Vu1 Corporation (fka VUOC)

[Robear]

About a week ago I posted the following to the Motley Fool Rule Breakers community to see what they think of this Rule Breaking penny stock. There were zero replies so I assume that they won’t be looking at it until it moves out of the penny stock realm. I’m posting this here because I’ve suggested that a friend (who used to be Motley Fool subscriber) take a look at this interesting little company and I’ve pointed him to this community as a place to begin his research.
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The following is not a recommendation for the Rule Breakers community, but it will be interesting to see if it turns into one during the next three to five years… Vu1 Corporation pronounced View-One is a small start-up style company (implying big risks & potential for big rewards) that is trying to outshine Thomas Edison by releasing a mercury free, fully dimmable, energy efficient light bulb that produces a light quality nearly identical to the incandescent bulb while using 70% less energy. If all goes right then their first product will begin shipping next Wednesday.

Why invent another light bulb? Apparently several countries around the world have initiated bans on inefficient incandescent style bulbs so there is a need for energy efficient alternatives:
http://en.wikipedia.org/wiki/Phase-out_of_incandescent_light_bulbs

Who are the competitors? Currently there are three main alternatives to the incandescent bulb that is being banned; they are: Compact Fluorescent, Halogen-a (improved more efficient incandescent) and LED. Each of these has its own advantages and disadvantages and each will be chosen for different lighting applications depending upon a customer’s needs and preference. I have bought and tried several of them and thus far I’m not very impressed. IMHO, there’s plenty of room for additional products including hybrids and Vu1’s ESL technology:
http://pressroom.geconsumerproducts.com/pr/ge/_prv-three-bulbs-in-one-ge-s-hybrid-199673.aspx

When will it be available? Vu1 Corporation is now preparing to release a R30 ESL bulb for the recessed lighting market; if all goes right then they will begin production this week and will start shipping to early adopters next week. Their technology is called “Electron Stimulated Luminescence” or ESL and promises to give the consumer a new option to solve their lighting needs. The bulb’s main attractions are that it is mercury free, fully dimmable, energy efficient and produces a light quality that is nearly identical to incandescent. FYI, I ordered a set of these back in December but due to a series of delays (more on that later) my bulbs won’t arrive until next week. The company felt so bad about the delays that they sent me one of their pre-production models; only to send me an email a few days later to explain that they discovered a faulty chip in the pre-production model (DOH!). Regardless, I am very impressed with the company and with what I’ve seen of their product; in fact, the following review closely matches my opinion of the pre-production bulb:
http://www.scientificamerican.com/blog/post.cfm?id=a-better-kind-of-light-bulb-2011-03-21&WT.mc_id=SA_DD_20110321

Why do I think that Vu1 could become a Rule Breaker? I have tried Vu1’s pre-production product and I believe that it is a disruptive technology that will shake up the lighting market and will find shelf space right next to the current technologies. IMHO, lighting is selected based upon both need and personal preference so I don’t believe that ESL will be for everyone yet its attributes put it right in a sweet spot between CFLs and LEDs and should allow it to gain a significant foothold in the lighting market. Some of the advantages of ESL over CFL are: its fast start time (zero to full brightness in less than a second), lack of mercury (many worry about the mercury content in CFLs), fully dimmable (most CFLs don’t dim and some flicker while dimming), trash can disposable (CFLs are supposed to be sent away with hazardous waste) and the light quality is nearly identical to incandescent (colors show truer than most of the alternatives)…….. Some of the advantages ESL over LED include: light quality (LEDs tend to produce a bluish light), works better in heat sensitive environments (LEDs aren’t well suited for recessed spaces), more affordable upfront costs (a R30 ESL is $20, a R30 LED is approx. $45 and up)… To be fair, both the cost of ESL and LED bulbs are expected to drop over the next several years as all lighting technologies will continue to see significant improvements. FYI, I’m sure we’ll see several new comers enter the market during that time including OLED based technologies.

I don’t expect that ESL will replace either CFLs or LEDs (albeit no one would miss the mercury contained in CFLs) but I do believe that it will gain significant acceptance for those who want to own quality, mercury free lights that look and behave similar to the traditional lighting that most of us grew up with. By the way, Vu1’s next product is an A19 ESL bulb and it should look nearly identical to the Edison style round bulb that is popular in both the US and Europe (without the airplane wings of many of the LED alternatives). If things go as planned (a big if here) then the A19 bulb should be available near the end of this summer or early this fall.

