SI Diamond falls on hard times, but hangs on by a nanotube thread

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Nov. 14, 2002 — SI Diamond Technology Inc. of Austin, Texas, has been forced to pare down to what Chairman and CEO Marc Eller called “the core of the company” — its subsidiary Applied Nanotech Inc., which develops nanotech for displays, medical cathode devices and hydrogen and other sensors.

SI Diamond recently announced the sale of its Sign Builders of America Inc. subsidiary for $250,000 while its Electronic Billboard Technology Inc. subsidiary shifts from direct sales and installations to just licensing.

With a recent quarterly filing that listed assets of $1.6 million and liabilities nearly double that, as well as a weak cash position, the company is banking on the restructuring and increased focus on nanotechnology to stay alive.

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“We have greatly simplified our operations now to the point where we want to be self-sufficient and not continue to dilute shares of the stock by continuing to raise money,” Eller said.

He said the company can now break even with $2 million in projected revenue for 2003, a figure the company believes it can achieve through Applied Nanotech alone.

“We believe that the nanotech field is going to be gigantic,” Eller said. “We believe there’s just going to be a few survivors in this area and that those companies are going to be well rewarded and our goal is to be one of those companies.”

Applied Nanotech added a ripple to a growing wave of signs that nanotube flat panel displays have nearly arrived when it announced a licensing deal with a large Japanese display maker.

Eller called the agreement significant for his company because it involves the licensing of technology and legitimizes Applied Nanotech’s business plan and potential for useful display parts.

“What it does is it really validates for us the way we’re going about it, our process and our patents” Eller said. “It also validates to the industry that nanotech is for real.”

Analysts agree the deal between the unnamed Japanese display manufacturer and SI Diamond adds to other announcements indicating nanotube flat panel displays may be among the first wider successes of nanotech.

“It may well be the first place we see it develop,” said Aberdeen Group research director Russ Craig.

Gartner Dataquest principal analyst Jim Walker said the announcement by Applied Nanotech indicates the company has gone a step further in the process of making carbon nanotubes work for flat panel displays. “Now they’ve got to put up,” he said.

Leo O’Connor, director of research for Frost and Sullivan’s Technical Insights, said the licensing deal — $500,000 up front and a 2 percent royalty of future product parts made by the Japanese company — is “an incremental step” in nanotechnology’s evolution.

“We are seeing increased interest in nanotechnology from companies with the capabilities and budgets to positively impact its growth,” O’Connor said. As for the overall industry, O’Connor said that products built with nanotubes are generally seen as emerging between five and 10 years from now.

However, referring to larger players such as Samsung and Canon Inc., SI Diamond’s Eller said companies are talking about nanotube flat panel displays that will be available by the end of next year. “They are showing prototypes at conferences, so that’s usually a pretty good sign,” Eller said.

Aberdeen’s Craig said the key question is whether several other display manufacturers will license the same nanotube-based technologies. “Because the stuff has so much promise, you’ll see everyone in the display space experiment with it,” he added, referring to Philips, Sharp and others. “They all, I suspect, will give it a try.”

O’Connor said nanotechnology is receiving more attention in Japan, with government and industry both putting nanotech ventures at the top of their research lists.

Gartner’s Walker agreed that it is encouraging to see deals involving Japanese companies. “Obviously, these large Japanese companies think there’s something there,” he said. “I think you’ll see it in the Japanese market before the U.S.”

Still, Walker said the true test of nanotube flat panel technology is whether it can be scaled up to be cost-effective quickly enough to compete with existing technology.

The Applied Nanotech licensing deal, which includes cooperation in other fields of nanotech such as sensors to detect leaks in hydrogen fuel cells, is a coup for SI Diamond because of the royalties, according to Eller. “That’s what we’re interested in,” he said. “You like that continuing revenue stream rather than just a one-time fee. That helps build a base.”

Flat panel displays — whether billboards in Tokyo or wide screens in living rooms — that use carbon films and carbon nanotube electron emission offer brighter, more efficient screens compared to conventional, photolithographic technologies, according to Craig.

He said nanotube-based technology boosts efficiency by producing higher levels of lumens and by holding lumens longer. Equally important is the potential for nanotube flat panel displays to reduce manufacturing costs and increase yields.

“If it works and lives up to its potential, it’s going to have an amazing impact,” Craig said. “The longer term impact could be significant.”


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