Seeing Machines wins Volvo

As predicted here a couple of years ago, the likelihood that Seeing Machines’ driver monitoring system will be a core safety feature in Volvo’s electric SUV successor to the XC90 now appears overwhelming. Rumour has it that it will be called the Volvo Embla but that hasn’t been officially confirmed, as yet.

The news from Volvo itself that Qualcomm’s Snapdragon Cockpit Platform will be used in Volvo’s “upcoming fully electric SUV” is the clearest indication yet that Seeing Machines has effectively won the brand in the home country of its closest competitor to date. 

I’m sure that, eventually, the Volvo win will be confirmed by all the interested parties but there is clearly some reluctance on the part of Volvo to discuss these matters in detail currently.

Coming on the back of the huge VW win only a month ago, some might expect Seeing Machines to rest on its laurels. However, I’m expecting very positive news in Fleet to accompany, possibly even precede, a series of spectacular auto wins over the next few months.

Of course, I could be wrong so it is important to do your own research.

Roy Holehouse

If I am right, and you make some money out of it, please consider giving a donation to the Roy Holehouse fund. He sadly passed away this week but I’m sure his family would appreciate any help during a terrible time.

Here’s the link to the page: https://www.gofundme.com/f/f3u5cw-a-helping-hand?utm_source=customer&utm_medium=copy_link_all&utm_campaign=m_pd+share-sheet Thanks.

The writer holds stock in Seeing Machines.

Desperate stuff from Redeye

This week’s note on Smart Eye (SEYE) from a Redeye analyst was disappointing and, quite frankly, unfair to investors who mistakenly believe it’s the leader in driver monitoring (or, as it might now term it, ‘interior sensing’). It isn’t. 

Perhaps desperation at the fall in Smart Eye’s share price following the Volkswagen (VW) win by Seeing Machines has prompted this latest attempt to maintain the myth that Smart Eye is the market leader. However, any sober analysis leads one to question this.

Smart Eye’s recent moves on the acquisition front are evidence for me of its late realisation that it can’t compete on the DMS/OMS front with Seeing Machines, proven by its recent failure to win VW.

Furthermore, I think SEYE has overstated the value of its wins to date, while Seeing Machines has understated its own 8 OEM wins. For example, One of Smart Eye’s early wins was with BMW, but it has since been supplanted by Seeing Machines. VW and Mercedes have also gone with Seeing Machines. Do you see a pattern?

In the US, General Motors, Ford and FCA (now part of Stellantis) chose Seeing Machines. Similarly, Fisker and Byton chose Seeing Machines. 

The much-vaunted early Audi design wins back in 2017 by SmartEye have also failed to go fully into production, as has the Jaguar Land Rover win a few years back. Redeye naively assumes that they have been temporarily postponed. As the analyst states on page 5 of this note published on 9th May, 2021: “Smart Eye says it has still not lost any design wins, but some are postponed for external reasons.” Let me suggest that those wins have been lost, as the auto companies concerned realise Seeing Machines’ technology is more advanced.

Importantly, the VW and Fisker wins indicate that Seeing Machines is not only the leader in DMS but is also winning as car manufacturers seek to build in occupant monitoring systems and move to interior sensing. Yes, Smart Eye can talk the talk re. Occupant Monitoring but the only cars currently going into production with OMS have a Seeing Machines system.

A further indication of SEE’s leadership position is evident from the fact that Qualcomm chose to partner only with Seeing Machines. Similarly, Magna has chosen to use Seeing Machines technology. 

My research indicates that Smart Eye’s “pure software” model effectively means that it is treated like a commodity and doesn’t really gain the respect of the Tier 1s whereas, in sharp contrast, Seeing Machines is acknowledged as the expert in DMS/OMS. After all, OMS is effectively only DMS with more occupants. And Seeing Machines leads the way in DMS.

What that means is that OEMs are far less likely to take a chance on Smart Eye for big programmes delivered to short timescales, especially when high-level DMS will be make or break in achieving 5 star NCAP ratings from 2024. It is simply too important for them in a fiercely competitive market to take a chance. For example, imagine the pain that Renault recently experienced at the hands of Euro NCAP, receiving 0 stars for shoddy safety in its Zoe. Such an event must be concentrating minds at car manufacturers around the world. 

