Late last week, a report surfaced claiming that Google (GOOG) is planning a big design change before it releases Glass to the public early next year. According to its claims, OLED technology from Samsung (SSNLF.PK) will replace Himax’s (HIMX) LCOS microdisplay.
Of course, such a move would be quite damaging for HIMX’s stock. To be clear, such a move wouldn’t change our prediction that microdisplays will achieve mass adoption in 2014 – a significant positive for HIMX’s business prospects. However, Google is a landmark account. Losing it would represent a notable setback for the company’s momentum and growth trajectory.
That being said, there are several reasons to dismiss last week’s report:
- Nobody else has reported seeing Google Glass featuring an OLED. In fact, a new prescription-glasses version of Google Glass was spotted at the Google I/O conference on May 15…and it featured an LCOS microdisplay that we have all grown to recognize – the same microdisplay we first reported to belong to HIMX. It would be reasonable to assume, if Google was going to switch to OLED, that we might have caught a glimpse of that at Google I/O as well.
- The most publicly-known expert in the field, Karl Guttag, is a close contact. We reached out to him for his thoughts. Upon review, he expressed skepticism in the OLED claim. Specifically, he took note of the article’s technical inaccuracies as it related to the various technologies in question.
- HIMX is in the final stages of a financing event. If its “major customer for a head-mounted display application” was moving on to other pastures, that would constitute a material event that would likely have come out by now. In fact, this morning, Himax requested the withdrawal of the F-3 it submitted with the SEC last month. However, the reasons cited were technical and not related to any material changes in the business. Any such change would require a separate filing, which would have surfaced by now.
While our data points are not yet conclusive, they cast doubt that Google has plans to replace HIMX. Either way, Our investment thesis on HIMX extends beyond Google. HIMX is the leading LCOS provider in an environment that is increasingly adopting microdisplay technologies. Investors should remain focused on this long-term view, while being mindful of the risks against the potential rewards. With this in mind, we maintain our long-term positive view and Wait Time rating on HIMX.
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By: Mark Gomes, CEO