The Players and Pretenders of Nanotechhttp://www.fool.com/investing/small-cap/2004/08/30/the-players-and-pretenders-of-nanotech.aspx Carl Wherrett and John Yelovich
August 30, 2004
In our last commentary, we defined categories as a means to identify nano companies. But general talk of science and its applications are all well and good as appetizers. We're Foolish investors, so let's have a look at the entrees.
We'll focus on some of the companies and name three from each sector: one an up-and-coming pure-play nanotech, another an established mega cap incorporating nano solutions into an existing business, and the last a nano pretender.
Three years ago, Elan (NYSE: ELN ) was mired in financial troubles and plagued by alleged scandals. As a result, Elan needed to raise cash and at one point was looking to sell its drug-delivery division to King Pharmaceuticals (NYSE: KG ) . Thankfully for Elan, that deal did not go through, and that same division has celebrated recent success with its patented NanoCrystal drug-delivery technology.
Altair Nanotechnologies (Nasdaq: ALTI ) is a company with arguably more press releases than revenues. It announces a drug going into preclinical trials yet will not generate revenue from it for at least another five years. (Can you guess whether this is the pure play, the mega cap, or the pretender in this sector?)
Alternatively Nanophase Technologies (Nasdaq: NANX ) , producers of nano oxides and nano powders, would like to see just one or two more companies using its products. Despite being the first true nano company that went public in 1997, Nanophase has yet to generate extraordinary growth -- or a profit, for that matter. Soon it will need further cash injections in addition to those received in the past five years. However, the company still has first-mover status and is busy solving the unique problems it encounters when particles of this minute size interact differently in clients' premises. These are problems other nano powder companies have yet to encounter, let alone overcome. Nanophase recently announced a new collaboration, including an equity investment from BYK Chemie, a subsidiary of Altana (NYSE: AAA ) , a German chemicals company. The partnership may just be the answer Nanophase is looking for, but the jury is out until we can see revenues from new applications.
And again we have Altair Nanotechnologies. Previously, the company was a titanium pigment manufacturer, even though it didn't sell very much of the material. When Altair scientists discovered that the fine residue from processing titanium was of a nanoparticulate size, the company called itself a nanotechnology company. Still, it has not made much of an impact on sales.
On the other hand, semiconductor wafer maker Kopin (Nasdaq: KOPN ) very much wants to be seen as a nanotech firm and recently dubbed itself "The NanoSemiconductor Company." Kopin manufactures CyberDisplay technology, the science of ultrasmall screens, which has been used in digital cameras, camcorders, simulation training and virtual reality gaming devices, and cameras mounted on race car drivers' helmets. So far, the smallest display Kopin has produced is the size of a grain of rice, and its NanoPockets technology promises to go smaller still.
Then there's NVE (Nasdaq: NVEC ) , patent holder of the biggest, brashest technology for next-generation flash memory chips, which power up your computer memory. Apparently, NVE's spintronics lets users quickly turn on their computers like a TV. But despite many promises made over several years, NVE hasn't yet delivered a valid working model.
Since 2000, Veeco Instruments (Nasdaq: VECO ) , which makes tools to produce, measure, and test microelectronics, went on a buying spree until debt prohibited further acquisitions. The company has been generating positive cash flow, but that's been siphoned off to pay down debt. Veeco was slated for an all-stock merger with nano toolmaker FEI (Nasdaq: FEIC