May 21, 2009
Energy Harvesting stands out as one of the most interesting, yet often overlooked, parts of our coverage universe. It has begun popping up frequently in technological discussions as interesting because it does two things that are undeniably sexy:
- - Energy harvesting can recycle energy and lower costs. Energy wasted in common devices such as light bulbs or engines are usually emitted in a form (motion or heat) amenable to recovery.
- - Out in the ocean, deep in the earth or out in space the limitations of batteries begs for ways to power devices in harsh or isolated environments.
Progress in applicable technologies revitalized belief in the concept of energy harvesting and enthusiasm for bringing products to market. The leadership in recent years has been in the remote sensor market; solving the problem of powering in isolation. But increasingly, energy saving is driving investment.
Though legacy energy harvesting solutions are largely micro-mechanical or based on piezoelectric materials, a growing area of investment is thermoelectric materials, frequently used to cool optoelectronic devices (electricity drives thermal change), conversely also work in the opposite direction (thermal change drives electricity). For reference, a blog with excellent discussion of this topic is Next Big Future. While once thought not economically viable because high capital cost would not offset either the energy saving or alternatives (batteries), thermoelectrics are making a comeback. We would point to three examples:
- - GMZ Energy is developing high-performance thermoelectrics based on a novel material (nanosized particles of bismuth antimony telluride) and structure.
- - Nextreme Thermal Solutions creates embedded (bismuth telluride thin film) thermoelectric generators to convert waste heat directly into electricity.
- - Amerigon subsidary BSST has developed a thermoelectric module that can generate power from the waste heat in automobiles.
Critics would point out the market is likely smaller than that of photovoltaics, and that new materials based on nanocrystalline structures that are still on the horizon might prove superior (an interesting presentation by Professor Arun Majumdar on this topic can be found here). We think there are benefits to being trailblazers and perhaps leading the discovery of additional markets.
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Technologies, Topics on Our Mind | Tagged: Alternative Energy, Energy Storage, Materials | 
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
May 8, 2009
A recurring theme in our discussions with public and private companies recently has been the recognition that non-telecom optical products help fend off the recession blues; especially military and medical components. These market segments hold up better in downturns for a number of logical reasons and contrasted with of the wicked volatility in telecom component revenue, lead some optical component companies to avoid telecom altogether. This however, is far from an obvious strategic course for management to follow if they eventually envision selling the business for a couple or reasons:
If you are a private company – being broadly diversified often diminishes the strategic merits for M&A because suitors must accept product lines or business segments they don’t want and will discount instead of reward the diversity.
If you are a public company – though the stock’s volatility may drop, and greater business diversity is less stressful for management, investors offset the lowered risk with assumptions of more moderate growth.
Looking at the current trailing twelve month enterprise value to sales multiples (EV/S) versus EBITDA margins for two groups of companies; telco focused component suppliers (list below), and optical suppliers that are more Commercial market focused (list below). One would think this environment would heavily favor the less volatile commercial focus, but it really doesn’t.
- TTM EV/S and EBITDA data from May 8, 2009 (Source: CapitalIQ)
As it often does, the market applies higher multiples to companies based on profitability; but note that companies with a commercial focus but poor EBITDA margins are treated just as badly, if not worse, than those telco focused. We would argue that to improve shareholder value, strategic moves should be more about improving the operating model, and less about diversifying the customer base away from telco. GTA can help.
*Telco Tickers: JDSU, FNSR, EMKR, OPXT, OCLR, OPLK, API, AFOP
*Commercial Tickers: ROP, HEI, IIVI, ESIO, OSIS, NEWP, ZIGO, AXTI
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
May 6, 2009
The path to commercialization of any new technology is tortuous. Every business school preaches that “fast followers” in emerging markets are usually more successful.* This was reinforced by an AP story yesterday on the use of nanocrystalline phosphors in two new lighting devices on display at LIGHTFAIR. The article “Tiny Particles Make LED Light More Pleasing“ Highlights products from QD Vision and Nexxus Lighting where the light from an LED or compact fluorescent lamp is enhanced by using nanocrystalline phosphors (a third company, Evident Technologies, is also mentioned).
Though portrayed as new, the idea realized in these products dates back to at least 1989; and when Ramesh Bhargava at Philips Laboratories hired me to create nanocrystalline phosphors in 1990, he foresaw both greater efficiency and greater control of the of the wavelength produced. We produced a series of patents and papers that demonstrated quantum-dot phosphors could be both bright and the color precisely controlled, but Philips stopped work on quantum-dot phosphors in the mid-1990s for the simple reason that commercialization appeared too far out. Basically, they were right. A greater than 20 year incubation period makes a poor investment.
The lesson I draw is that timing matters. The timing of the launch, the market, the funding and the exit matters. One of the reasons to hire a firm like GTA is that we understand the complex issues surrounding a sale that transcends knowing the buyers. The timing, process and structure of a transaction is immensely important to our clients.
*I think it is less the uphill battle of being novel that a first-mover faces, and more the fact that it is easier to attract a first-class management team and sufficient funding to a fast follower that matters.
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Posted by Dennis Gallagher dgallagher@gtadvisors.com
May 5, 2009
We continue with our observations from ISC-West. Part I appears here. Part II appears here.
Of the executives who spoke to us, those working in software-intensive businesses seemed to have the brightest outlook. This circumstance makes sense to us; software is a key to flexibility and enables systems to be upgraded with little capital investment. Executives at companies offering software for video surveillance such as BRS Labs, Genetec and Vidient Systems all mentioned seeing strong demand despite the recession.
There were also a number of companies including Avigilon, ImmerVision, SightLogix and VideoIQ offering camera solutions having a combination of front-end processing and/or video analytics. The additional capability afforded by software in these products made them more cost-effective for customers; some of the benefits to users were: decreasing the number of cameras required to cover an area of interest, improving detection alarm events and limiting the system bandwidth required by ever-increasingly high resolution sensors.
Two other software companies that we found interesting were AlertEnterprise and TimeSight Systems. AlertEnterprises offers a solution that integrates physical and logical security domains to identify enterprise-wide risks which might not be captured by standalone systems. AlertEnterprise enables companies to maximize the utility of existing security systems by looking at all available data across the enterprise, resulting in significantly increased likelihood of threat event detection. TimeSight uses a proprietary compression algorithm that takes advantage of the limited shelf life of surveillance video by providing a solution enabling companies to continually re-compress digital data. With successive compressions decreasing the memory required to store a segment of surveillance video, TimeSight enables a company to lower its memory usage as needs change over time and the resulting savings can be very substantial. TimeSight claims up to 90 percent reduction in cost versus existing video archival methods.
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Posted by Peter Yu ptyu@gtadvisors.com