That’s why I think Seeing Machines is going to clean up in the DMS/OMS market. Okay, Smart Eye will win a few Chinese models and low volume models elsewhere but for premium and large volume RFQs I don’t expect it to win any of note. 

A further problem for Smart Eye may also be that QC is set to take away its Chinese lunch in due course, supplying Seeing Machines technology as part of its system.

Of course, I may be wrong or, perhaps, my investing in Seeing Machines has affected my judgement.

Well, here’s a little test. Back on 22nd October, 2021 the Redeye analyst wrote: “Three of the largest DMS procurements to date will be completed within next few quarters – where ‘Smart Eye is a force to be reckoned with in all three’. Though we don’t know what this means, we believe Smart Eye is confident of getting at least one or two of these”.

Well, one of them has been completed and it wasn’t Smart Eye that won it. I’m confident that Seeing Machines will win those other two in this financial year, as well as a host of others this year and next. 

Fleet

I’m expecting great things from Seeing Machines’ Max Verberne and his team in fleet, similar to what Nick DiFiore and his team have achieved in auto.

I’m therefore confident that 2022 is set to be a transformational year in fleet for Seeing Machines. Despite the fact it already has approximately 32,000 fleet installations, the pipeline is rapidly expanding, 40% annual growth in revenues is expected. The Shell deal is huge and offers the potential for many thousands of installations each year, National Express is also in the process of rolling out Guardian tech to its enlarged fleet following the acquisition of Stagecoach. That target market represents approximately 40,000 badged as National Express, with approximately 10,000 more belonging to  contractors.

Moreover, such is the potential for driver monitoring as part of an overall control system that it is clear this is only the beginning of a global ramp up in sales. Seeing Machines is only scratching the surface of the potential within telematics with its current partnerships. Europe and the US will be screaming out for this technology as regulations tighten and companies seek to improve both safety and reduce emissions. This will all become apparent as we hear more about the introduction of its 3rd Generation fleet product.

In contrast, SmartEye is ‘pre-revenue’ with a fleet operation that only launched in March 2021, with 20 staff. It had a ‘pilot projects’ operational in July and I look forward to hearing about some meaningful revenues one day soon.

Aviation

Smart Eye is even further behind in aviation. To the extent that even Redeye doesn’t want to talk about it. Suffice to say that it has yet to fly in Aviation.

By comparison, Seeing Machines’ Pat Nolan is airborne, and charting a course for a smooth landing on profit central. Take, for example, the recent agreement with Collins Aerospace, which is the world’s largest Tier 1 avionics company.

In addition, via CAE and L3 Harris, Seeing tech is already in simulators used by Quantas and the Royal Australian Air Force. It is also working with Airservices Australia to use its technology within Air Traffic Control (ATC).

Summary

In summary, not only does Seeing Machines lead in auto, it is far ahead of any competitor in fleet and the only player in aviation. Too little, too late, sums up Smart Eye’s offering in both fleet and aviation. 

I expect the next second half of this financial year to confirm the pre-eminence of Seeing Machines in all three transport sectors. Seeing Machines’ ever-growing pipeline will make this very clear, very soon.

Yes, Smart Eye does have significant value and potential. However, in my humble opinion, it could be an expensive mistake for an investor to presume it is in the same league as Seeing Machines. Of course, any investor should do their own research.

Full-year results for both companies should bear out what I have stated here. In the end, the acid test for both is the visibility of increasing revenues and profitability. If I am correct, Seeing Machines should impress on the upside and Smart Eye will fail to match that.

The writer holds stock in Seeing Machines.

Mobileye IPO is positive for Seeing Machines

News that Intel plans to float Mobileye for around US$50bn in 2022 is very positive for Seeing Machines in a number of ways.

Intel a possible bidder for Seeing Machines?

Firstly, it would provide Intel with funds to take over Seeing Machines, which is the leading global player in the driver monitoring/occupant monitoring space. Intel would gain additional revenue lines in aviation and other transport verticals. It would also stymie Qualcomm’s strategy of dominating interior sensing within auto. 

Even if the acquisition turned out a mixed success for Intel, it could do what is plans to do with Mobileye; IPO it a few years later for multiples of that value. Remember Intel paid $15bn for Mobileye and that acquisition has arguably turned out to be a very mixed blessing.

