Seeing Machines boss Kroeger eyes many dimensions of growth

It is fitting that Ken Kroeger’s tenure as chief executive at Seeing Machines (LON:SEE) began on the fourth of July as there were fireworks quickly after his arrival.

When he took over the share price was bumping around 1.86 pence. Yet within days it had rocketed to 4.23 pence and, and remains around 3 pence.

The blue touch-paper was lit under the stock by a technology paradigm shift – the launch by Toshiba of their first glasses-free 3D laptop, which could pave the way for similar innovations in television.

The excitement for followers of Seeing Machines is that the Toshiba Qosmio F750 incorporates the company’s faceAPI technology, which allows the computer’s camera to track the face and eye movements of the user.

This is important as today’s high-tech screens trick the brain into thinking it is viewing pictures in three dimensions. The current success with Toshiba is based on a chip produced by a Chinese 3D technology company called SuperD.

“What our software is actually doing is allowing the web camera on the computer to track where the person’s eyes and head are so that the 3D screen images can be directed to the eyes of the viewer by the SuperD technology,” Kroeger tells Proactive Investors.

“You think of the Nintendo 3DS…you have to have the device at the right angle from the face to get the effect. 

“FaceAPI software allows the computer to know where you are in relation to the screen.”

The Seeing Machines algorithms have been successfully deployed in another device, called the Driver State Sensor, which detects whether drivers are literally falling asleep on the job.

The DSS is attracting a great deal of interest from the world’s largest miners which operate fleets of giant earth movers.

Driver fatigue is a problem yet safety is of paramount importance, so the DSS has a ready market with no competitors offering a “non-intrusive” or “off-body” solution – other solution tether the driver with special headgear or glasses.

This cab-based box and warning system has, to use a pun, been the driving force behind Seeing Machines and its push towards profitability. 

Success for Seeing Machines has, however, created problems. Problems other high-tech minnows would love to have, but problems nonetheless.

The first is that Seeing Machines is effectively two businesses in one.

There’s the relatively capital intensive DSS business, which produces the in-cab gear needed to check on our dozy drivers.

And there’s the face and eye tracking technology, which works on the licence and royalty model adopted by the likes of ARM, Wolfson and Imagination Technologies here in the UK.

The second is the potential need for new finance sooner, rather than later. Of course this is the bane of any small, but growing firm.

But there are also opportunities, massive opportunities. Kroeger says the company has developed multiple face tracking that would make it possible to create the world’s first dynamic glasses-free 3D TVs. This is quite a game-changer because the current technology doesn’t really apply to TV as we often don’t watch TV by ourselves.

“The other thing that is special about the technology is you can watch 2D and 3D on different parts of the screen at the same time.”

“What’s about to happen in the next 18 to 24 months is we are going to see the first releases of consumer-focused cameras that take 3D pictures,” the Seeing Machines chief reveals. We hope to play part in that technology.

However the real fireworks will come if it can shoe-horn its IP into the chips used in smart-phones - something Seeing Machines is actively pursuing. 

“This FaceAPI thing is kinda crazy,” Kroeger says. “Right now the Toshiba deal is significant for us. It runs on an Intel processor. 

“But if we had the money and a bit of engineer time, we could migrate this to less powerfull processors. 

“So in 12-18 months it is realistic to believe we could have this on smart handheld device – iPad, iPhone … you name it. 

“Anything that has a camera can be 3D and driven by this little piece of technology. I think the platform has got some legs.”

It has been a roller coaster few months for investors in the group, which was rocked by an earnings alert in June which wiped over a third off the company’s market value in a couple of days.

Delays to a major order for the DSS and challenges with the technology were at the root of the problem, which had a consequent impact on the company’s results for the year to June 30.

However these are delays, not cancellations and business will be picked up in the current year.

More to the point the DSS division is in rude health dealing with about as many sales leads as it can comfortably handle and site installation is becoming a challenge.

And while he isn’t specific, Kroeger says there’s at least one substantial DSS order in the offing.

“Every day there’s three or four requests for further information on our products,” he adds. 

“And this smells and feels like the right activity that leads to sales. They are global customers, big companies with significant operations all around the world.” 

There are two other products in the portfolio. The first is Facelab, a device that tracks eye gaze, which Kroeger describes as a quiet performer bringing in a “couple of million dollars a year”. 

The other, the newest product, Truefield, is a very specialist eye test device for disorders such as macular degeneration.

“The final clinical trials will commence later this year and we are eager to see the results.”

What Kroeger must do now is consolidate on the work of the predecessor Nick Cerneaz and provide the company with some real focus.

Dealing with the likes of Toshiba, or if it ever happened, perhaps even Apple or Intel, will require commercial acumen as much as the technical brilliance the company has displayed. 

So there are what the professionals call execution risks associated with Seeing Machines – that it won’t actually capitalise on the huge opportunities it has created. 

You sense the sheer enormity of the challenge is starting to sink in.  “It is very hard to measure the market, because the market doesn’t exist yet,” Kroeger tells me. 

“There are so many uses for this technology that we haven’t even thought about yet.

“We are talking to all the big players in the handheld device space. There are some technical challenges there moving it to low output devices, but be if we can get there it will be big.”

“If you can move it into an area where you are selling tens or twenty million devices – even at a fraction of dollar a time you are still talking a lot of money.”