However, the company cites increasing screen resolutions as a positive and this is helping its margins in the high-end of the smartphone spectrum, where Himax claims that it is among the leaders. In addition, the company expects automotive displays and tablets to lead to further revenue gains in the future.
Glass is not the biggest in its own segment!
Finally, let’s take a look at Himax’s non-driver products segment. It accounted for 15% of overall revenue in the previous quarter, grew at a slower rate than small and medium sized display drivers, and yet, is the most watched segment because it houses LCOS microdisplays which are expected to be used in Google Glass.
But before moving to Google Glass, investors should note that in display drivers, the CMOS image sensors are the strongest performers now, accounting for the highest revenue in the segment.
Himax is witnessing robust demand for its 2 megapixel and 5 megapixel camera sensors from smartphone and tablet makers in China and abroad and recently launched an 8 megapixel sensor as well. The company is expecting growth from new smartphone customers this year and expects CMOS image sensors to grow at a brisk pace in the future.
What about Glass then?
And finally, coming to Google Glass, I think it won’t be prudent to make big claims on how it is going to change the face of technology and send Himax’s revenue through the roof. Well, Business Insider does estimate that Google Glass would be an $11 billion market by 2018, and there are rumors that the product will be priced at a reasonable $299 at the time of launch. These are certainly positives, but there are negatives as well.
Cheaper competitors can hurt Google while concerns about privacy, low battery life, and strain on the eyes are other things to keep in mind. So, pinning ones hopes on a product that hasn’t hit mass market yet isn’t a prudent thing to do. Google Glass can be a huge driver for Himax if it clicks, but for the time being, TVs, monitors, laptops, smartphones, tablets, automotive displays, etc. need to be paid attention to.
Don’t be just a fanboy
Himax management stated that there is “relatively poor visibility” in its end markets. However, shares have become frothy and investors need to look at the actual business of Himax rather than counting on Google Glass to deliver the goods. There are challenges faced by Himax, such as price wars in smartphones and a shrinking large display driver business.
Moreover, revenue is expected to grow just 8% this year and the recent guidance suggests that there’s a possible slowdown. So it won’t be surprising if Himax faces some difficult times ahead and enters a period of correction, which again might be a good time to pick up some shares if the stock becomes a bit cheap relative to its growth as the long-term opportunity is still there.
The article Breaking This Google Glass Play Down originally appeared on Fool.com and is written by Harsh Chauhan.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google.
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