Presssure on Qualcomm to bid increases

A further positive for Seeing Machines is that the timing of Intel’s move increases the pressure on Qualcomm to make a bid for Seeing Machines, while the former’s hegemony in DMS/OMS is still rumour not fact. By June 2022 multiple wins in auto DMS/OMS will be known to all market participants and Seeing Machines market value will have risen significantly. 

By acting soon, on its knowledge of guaranteed wins by Seeing Machines that have not yet been officially signed, Qualcomm could save itself billions and avoid a strategic denouement at the hands of Intel. 

Yes, Qualcomm would have to come up with at least US$5bn but that is a relative bargain, given that Seeing Machines profits from fleet, auto and aviation would earn that back by 2030.

The writer holds stock in Seeing Machines

SmartEye vs Seeing Machines

In view of the stellar PR coming out of SmartEye today, I felt it worthwhile to mention that while I applaud its chutzpah, I still don’t think its technology matches that of Seeing Machines. That said, I believe both will progress further and eventually be taken over.

Questions for SmartEye

Let me explain some questions that arose in my mind as I read the announcement from SmartEye today.

  1. SmartEye is saying that it has half a million cars carrying its DMS but, if so, they must be selling it very cheaply given the revenues announced.
  2. Given Seeing Machines has already stated that A$900m of RFQs are being decided right now, it seems odd that SmartEye should contradict this with the statement that “several smaller procurements are soon to be decided in the near term”. Is it possible that this is marketing speak for: “We’ve not won VW or Toyota”?
  3. As if to dispel this notion we’re promised: “Three of the largest procurements of DMS to date are due for sourcing in the coming quarters”. Really? Well, don’t hold your breath if you think SmartEye is going to win them against the combined might of Qualcomm and Seeing Machines.

Of course, I am biased purely because I’ve conducted one helluva lot of research. I believe Qualcomm is set to unveil a host of auto RFQ wins before Christmas, with Seeing Machines DMS/OMS in them. And yes, I’m convinced SEE has won Toyota and VW — I just can’t prove it. Certainly, I don’t hear SmartEye mentioning either company.

Regarding fleet, I believe the global Shell deal is set to be huge. I’ve heard whispers that it could be a caterpillar-style deal, with upfront revenues that will bring forward break-even. Though, with Shell in a quiet period, I can’t confirm.

Moreover, See’s fleet arm is making money, while SmartEye’s nascent fleet offering is still pre-revenue! 

As for aviation, we patiently await the imminent takeoff off of Seeing Machines’ licensing deal with L3. It appears to have been delayed by a year. Regardless, given the progress made, the idea that Seeing Machines aviation arm has no value is plainly ludicrous (not in an Elon Musk way).

Bidders circling Seeing Machines?

By the way, I’m still of the opinion that Seeing Machines is very likely to receive a bid from Qualcomm very, very soon. Indeed, one fund manager recently rang me to ask about a rumour he’d heard coming out of the US, regarding a possible takeover of Seeing Machines. He didn’t mention who it was or his source but, if I was Qualcomm, I’d get the ring on Seeing Machines finger fast.

CES might be the perfect opportunity to announce the betrothal to the world. (I also believe SmartEye will also get bought in due course).

My logic? I just can’t imagine that Qualcomm can risk SEE’s tech falling to anyone else, given its importance to its auto stack offering. Look at how it outmaneuvered Magna to get its hands on Arriver. Certainly, Apple or Alphabet have the potential to outmuscle Qualcomm, as they must also know its potential worth. Therefore, I believe a lot of wooing is going on behind closed doors. 

By the way, has anyone dared tell Elon Musk that buying Seeing Machines might get Missy Cummings off his back?

My advice to Seeing Machines: “Don’t sign any pre-nup until you’ve seen the size of their respective wallets. You’re worth at least £10 billion!”

(Do your own research, as the writer may have been high on life while writing this – Ed).

The writer holds stock in Seeing Machines

Is Seeing Machines set to be taken over within 6 months?

Following today’s interview with Seeing Machines CEO Paul McGlone, I’m convinced that Seeing Machines is set to soon follow Veoneer and be the subject of a bidding war, most likely within the next 6 months.

