Microvision Seeks Partner to Ship MEMS Late 2008

Microvision, which struggled last year amid a major restructuring and management shakeup, redesigned the MEMS technology developed for its Flics laser-based bar code scanners to serve as a “micro-projector” in cellphones and other devices. It has received “strong interest” from cellular carriers and handset manufacturers for use of a MEMS system consisting of minilasers and a tiny pivoting micro scanner mirror that’s smaller than a pinhead. The lasers fire at the mirror, which reflects light on a surface a pixel at a time, fast enough so the entire screen appears lit.

Microvision demonstrated the technology using Novalux’s green laser at CES in Jan. and received interest from 20 companies, 7-8 of them “very serious,” Brown said. From that field, 3-4 companies are being targeted for signing development contracts, he said. Brown declined to disclose potential partners. But at least one pact is expected to be signed in the first half, CEO Alexander Tokman told analysts in an earnings conference call.

The Microvision MEMS systems is capable of 800x600 resolution at a 60 Hz refresh rate, which requires projecting 28.8 million pixels a second. In addition to product manufacturers, Microvision is working with Corning, Osram and Novalux on development of green lasers. Microvision paid an undisclosed sum to Novalux last year to fund green laser development, Brown said. Novalux tweaked gallium arsenide crystals found in DVD-player lasers to get red, and modified gallium nitride crystals for “blue” laser DVDs to get true- blue wavelengths. To get green, Novalux uses a “frequency doubling” crystal. Green is produced by firing an infrared laser into a lithium niobate crystal, resulting in every 2 infrared photons merging into one green photon, Novalux has said.

The timing for introducing products based on Microvision MEMS technology will be up to its partners, but the company expects to finish development work on an accessory device to attach to a cellphone for projection display by mid-2008, Brown said. Embedded MEMS technology would be ready later in 2008 for integration with cellphones along with head-up displays (HUDs) for automotive applications. Microvision has a development agreement with Visteon for motor vehicles and is in discussions with other component suppliers, Tokman said. Automotive suppliers also have expressed interest in using laser-based technology for instrument panels, he said. Microvision also has MEMS IP with applications for laser printers, but that development work is “in the background,” Tokman said. “We built credibility in 2006 and now we can negotiate from a position of strength,” he said.

Meanwhile, Microvision’s Q4 net loss widened to $8.68 million from $5.41 million as revenue declined to $1.8 million from $2.7 million. R&D expenses soared during the quarter to $3.3 million from $703,000 a year earlier as Microvision raced to develop demonstration units for CES, company officials said. Contract revenue declined to $1.6 million from $2.1 million a year ago, when Microvision recorded revenue from sales of its Nomad system to the U.S. govt. Microvision scrapped the Nomad product line last year as part of its restructuring. Product sales declined to $224,000 from $647,000. Gross margins improved to negative $181,000 from negative $1.7 million a year earlier, the company said. For the year, Microvision’s revenue declined to $7 million from $14.7 million. Fiscal 2006 revenue was short of Microvision’s $8-$9 million forecast as it “reallocated critical engineering resources” from “several revenue generating programs” to boost development of its MEMS technology before CES.

Microvision ended the year with $14.6 million in cash and expects to pay off its remaining $1.4 million debt today (Thurs.), Tokman said. It also owns 1.7 million shares in lighting developer Lumera that are valued at $7.5 million and could be used to pay for operations this year, he said. Microvision is working with Lumera in developing electro- optical polymer modulators that can drive voltages of less than 1-v. The modulators can be used to speed the transmission of data in PCs between processors and memory chips. Microvision ended 2006 with a $7.1 million order backlog, up from $3.4 million. A reason for the backlog increase was Microvision’s fixing “the quality” of its Flics bar code scanners, resulting in an 85% decline in returns the 2nd half of 2006, Tokman said. Microvision switched contract suppliers for its bar code scanner that half.