Vu1’s management has a fairly good reputation and background but appear to be a bit green as they’ve encountered their share of setbacks over the last six months and provided a few too many release dates before a production ready bulb was available. These sorts of things can and do happen with startup companies but they will have to do slightly better as their product begins to take flight (hopefully it won’t crash and burn).
http://www.vu1corporation.com/management/

Vu1’s board is actually a bit more impressive than their management team; including a few that I am personally impressed with those being: Chairman William B. Smith (Founder and Chief Executive Officer of Smith Asset Management), Bill Hamlin (Former The Home Depot Inc. Group President) and Professor Charles Hunt (Professor UCDavis, Vu1 CTO, researcher for California Lighting Technology Center CLTC)
Smith: http://www.smithassetmanagement.com/our_team.php
Hamlin: http://www.globalebs.com/content/aboutgebs.html
Hunt: http://www.ece.ucdavis.edu/people/profiles/hunt.html

The following is a quote from Bill Hamlin who was once credited with making The Home Depot a success:

“I have seen a number of new and innovative products during the course of my career, and I believe the potential for Vu1's unique lighting technology surpasses anything I've seen before," commented Bill Hamlin, Vu1 Board Member. "Vu1's lighting technology addresses an immediate consumer need for an affordable, clean, energy efficient light bulb that produces good light quality. It's a particularly timely opportunity because Vu1's R30 ESL™ bulb is a direct replacement for the 65W incandescent flood bulb and will therefore be able to fill the massive void left when the traditional incandescent light bulb is banned in the US in 2012”
http://www.prnewswire.com/news-releases/retail-industry-veteran-bill-hamlin-joins-vu1s-board-of-directors-104487159.html

BTW, it appears that Vu1 may be in discussions with the Home Depot:

The following is from an interview with the CEO Philip Styles: “ We’re in discussion with major retailers here in the United States… We’re currently in discussions with two and I’m trying to line up a third one. It’s the big boys here in the States,” he said, declining to name the potential customers
http://vu1corp.blogspot.com/2011/01/vu1-in-bloomberg-news.html

Regarding delays mentioned in today’s New York Times and mentioned briefly above. In the middle of last year Vu1 announced that they would have a product before the end of the year and that a Northwest Electrical Distributor had placed an order with them. In the fourth quarter of last year they announced that they would deliver product by the end of the year. They shipped product to Seattle Lighting in late December and Seattle Lighting began testing that product in early January (like a typical beta test site for a startup company), Seattle Lighting then told Vu1 that they would like to see some changes to their product including a shorter bulb length (it was approximately 6”). Vu1 gave a public ship date of March 23 for their new shorter bulb but during the testing of that bulb discovered a supplier gave them set of faulty chips so the bulbs were delayed in order to test out the replacement chip. Their testing process is apparently now complete, production should begin any hour now and product should begin shipping next week… Assuming all goes according to the new plan.
http://us.rd.yahoo.com/finance/external/nytimes/SIG=12gtjtq1d/*http%3A//gadgetwise.blogs.nytimes.com/2011/04/04/vu1-light-bulb-delayed-again/?partner=yahoofinance

I’m looking forward to seeing the light (next week?)

Hopefully it shines bright and true for many years.

Robear
P.S. On an amusing note; the lifespan of the bulb does not appear to be set in stone. They have a number of test bulbs that have been running for several years yet you can only expect a bulb to run for as long as your tests indicate it will run. Up until a few days ago the targeted lifespan of the bulb was 10,000 hours; now it is 11,000… I imaging that in another month and a half they might be able to say it lasts up to 12,000 hours… It would be really impressive if someday it matched or exceeded the 25,000 hours listed on most LEDs.

I currently have a foolish level investment in Vu1 and am hoping that they succeed in capturing a slice of the worldwide lighting market but am aware that this is a penny stock and a risky investment so I have not invested more than I can afford to lose. Anyone who decides to invest in Vu1 at this time should look at it as a highly speculative investment and keep the size of their investment to a minimum; in fact, you might want to wait and watch to see if the market accepts their product or gives it a collective thumbs down. Personally I think it should be a winner.

FYI, Vu1 is a penny stock and currently trades at 45 cents