The main driver is its dominance in the automotive driver monitoring space, where it is set to win the lions share of a multi-billion dollar market over the next year. (My view is it wins at least 70% of the RFQs).

McGlone was very candid in the interview and the key part I’m going to refer to starts from around 13 minutes in. There he outlined the problem winning most of the DMS/OMS market brings to a relative minnow:

“In my opinion, this is the beginning of the consolidation in interior sensing. Not the end, the beginning. I doubt very much whether there will be 3 or 4 majors in this space 2 years from now.”

“One of the challenges we have right now is that with almost a billion dollars of RFQs, which is more than we’ve seen in our entire life, on our table today, and we expect another billion next year, we have a really important decision to make. Do we pursue it all, do we get selective and strategic about what we pursue? What are the investment implications for either choice?

It is very, very clear: if we pursue it all and we win at our historical run rate of 40 plus per cent it is a fantastic return on investment. So, over the next 2 quarters we’ll be looking in great detail around the volume of RFQs, the requirements in each of them…the cost of doing them and the return on investment. That is the big decision for us to make. We don’t have to make it now but we’ll be working on it over the next 2 quarters.”

I personally think the opportunity is so huge that even if Seeing Machines wanted to pursue the opportunity offered by automotive alone, it won’t be allowed to do so. However, I think they’ve already decided to sell if the price is right.

By the way, I think that price will be over £1. Looks silly when the price is 10p but huge contract wins haven’t yet been announced. When they are the price will rise and £1 will eventually look cheap.

Qualcomm grabbed Veoneer from the hands of Magna because it sees the strategic importance of active safety in automotive to its future business.

Seeing Machines is of even more importance as its technology is the jewel in the crown of active safety (an area that has grown in importance as the automotive industry comes to realise that mass adoption of fully autonomous vehicles is decades away). While car computer systems will increasingly carry out more tasks for drivers they’ll still need to ensure drivers are paying sufficient attention to take over when required.

Moreover, Seeing Machines technology, which at its height goes far beyond mere eye-tracking and helps computers to assess the cognitive load of a human (including whether they are incapacitated or not), has many uses that go far beyond passenger automotive. This includes trucking and uses in aviation (training simulators, ground control tracking and planes). Shipping and flying cars will surely follow and spacecraft would logically use it eventually.

Yet, its tech has uses far beyond transport: in XR headsets, mobiles, medical devices and robots. In all these markets Seeing Machines technology has the potential to deliver multi-billion dollar revenues to its owner.

That’s why, although I expect it to be valued partly on a forward order book in automotive, its dominance in the trucking and nascent aviation markets will also increase its intrinsic worth.

Crucially, it should also obtain a healthy premium for its strategic importance in developing future markets.

That’s why, although Qualcomm must be red hot favourites to take it over, there is the likelihood that another chip company (eager to spoil the party) or even a private equity firm (awash with dry powder and seeking to acquire valuable assets) will make a bid.

I also think a bid from Apple or even Alphabet is a strong possibility. Each will know its strategic importance to their future plans and be prepared to outbid Qualcomm for it. For example, after the money spent on Waymo for little real return it might make sense for Alphabet to hedge its bets and spend a few billion dollars to acquire a guaranteed golden goose like Seeing Machines. Equally, why should the forthcoming Apple Car not use its own DMS (from Seeing Machines) and use that technology in its own computer chips to power its headsets, mobiles and computers?

Of course, I could be completely wrong. After all, I once thought driver monitoring would be one of the hottest areas in automotive and look how that worked out.

The writer holds stock in Seeing Machines.

Expect massive re-rate of Seeing Machines by year end

Seeing Machines put out a positive year-end trading update today, without actually providing news of auto contract wins.

Fortunately, they are set to pile up over the next 6 months, with the company admitting it is bidding for a A$900m pipeline from numerous car manufacturers with 16 Tier 1s.

My view is that Seeing Machines, which has been working with the likes of Toyota and VW for years is set to take at least 75% of that pipeline. Indeed, one source (from outside the company) has already told me that A$750m is the figure I should have in mind, which would equate to over 80%. Another source (again outside the company) has recently validated my long-term bullish view on the company’s prospects in auto.

