Today, Energous (WATT) announced a joint development agreement (JDA) with Haier Wireless, the company's tenth JDA in the past five months. I had the opportunity to speak privately with George Holmes, Senior Vice President of sales and marketing at Energous, about the JDA and other partnerships.
Energous' "WattUp" technology enables a charge to be sent, using the same frequencies as a wi-fi router, to a mobile device within 15 feet of the transmitter unit. As someone with a constant need to power his smartphone and tablet, I am in desperate need of the WattUp technology on a daily basis. Also, one can't ignore the need to charge wearables, as that market gains steam. Wearable fitness trackers and communications devices are rapidly hitting the market, with Apple's iWatch gaining much of the attention.
Energous is an early-stage company with essentially no revenue, so cash in reserve (at $22.9 million as of June 30) and intellectual property (65 patent filings as of June 30) are the first two key factors. I look forward to updates on both those fronts with the company's third-quarter earnings release, due in the next two weeks.
The third factor is getting companies to actually use the technology. Mr. Holmes is the marketing guru for Energous, just as he has been for many tech companies in the past. Our conversation focused on the JDAs and the rationale behind the partnership decisions.
The Haier Wireless deal is massive for Energous, if for no other reason than Haier being the world's largest appliance manufacturer. It's not just about size but about spotting a market. In this case, it's a market for refrigerators. Mr. Holmes spoke of a potential application in a dorm refrigerator, an apt use of the technology, as millennials are the most likely early adopters of wireless charging. Imagine that your fridge has a transmitter that can charge your phone while you are studying.
The Haier deal is a great leap forward for Energous, but the other nine are quite different in nature. Wireless charging without the need of a matt is one of the hottest frontiers in mobile tech, and two key themes about Energous' JDA partners emerged from my conversation with Mr. Holmes.
Focusing on tier-two suppliers and original design manufacturers (ODMs) will speed WattUp's time to market. Tier-twos are accessory suppliers in the handset market, and they are far nimbler than their handset-making customers, thus speeding Energous' potential time to commercialization. Similarly, ODMs offer much faster design and development processes than their original equipment manufacturer (OEM) competitors/customers.
Energous' first JDA was with Hanbit, which made an equity investment in WATT. Hanbit is a Korean company that is working as an ODM, on a white-label wi-fi router incorporating WattUp.
Energous is agnostic as to how WattUp is used. WATT management demonstrates WattUp as part of a system, including a cellphone battery backpack (similar to a Mophie case). The backpack costs $75-$125 and the transmitter unit costs $300. This is such an early-stage company that it's not possible to definitively say that will be the first application.
Access points (wi-fi routers) are an obvious use, and it is the subject of the Hanbit JDA. Also, Energous has signed two JDAs with semiconductor manufacturers, as WattUP could be incorporated into a semiconductor's reference design, eliminating the need for a backpack.
Finally, Energous' JDA with Highpower is focused on incorporating WattUp into cylindrical-cell battaries, which is obviously an enormous market worldwide.
Energous is the best idea I have heard in 2014. Of course, that doesn't necessarily make it the best short-term stock pick. WATT's IPO occurred on March 27 at $6 per share. By the end of May, the shares had risen through $14 per share.
WATT is now trading back below $10 per share, and I believe some of the recent selling pressure on WATT has been caused by the expiration of the standard 180-day lockup period from its IPO. I believe this has presented an attractive entry point for WATT and I have been buying at these levels for my most risk-tolerant clients, those who have a long time horizon and are looking for home runs.