Vuzix had some enterprise momentum with SAP pilots and a partnership with Lenovo. What it didn't have is capital and the balance sheet to make a go of its enterprise ambitions. Intel may have just bought the smart glass maker some time and credibility courtesy of a $24.8 million investment.
On Friday, Vuzix said Intel acquired 49,626 preferred shares, which convert at $5 a share. Intel now owns about 30 percent of Vuzix. The investment could turn out to be a win-win and Intel, which is likely to talk up smart glasses in some form at CES 2015, gets a hedge in case wearables in the enterprise really take off. Rest assured smart glasses have a better shot in the enterprise and industries like oil and gas and manufacturing than they will in a friendly neighborhood bar or sidewalk outside of San Francisco.
What's notable about the Intel investment is how much it is a business saving move by Vuzix. Since Vuzix trades over the counter, an illiquid market that serves as a minor league before a company can trade on the New York Stock Exchange or Nasdaq, the company's financial health is public record.
Also see: CNET's CES 2015 coverage
For instance, Vuzix reported third quarter revenue of $664,586, up 96 percent from a year ago. The third quarter net loss for Vuzix checked in at $3.3 million. Vuzix was exercising warrants to generate cash, but as of Sept. 30 the company had $564,302 in cash and equivalents. Inventory was valued at $1.08 million as of Sept. 30.
Not surprisingly, Vuzix in its third quarter filing with the Securities and Exchange Commission noted that it was strapped and had "going concern" issues. In other words, Vuzix was on the ropes unless it sold intellectual property or found investors.
With Intel on board, Vuzix will at the very least be able to play out its plan. The company competes with Epson in the enterprise market and possibly Google with its Glass. Other competitors will range from Sony to Brother to Oculus. Vuzix's claim is that its headsets and glasses are smaller and more easily integrated into a worker's life. It's worth noting that the Osterhout Design Group (ODG) announced its smart glasses aimed at the consumer market. ODG has sold its R-6 device to government and industrial companies for 18 months. The company added that it will be selling a Qualcomm Snapdragon version of the R-6 this year.
Vuzix said in its regulatory filings:
There is competition in all classes of products manufactured by us, including from divisions of large companies and many small companies. Our sales do not represent a significant share of the market for any class of products. The principal points of competition for these products include, among other factors: price, product performance, the availability of supporting applications, the experience and brand name of the particular company and history of its dealings in such products. We believe that most of the monocular Video Eyewear products currently offered by our competitors are inferior to ours because they are bulky, have smaller image sizes with lesser performing optics and/or are currently priced higher than our products.
Here's what Vuzix has going for it:
- A co-branded deal with Lenovo for its M100 Smart Glasses in China.
- A software update for the M100 that integrates Nuance voice controls.
- Efforts to develop wearable enterprise tools under Salesforce Wear.
- Various pilots with key tech players such as SAP.
What Vuzix didn't have is cash. Intel took care of the deficits for a bit. Now Vuzix will have to deliver to fund further expansion.