Of course, that pipeline will also grow as OEMs scale up initial contracts further. Indeed, the fact that Seeing Machines tech is now so much in demand must be the reason so many Tier 1s are now scrambling to work with it. They, unlike most investors, have seen the writing on the wall and its reads: ‘Seeing Machines DMS rules ok!’

That of course brings in the whole question of who is going to bid for the company and when?

With a A$1bn+ order book in auto set to become a reality in the present financial year, I’m sure informal approaches are becoming more regular. 

But Seeing Machines is traditional and I have a feeling any match will be an arranged one. One that will need the approval of the whole family of shareholders.

However, Seeing Machines needn’t be in any rush as its value should be considered in pounds not pence. I’ve earmarked the end of calendar year 2022 as the most likely date by which we’ll have some M&A action. By then it will be clear that:

  1. I’m not making this stuff up.
  2. Aviation is another cash cow
  3. VR headsets/mobile phones is a likely growth area for its tech. For instance, its technology seems perfect for the next iteration of the Microsoft Hololens, which only has rudimentary eye-tracking.

The exact timing of any offer depends, of course, on contract announcements and broker upgrades as companies generally prefer de-risked investments. Still, by the end of this year I expect Seeing Machines’ auto division to be almost totally de-risked.

At this point, I want to put in a plea for Seeing Machines to engage Morgan Stanley as a broker and to ensure Adam Jonas is the analyst covering it. It is a plea I’ve made directly to the company in the past and now is certainly the time to consider it seriously. 

SEE is a global leader in one of the hottest areas in tech. Waymo brags about full autonomy but in scale that is decades away. Long before then Seeing Machines tech is going to be in hundreds of millions of cars.

It therefore needs huge coverage in the US, where they naturally think big and fully value a successful global tech company. Who better than Adam Jonas to serve SEE up to the investment world?

Price

Speculating on price is a mug’s game. But then I’ve been labelled a mug multiple times for holding SEE for so many years. So here goes:

Personally, I think £1 is achievable in the next 12 months, provided:

  • VW/Toyota contracts are announced before the end of 2021
  • Someone admits we’re in Honda, courtesy of GM
  • Qualcomm reveal more about our wins together in auto
  • Volvo win is announced (Okay, I just put that in because I crave validation)
  • We get at least one firm aviation licence deal
  • We get Morgan Stanley (more importantly, Adam Jonas) on board

It could be a lot more by this time next year, if:

We get confirmation that our tech is being factory fitted to trucks

We get confirmation that Microsoft is putting our tech into the HoloLens headset

We get confirmation that Apple/Tesla is using us

An aviation license deal provides significant up front payments

If a bidding war were then to kick off, well it could even stretch to an Ayrton Senna. However, I’m sure a certain chip manufacturer or some Private Equity firm laden with dry powder won’t want a bidding war.

Soon, the institutional holders will have to decide: do they want a pound in the hand or a tenner in the bush?

The writer holds stock in Seeing Machines.

Battle of the Titans draws ever closer

I’m glad to finally get confirmation from Seeing Machines that the Mercedes S Class contains its driver monitoring system. Especially, as this website was the first to reveal this 4 years ago. The additional models announced today are all good news too.

Okay, we all know about NDAs and lead times in the auto industry by now but, as the deadline for mandatory DMS in Europe nears, SEE is clearly benefitting from a rush for its tech from OEMs.

The good news is that there is a growing pipeline of auto wins that I expect over the next 6 months,  My firm view is that Seeing Machines will (eventually) be in a position to announce wins with VW (and Audi), Toyota, Honda, Subaru, Volvo etc. etc.

Seeing Machines has effectively crushed the opposition and with the help of Qualcomm and Xilinx is scaling up its auto operations beyond the expectations of many.

It’s also making huge strides in getting its technology into the real world via Fleet and Aviation. More on that in due course.

My view is that overall it’s heading for A$1bn+ turnover by 2025. Of course, until the news is ‘official’ and house brokers have put the numbers out, there will be justifiable scepticism. Still, the exact number is less important than the massive revenue and profit acceleration path it is forging. That is now becoming increasingly clear to a host of sweet-toothed companies that would love to acquire a de-risked jam factory.

