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Gilder's Guide: Teleputers to MEMS
10/08/2004 12:00 am EST
George Gilderis described as a visionary, and rightfully so. His insight into technology – and each issue of his Gilder Technology Report - is nothing short of fascinating. Here are some highlights from his various speeches in San Francisco.
"The technology crash was peculiar to the US. The so-called ‘bubble’ just moved to Asia, where it manifested itself in all sorts of technologies. Today, Korea has 40 times more bandwidth per capita that the US. About a quarter of their GDP is transacted on the Internet, compared with about 2% of GDP in the US. Japan also has about 20 times more bandwidth per capita than we do. It seems to me that what really happened during the technology crash was that tragically misconceived regulatory management in the US drove the Internet overseas.
"So I think a lot of the crash did not reflect a bubble, but rather reflected the bubbleheads in Washington who tried to regulate the Internet differently in 50 different states and hundreds of jurisdictions and thousands of courts – creating a degree of uncertainty that made the rollout of broadband to our homes impossible. When people talk about broadband being a big success in the US, they fail to recognize that we have virtually no broadband at all compared to the average in countries such as Korea and Japan. It’s still in a state paralysis in the US and I hope that some attention will soon be paid to the technologies of our era.
"Meanwhile, I believe that technologies are continuing to prevail and that a lot of the projections that were made before the crash will be fulfilled over the next several years. A key projection of mine is for an all-optical network. When we finally have broadband in the US, our current networks will be swamped and we will need a new optical backbone for the Internet to accommodate new technologies. Indeed, I focus on several stocks which will benefit collectively from the revitalization of technologies that broadband deployment can generate.
"One favorite choice is Corvis (CORV NASDAQ). I try to find 10-baggers. I look for home runs rather than incremental advances. The company, which nearly went broke in the tech crash, is battered, rebuked and scorned. But I think it has the single best technology and the best network in the world and I think it will ultimately prevail. Corvis created a 11,000-fold improvement in the capacity of fiber optic lines during the end of the 1990s. They accomplished this increase in the cost-effectiveness of what is called wavelength division multiplexing. What this means is that they send messages through fiber in single colors of light. They currently produce systems with about 400 different colors of light. Ultimately it is possible to create systems with 10,000 colors of light passing down all-optical networks. You have to use optics in order to enhance connectivity and the company that is paramount in this field is Corvis.
"One of the reasons the all-optical network is going to prevail is because optics is moving down to the motherboard. This will be the great breakthrough of the next two or three years - optics moving all the way down to the chip level. There are several companies pioneering this technology and Agilent (A NYSE) is a specialist in vertical cavity surface emitting lasers. They put tens of thousands of these lasers on an individual microchip. With its technology, you bypass the bottleneck of pins that connect the microchip to the motherboard. I think this technology – allowing a stack of chips to connect to an all-optical network - is going to completely change the architecture of electronics in coming years.
"The new era will be the teleputer – not the PC. This will be a mobile computer in a cell phone, optimized for communications, for photography and imaging, and for a wide range of functions that take it beyond what a fixed PC can perform. The establishment that is being threatened by the teleputers is the personal computer. The PC makers have tried to strike back by creating WiFi and WiMax and have tried to create fear and doubt surrounding cell phone technologies. But I believe that Qualcomm (QCOM NASDAQ) is on track to outperform almost all the functions that PC companies can offer. Its 3G technology will not be abandoned. It will spread. With new systems from Qualcomm being rolled out by companies such as Verizon and SBC, it’s all across the country. The whole country will be a hotspot, performing about as well as any WiFi hotspot will perform.
"One thing that teleputers need is a way to input information. Synaptix (SYNA NASDAQ) is a company that has been providing touch pads for notebook computers and laptops. It is now creating touch and tap pads which are increasingly being adopted by teleputers. This firm is now shifting towards the teleputer industry. It also owns 16% of a company called Foveon (which was spun off from Synaptix), which has created a radically new imager that captures all of the light in every pixel rather than filtering just one color at each pixel. Synaptix is a powerful play in itself, and its stake in Foveon will put it in what will be a fascinating field two or three years from now.
"These teleputers, which are all purpose devices, also all need a screen, which leads to my recommendation for Microvision (MVIS NASDAQ) The company is involved in MEMs – micro electronic machines. It makes heads-up displays, where tiny mirrors reflect directly onto the retina. That creates displays that are not only 100 times better in terms of contrast than ordinary flat top displays, but also are thousands of times more efficient in their use of power.
"Outside of teleputing, another interesting company in the MEMS area is Cepheid (CPHD NASDAQ. This is an example where the microchip has invaded biotech and you can now put a laboratory on a chip. Cepheid has a big contract with the Post Office for systems that can readily identify anthrax. Their technology has been extended to clinical trials for detecting cancer and infectious diseases and revenues have quadrupled. They are projecting around $46 million in revenues this year from $10 million last year. So Cepheid is an exciting example of the convergence of biotech and semiconductors, while also being a terrorism antidote."
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