This teaser solution first appeared as part of a Friday File that was sent to the Irregulars on January 15, 2016, so it just passed its first birthday… but so many readers are asking about it again now that we’re re-posting it for everyone to read.
What follows has not been updated or revised since then, though the company Jason Stutman calls “the $7 ‘iPhone Killer'” had a good year into the Fall and hit $10 after three good “beat” quarters in a row and analysts raised their estimates for 2017 earnings expectations to 57 cents a share, getting everyone excited… then started to disappoint and received a wave of analyst downgrades and is now expected to earn about 40 cents a share. It’s now down to about $5.50 a share, I have not updated or revised the comments below and have not examined the company more closely in recent months.
The ad from Jason Stutman for the Technology & Opportunity newsletter, and this is the intro that is still catching the attention of Gumshoe readers:
“After years of getting pushed around by Apple, these three technology giants have finally had enough…
“Microsoft, Google, and Facebook have joined forces to create a groundbreaking device that will bring about…
“The Death of the iPhone
Wired magazine says it will ‘change the way we interact with the world,’ and this tiny, $7 tech company is the one thing connecting them all together.”
So that’s our challenge — who is it?
The big picture is, as you might have already guessed, “virtual reality.” That’s the prediction, that this currently “hot” technology of creating an immersive virtual world using headsets and other technology will change the way we do almost everything.
I’m a little nonplussed by how much of a “virtual world” I live in already, sometimes staring at my phone while there are real people around with whom I could be interacting instead, so the idea of all of us wearing augmented or virtual reality headsets and becoming even more depersonalized doesn’t appeal all that much… but there’s certainly a tech consensus that more virtual reality is coming.
And Stutman thinks he’s found the big “hidden” winner of the virtual reality gadget race… more from the ad:
“But here’s the kicker: the little known $7 tech stock that I’ve uncovered has found its way into not one, not two, but all three of the ‘iPhone Killer’ devices currently under development by Microsoft, Google, and Facebook.
“After taking a look inside these three devices, we know one thing for sure: Without this tiny firm’s proprietary computer chips, the ‘iPhone Killer’ wouldn’t even exist.
“Its components have become a necessity, just as Intel’s chips once were to PCs two decades ago.
“In just a moment, I’m going to explain exactly how you can profit up to 6,400% from this $7 ‘iPhone Killer’ stock as these three technology bellwethers attempt to knock Apple off its perch.”
Much of the “story” here is that Microsoft, Google and Facebook, having “lost” the handset war, are doubling down to seize leadership of the next big gadget explosion, and that this will drive mass adoption and get lots of gadgets sold, and this “iPhone Killer” company will benefit.
All three of those companies trade at huge premiums to Apple largely because they’re not gadget makers, so I don’t know that this is a story of three losers trying to catch a winner… but yes, there is a race on to “win” the first stages of mass-market virtual reality or augmented reality devices.
What do we get by way of clues? Well, it’s mostly about the fact that this secret company provides a component that is used in the gadgets being developed by Google, Facebook and Microsoft — here are a few snippets that provide most of the hints:
“… that $7 tech company I’ve been talking about is providing a crucial component for the device: a special kind of computer chip that processes images for the Oculus Rift.
“Better yet, this company has found its way into the devices of two other technology giants determined to kill the iPhone: Microsoft and Google….
“…. this little-known company produces a special kind of display chip, essential for the HoloLens to work.
“And because Apple is being forced to poach Microsoft engineers, you can bet it’ll be following a similar design approach…
“Based on all our internal sources, this tiny company is the only place for Apple’s engineers to turn….Are you getting our free Daily Update
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“One of the most telling indicators is that even technology giant Google relies on our $7 tech firm’s one-of-a-kind computer chips.
“Specifically, Google uses the company’s chips in its Google Glass devices.”
Yes, Google Glass was an early “beta” product flop, so far — but it’s not going away… at least not yet, Google is still working on the next iteration, widely expected to be an “Enterprise” version more specifically tailored to work environments. Hololens, if that reference confused you, is the Microsoft “Augmented Reality” goggle device that’s sort of a cross between Google Glass and immersive virtual reality — it’s expected to allow you to navitate 3D imagery while still being able to see the outside world, a bit like a fancy fighter pilot’s visor. That’s a different market, with quite different hardware and software, than the “Virtual Reality” immersive market with devices like the Oculus Rift and competitors, but apparently this company is working on chips for both.
Apple did “poach” a Hololens-focused employee from Microsoft last year and spur more speculation about Apple’s future product plans (though that kind of ‘recruiting’ is endemic to the tech world, so the coverage of this one hire probably says more about our need to grasp at clues than it does anything about the future plans or prospects for two of the largest companies on earth).
And one last bit about Google…
“… while the appearance of Google Glass may have changed, all patents indicate its core components have remained the same.
“Simply put, just as Facebook and Microsoft both rely on our tiny tech firm’s computer chips for their “iPhone Killers” to work, you can expect that Google will, too.”
Hopefully you can see that this is a somewhat tortured logical trail, and requires reading quite a few tea leaves to conclude that these four mega-tech companies all “depend” on this “little $7 company”… even if there is a lot of development going on in this sector, and a lot of hope for a big new market, we haven’t yet seen a mass-production virtual reality or augmented reality device from any of those companies, and virtual and augmented reality will remain a vanishingly small part of those companies’ product lineups for the foreseeable future.
But further cynicism has to wait until we name the actual $7 company being teased — so who is it?
Thinkolator sez this is HiMax Technologies (HIMX)
HiMax does indeed have chips in all of those preliminary VR and augmented reality products — they were in the Oculus Rift developers version and might well be in the consumer version coming out soon; they were in the first version of Google Glass and say they’re still partnering with Google on this project; they say they’re in the Hololens. None of that’s certain until the commercial versions release and there’s a “teardown” by some third party to identify the chips, and even then sometimes the display panels and chips (which is at least part of what’s teased here) sometimes don’t get identified.
Does that mean the stock is going to soar when volume picks up for these kinds of products? There’s some logic to that, in that they would be getting a new commercial-scale revenue stream… but don’t hold your breath about company-changing gains. Most projections are that this VR and AR segment will grow relatively slowly, hitting maybe 5 million units over the next year or so and perhaps 25-30 million annually within five years. From what I can tell, the chips from HiMax that drive graphics (helping to run the LCD screen, etc.) cost a few dollars each. Their chips for microprojection might be more specialized and expensive, that’s what would go into the Hololens and the Google Glass (the actual VR goggles, like the Oculus Rift, use something much more akin to a smartphone screen — it’s th