That is why I expect there to be a massive battle to acquire SEE well before 2025. By late 2022, early 2023, I reckon.

The leading runners and riders will doubtless include some or all of the following:

Expect at least one left field bidder, who could even start the auction off with an opportunistic bid.

As to the price? Well, my minimum is £1 a share. My maximum is £4 by 2023.

A warning: I could be completely wrong. After all, maybe it really was blind luck that I guessed about the Mercedes S Class back in 2017. Moreover, circumstances and stock markets can change quite rapidly, defying conclusions based on fairly accurate analysis.

If you’re in two minds about this you have to ask yourself one question: “Do you feel lucky?”

“Well do you punk?”  (2m 11sec)

In any case, do your own research before investing.

The writer holds stock in Seeing Machines.

 

 

 

 

 

Seeing Machines bags Nio

At the Qualcomm shindig last week, it was fascinating to learn that 20 automakers have selected Snapdragon automotive cockpit, gen 3, particularly as I believe most, if not all, of them will have Seeing Machines DMS integrated into it.

I’m sure that one of them is the Nio ET7, the Chinese would be Tesla killer. You don’t have to be much of a detective to work it out as the clues are all within an easy Google. Nio is signed up with Qualcomm and has an enhanced DMS. Hmmmm does anyone know a supplier of advanced DMS that is working with Qualcomm? Answers on a postcard, please.

Fortunately, Qualcomm also supplied a photo clue last week.

Screenshot 2021-01-26 at 15.44.20

I certainly would not rule out a Qualcomm bid for Seeing Machines in the future. Its technology has applications in markets far beyond automotive that Qualcomm would love to dominate. The more Seeing Machines impresses Qualcomm (and it got a lot of respect last week), the more likely it is to want to snap it up on the cheap. Keep watching.

The writer holds stock in Seeing Machines.

Are Qualcomm and SEE climbing the Great Wall?

It appears the share price of Seeing Machines is continuing to climb in anticipation of some big announcements from Qualcomm next week.

It would appear very likely that Seeing Machines via Qualcomm has made very big strides in China.  In addition, I came across some interesting news from Japan. Here are two snippets that may hold the key to the rise.

The first is news of Great Wall Motor in China. The second is news of Japanese OEM Honda installing DMS.

I don’t have definitive proof of either but I expect more good news very soon.

The writer holds stock in Seeing Machines.

 

 

Seeing Machines storms CES

All the news coming out of CES is very positive for Seeing Machines and I’m more confident than ever that it’s on target to take 75% of the global DMS market over the next few years. (Naturally, Seeing Machines itself and its broker Cenkos prefer to state a target of 30-40% publicly).

The tie-up with Qualcomm was probably the highlight of the show for me and it’s great to hear that they’re both working with a “global premium automaker”. It has been suggested it is a new OEM, if it is I assume a more detailed RNS will eventually be published.

Yet the partnership with Qualcomm, apparently at the latter’s instigation, may also be much more significant than many realise. It opens the possibility of marrying industry leading eye-tracking with chips that can go inside mobile devices and VR/AR headsets. It is potentially a huge opportunity and some speculate that a lucrative licence deal is possible for Seeing Machines. (If so, let’s hope it arrives sooner than the “imminent” Aviation licencing deal that we are still waiting for!).

Further out, robots/cars should soon be capable of displaying empathy using eye-tracking that can also interpret cognitive load/read facial gestures.

With EU safety legislation now law, and other countries set to follow Europe’s lead, the near-term future is increasingly bright for SEE. Indeed, this is a company that should be worth billions right now.

Volvo

Strangely, though, there has been silence re. Volvo. My industry contacts tell me it has finally decided who will be supplying its DMS and I’m pretty confident it will be Seeing Machines as it’s the only system that can accurately tell if a driver is incapacitated – a feature teased by Volvo in early 2019.

I expect it will first feature in the 2021/22 Volvo XC90 but Volvo are staying tight lipped as are Seeing Machines and the likely Tier 1, Bosch.

While the share price has been motoring, the next trading update (expected in a week or so) should provide further proof that fleet is set to comfortably beat full-year estimates.

This is a stock on the move and I’m increasingly confident that a huge re-rating is just a matter of weeks away.

The writer holds stock in Seeing Machines.