POET Technologies Inc. (TSX.V:PTK): Disruptive Advances in Intel’s (NASDAQ:INTC) Back Yard
POET Technologies Inc. (TSX.V:PTK) CEO Peter Copetti is charging his cell phone twice a day right now, and he’s working on holidays. Thats because his company, currently working in the same space as Intel Corporation (NASDAQ:INTC) has increased in value by 400% since he took the reins just over a year ago.
POET is a semiconductor design and engineering firm whose Chief Scientist is Dr. Geoff Taylor, a highly respected and recognized Professor of Electrical Engineering and Photonics at the University of Connecticut. He has overseen the development of processes that, in a nutshell, combine to make the powerful semiconductor chips that power everything from computers to cell phones to avionics systems up to ten times faster, with up to 90% greater power efficiencies, while reducing manufacturing costs.
Its as disruptive as new technology can get, and is being looked at under Non-Disclosure Agreement by several mega-cap firms in the space, which is what primarily is likely attributable to the stock’s dramatic rise in the last year.
The company currently has no sales or revenue, and expects to license its development platform to device developers from Samsung to Apple and Google. The proof in the pudding will be the announcement of just such an agreement with a major name in the electronics manufacturing space.
I spoke to CEO Peter Copetti on Friday, April 18, 2014 to get his take on what’s driving the company’s share price lately.
Listen to the Interview Now:
James West: The stock of POET Technologies lately has just been on fire. I’m wondering why investors are piling into POET Technologies now?
Peter Copetti: I think you can attribute the recent price appreciation to the market becoming aware of how compelling the POET Technology platform is and the potential impact on the future of the semiconductor industry you can have.
James West: Interesting. So what exactly is the value proposition for investors looking at POET right now?
Peter Copetti: What POET does is, it integrates optics and electrics on one dye, one monolithic chip, if you will. And it does so while still providing best-in-class performance and step function improvements in both speed and power and in many cases of substantial decrease in manufacturing cost.
Now by step function improvements, I don’t mean incremental improvements that you see in computers these days where you move by 3.2 gigahertz to 3.5 gigahertz. I’m talking about multiple times improvements, and in power efficiency, you’re talking about 70% or 80% power savings on your cellphone for example. So instead of charging that phone twice a day like I do regularly, you might charge that phone once a week.
James West: Okay. So essentially, this is in the integrated chip industry. You’re eliminating a lot of the excess, creating a tighter device and saving power and increasing speed at the same time.
Peter Copetti: Correct.
James West: Okay. Exactly what is the nature of the breakthrough? What’s so disruptive about it?
Peter Copetti: That’s really the heart and soul of our IP –our Secret Sauce. So we’ve got to be careful here without getting too technical, but basically Geoff Taylor has developed a p-channel in gallium arsenide that is always off, that’s the very first time that’s been done. He’s combined that with PNN HFETs and PNN HBTs which are transistors and finally that is his optical thyristor. All of these are backed by over 40 patents with more pending and that’s the extent at which I want to disclose on an interview like this without NDA.
James West: Okay. So essentially, it’s a better mousetrap on steroids.
Peter Copetti: Yeah, that’s one way to put it. I would just say that the type of device, the type of chip, the type of platform that Geoff has created in my opinion, it comes around once every few decades, once every 30, 40, 50 years. It’s just not your normal incremental improvement. It’s really where Geoff has moved the track. He hasn’t just gone on different — he’s actually moved the track. I’m very proud of what he’s done.
James West: Okay, so is Geoff the driving force behind the technology then?
Peter Copetti: Absolutely. Geoff is the driving force. He’s the visionary behind all that is POET. He spent over 25 years developing the platform. He is as motivated and as driven as any entrepreneur I have ever met. He’s a true visionary with a rare ability, I might add, to be our chief scientist and a PhD in Engineering and be the dean of engineering down at the University of Connecticut, but also understands how the commercial marketplace looks and works with new technologies.
James West: Okay. So he’s an academic and an entrepreneur who can run a business.
Peter Copetti: Well, I would say that he can look at what the marketplace is going to need going forward and he can take his technology and bolt it on very easily instead of having to spend hundreds of million of dollars to, for example, completely redo a fab or foundry.
James West: I see, okay. So, what major industry names might POET compete against then with this new technology?
Peter Copetti: Well, POET will compete across various sectors because the platform itself is so broad. For instance in the CMOS silicon area, you could have competitors like Intel and AMD; and the optical electrical conversion area, you would see Avago or Finisar; memory and storage, you could have IBM and Google. Finally, sensors and arrays, you would look to Boeing new technologies, BAE, et cetera. That’s not even taking into consideration our recent patent filings in the quantum computing area or other IP that we’re developing right now, but we haven’t released to the market. But you get the picture – the size of the market and the POET platform is tremendous.
