPhone Killer,

“THEY’LL ALL require a ‘Holo-Core’ component to function properly….

“… the global leader in ‘Holo-Core’ technology — an absolutely essential component to every iPhone Killer — is a small company based in upstate New York.

“How small?

“Well, the company currently trades on the Nasdaq for 0.10% the size of Apple!… small enough that a single share of stock could change your life.”

What else? Basenese says that he thinks “this little company’s technology is roughly three years ahead of Samsung’s… and two years ahead of Apple’s… and it’s protected by over 180 patents.”

And that’s about it.

OK, so the hints we get are that it’s a sub-$2.5 billion company, based somewhere in New York, with “over 180” patents, and having something to do with some of the components that will be required to make Apple’s “smart glasses” or whatever their next augmented reality device might be.

And one more clue, confirming that the share price is well under $100…

“I believe Apple is prepared to make an offer to buy this little company, thus eliminating it as a potential competitor… and gaining all of its ‘Holo-Core’ intellectual property in the process. In my buyout scenario, Apple could offer over $100 per share.”

Who is it? As was the case last year, and without any real substantive updates to the ad, the Thinkolator’s best answer remains… Vuzix (VUZI), which makes smart glasses and components for same, and is sometimes rumored to be selling components for larger “smart glasses” projects, like those underway at Apple or Google.

This stock has been teased many times over the years, going all the way back to the early “Google Glass” days when it was really a “penny stock” (I think the market cap was well under $100 million the first time I wrote about them, close to a decade ago), and they are the only real standalone company with an established product line of augmented reality glasses.

There have been others over the years, from companies big and small, and next-wave AR glasses from Google and others continue to be featured as future ideas or concepts, though most of the augmented reality glasses I’ve seen make their debut in the marketplace over the past decade have been abandoned, from the Kopin Solos to Google Glass, and nobody has come up with a product that’s good enough to have consumer appeal, so they’re mostly used, so far, in niche applications. (There are still plenty of attempts out there that you can buy, including the Epson Moverio, Lenovo ThinkReality, or Everysight Raptor glasses in addition to Vuzix’s products, along with higher-end AR projects like Microsoft’s Hololens and the Magic Leap goggles, and there are “smart glasses” that don’t have actual augmented reality or displays in them, like the Meta/Rayban collaboration or the glasses from Snap, which combine audio controls and cameras but no display yet so no real AR capability, but nothing has really taken off yet… perhaps we’re all waiting around for Apple to tell us what we want.)

I’ve been pretty skeptical about this one for a long time. I don’t think VUZI will make progress as a small hardware company, but it’s certainly possible that Google or Apple could buy more control of the category or clean up possible patent challenges by purchasing VUZI — it would certainly be cheaper to do so now than back when Basenese was pitching this same idea last Summer (the stock was around $12 then, on its way down from the meme stock mania period of early 2021, so it has been roughly cut in half and now has a market cap of only about $400 million).

The fact that no larger player has acquired this company, and that VUZI has been selling smart glasses mostly for industrial applications for years, is an indicator for me that Apple and Alphabet and Samsung don’t see VUZI as a threat or an innovator or an owner of patents that will slow the development of their own products.

That doesn’t mean the company is standing still, or is worthless — I’m just skeptical that they’ll explode as a major player. It’s entirely possible that the stock will go on a “story” run when the next wave of AR/VR products from Apple or whoever else hits the market, it’s a small “pure play” company in a space where there aren’t many obvious public competitors, so it often draws investor attention… it’s just hard to see the real operating business growing into something meaningful.

The company did have an announcement about their latest technology push a couple weeks ago, they’re partnering with a French display tech company to bring new micro LED displays to their products at some point, and maybe to acquire that company (Atomistic) if all goes well, but that really looks like it’s still R&D — maybe those displays end up being appealing to Apple or Samsung in a couple years, maybe it’s just another iterative step in pushing the technology further along.

Before that, in the first quarter earnings report, they noted — no surprise — that supply chain challenges and the war in Europe are slowing things down, and they reported weaker sales than expected… but they do think things will pick up later in the year, with more orders from customers who see uses for their smart glasses in warehousing/logistics businesses and healthcare, in particular. And yes, they also said that they’re expecting more OEM orders, which would mean orders for Vuzix parts that go into products manufactured by other companies — that has mostly been from the defense industry in the past, but they also see consumer electronics companies ordering more from them. It’s that OEM business that seems likely to be the source of any profitable growth they might have, as they’ve scaled up their manufacturing capacity for parts and display technology in this area, so who knows, perhaps a big customer will come along and shake things up. There is no real sign of a big buyer yet, however.

Like I said, I remain pretty skeptical. They are not in danger of running out of money in the near future, mostly because they sold $90 million worth of shares last year, so they can certainly remain a niche player and might get some investor attention again in the future, but it’s been a slow slog and that might continue — not unlike the struggles that other small component makers have had despite their connection to the possible growth in AR/VR technology and many pitches by newsletters over the years (Kopin (KOPN) and HiMax (HIMX) come to mind there as past “Apple will buy this” pitches for AR headset tech, both long-term disappointments so far… though HIMX is at least profitable).

Vuzix had $13 million in revenue in 2021, about the same as they had in 2008 (in between, the number collapsed to about $2 million in the down years, and has rebuilt gradually), and they have never had positive cash flow, let alone real profitability. There are a few analysts who cover this small cap stock, and they expect $14.5 million in sales this year and $21.8 million net year, both of which would be new records… but not nearly enough to achieve profitability.

The story remains a little bit appealing, particularly if their shift to making products for other manufacturers gains any traction, but the company has been around for 25 years now, without much progress being evident in their income statement yet, and it’s still carrying a very elevated valuation at about 25X expected 2022 revenues, so I’d need more than a story to get interested.

Vuzix has sometimes been a fan favorite among Gumshoe readers, and we’ve covered it quite a few times — so perhaps some of you see more hope than I do on the horizon. If so, feel free to try to talk me into buying VUZI… are they at some tipping point that we don’t yet appreciate? Is their technology unique enough to lead after a decade of selling niche products? Think there will actually be an Apple connection? Let us know with a comment below.

P.S. Basenese’s tease also included a few “special reports” that readers ask about pretty regularly — so I can also tell you that “The Secret $15 Company Behind Elon Musk’s Race to Own the Internet” is almost certainly still Gilat (GILT), a stock he has pitched several times over the past couple years.