James West: Sure. So we’re talking computers, cellphones, cameras, weapons systems, infrastructure management systems. Anything that basically runs on a computer; it has a computer chip in it; there’s an opportunity for the POET platform to realize these improvements in speed and power.
Peter Copetti: Yes, speed and power and don’t forget, in many cases, a decrease in manufacturing cost because for some devices you’re going from eight chips to one or two chips, so that’s a lot your manufacturing cost drops substantially.
James West: Okay. So what major industry names would seek to acquire the POET platform or else use it or incorporate it into their developmental process?
Peter Copetti: Well, we’re not building POET to be acquired; we’re building it to stand alone and to be successful on its own. However, the disruptiveness of the inherent nature of the technology is so great that someone most likely will want to control it. I don’t want to get into specific names. That’s about all I’d like to say on that topic for now.
James West: I see. Okay. That’s just in another way of looking at it. So is this something that — I mean, it sounds like this is what Intel lives and breathes, creating chips that are ever stronger, faster, lower power so that they can create more powerful computers. Is that something that Intel would compete against?
Peter Copetti: Absolutely. Obviously, Intel is a great company. It’s been around I believe since the early ‘60s and they’re an industry leader. However, they’re facing a problem that many semiconductor companies are facing and that’s the fact that Moore’s Law is coming to an end, and they’re having to create silicon photonics, they’re having to create basically packaging exercises now to get more and more and more out of a smaller and smaller and smaller shrinkage in the chip if you will. And it’s becoming very expensive; it’s basically the law of diminishing returns. So not just Intel but the market is looking and waiting for the answer and we believe that answer is the POET Technologies.
James West: Okay. So what’s the revenue model for POET and then when do you anticipate profitability for the company?
Peter Copetti: Well, our revenue model was based on licensing our Process IP. We expect the initial NRE revenues could start as early as late this year in early 2015. After that, you’re talking about revenues from foundries and revenues from foundries and finally end device revenues. We’re under NDA with a number of major firms right now in discussions. So I would hesitate to sort of spell that out on this, it could act against us if you know what I mean in terms of our negotiations.
James West: Sure.
Peter Copetti: But that’s sort of what the revenue model does look like.
James West: Okay, interesting. Who are the largest shareholders of the company in terms of management institutions, insiders, et cetera?
Peter Copetti: The largest shareholders right now since I last looked are all Canadian institutions. You’ve got Pinetree Capital, IBK Capital, Brant Securities, AlphaNorth Investments and the board of directors and senior management also owns about 7% of the company. I think in total, that’s somewhere in the neighborhood of 42% of the float. That’s the best I can give you at this point.
James West: Sure, okay. Let’s say investors are looking at the stock. It’s appreciated by 300% in the last year here, what can they look for to drive value into the stock going forward? I mean, is this a beginning of a major move for the stock or this sort of just a flash in the pan based on some sudden perception?
Peter Copetti: No. I don’t think a POET Technology is definitely not a flash in the pan. I think that the POET Technology will be here for decades into the future – decades. The company is at a very critical step right now in its evolution. We’re moving from purey a research company to now into the development stage. To that end, investors need to watch for reports achieving commercial partnerships/deals with major industry players. Now, I believe that we can accomplish this in 2014 with more deals to follow in 2015.
James West: Okay. So that’s what’s going to trigger revenue in 2014, is the actual establishment of a partnership as one of the first industrial partners with POET.
Peter Copetti: Yes, absolutely. Up until this point, the market’s been concentrating on many of our technical milestones and they’re very important. But now, we’re at the stage where we need to verify with not just the institutional, not just with the investment community but also with the industry community that POET is actually real and tangible, and the only way to do that is by doing commercial deals and that’s what we’re working on in earnest.
James West: Okay. So then I’m looking at the stock chart of POET and going back, it’s been bouncing along the bottom is the best way to describe it at sub-50 cents for most of the year. When did you get involve and what did you do to turn this thing around so suddenly?
Peter Copetti: Well, I’m all about shareholder value. That’s very, very important to me. In June 2012 when Mr. Benadiba and myself joined POET, I think the stock was making all time lows and last week we made all time highs. I’m very proud of that.
Basically, I’ve surrounded myself with great personnel. Our senior management team is a task-oriented, all about results, we’re all about planning and execution, and our board of directors is constantly adding value and finally the key piece in my opinion is the billions of Dr. Taylor and his University of Connecticut team. So that recipe makes my job a lot easier and I’m really excited about the future of POET Technologies.
James West: It sounds fascinating. We’ll be following with interest Peter. Thanks very much for your time.
Peter Copetti: Thank you for having me.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.