Let me tell you about Frank Frankovsky.
As the hardware chief at Facebook Inc. (Nasdaq: FB), Frankovsky’s team invented a way to use Blu-ray discs to save the oodles of photos that we all upload on that site every day. While Facebook still keeps its frequently accessed data on hard or flash drives, its deeper archives now reside on thousands of Blu-rays.
Frankovsky’s system – which involves robotic arms, thousands of discs, and hundreds of racks – turned out to be tremendously successful for the social-media giant. Facebook says the system cut costs by 50% and energy use by 80% compared to the hard disk drive system it was using.
So it’s no surprise that Frankovsky broke off from his “corporate overlords” back in 2014, opened up his own shop – Optical Archive Inc. – and started selling his system to other companies with Big Data storage needs.
His beard may be a bit flamboyant – but he and Optical Archive operated in what I like to call “stealth mode”… quiet and under the radar.
That company was also operating in stealth mode at the time. After years of decline, it needed to stay quiet in order to rebuild.
In fact, around that time, it made three big stealth moves that have now put it back on the map.
It’s no longer in stealth mode… it’s absolutely crushing the market… and it’s just getting restarted.
Today I’ll tell you about the three big moves it made.
And I’ll show you how you can join in – and ride along as reclaims its place as one of the world’s preeminent technology companies.
Take a look…
Big Invention – Bigger Market
Here’s why Frankovsky’s innovation is so important.
He basically came up with a system that uses high-definition Blu-ray discs to replace hard drives or legacy tape systems.
His optical image discs can hold more than 300 gigabytes of data. That’s roughly six times more than you have on a standard Blu-ray disc at home.
Moreover, Optical Archive created a storage system that can pack one petabyte of data (that’s 1 million GB) into a single cabinet filled with 10,000 Blu-ray discs.
This is a huge market.
Storage equipment, according to the analysts at IDC, accounts for 45% of the Big Data market, which they say will hit $17 billion by the end of this year. Moreover, within Big Data, infrastructure technology (including storage systems) ranks as the sector’s biggest and fastest growing segment.
So it’s no wonder that Sony Corp. (NYSE ADR: SNE), the technology conglomerate best known for its consumer electronics, pounced on Optical Archive back in May 2015.
Here’s the thing. The purchase was a key part of the Japanese giant’s “One Sony” restructuring plan in which it’s shedding low-margin units to focus instead on growth markets.
More than any sales it will get from this system, the purchase was heavily symbolic. It underscores just how serious Sony was about putting its troubled past behind it and focusing instead on cutting-edge tech once again.
And last week, we learned that Sony’s restructuring plan is doing much better than anyone on Wall Street would have believed possible only a year ago…
“Unexpected”… a “Blowout”
On Oct. 31, Sony delivered a terrific earnings report – and raised guidance. Now it says fiscal 2017 earnings will likely be the best in its 71-year history.
And it caught Wall Street completely by surprise.
Atul Goyal, an analyst at Jefferies, summed it up best. He told The Wall Street Journal that the revised earnings forecast was “unexpected” and a “blowout.”
Sony CEO Kazuo Hirai has done an outstanding job executing his turnaround plan. By shifting to new growth fields, he’s made all of Sony’s electronics businesses profitable – including the TV division that suffered a decade of losses.
I recently appeared on CNBC World to discuss Sony’s impressive results. And today I’m following that up to talk with you about the two other stealth moves the firm made in creating what we can now safely call “The New Sony.”
Let’s start off with Sony’s big jump into smartphones…
What Most Investors Don’t Know
The new iPhone X from Apple Inc. (Nasdaq: AAPL) looks to be a hit after advance orders sold out in the blink of an eye.
And Sony is behind two of the phone’s key features.
It developed the iPhone X’s 12-megapixel camera that provides nearly professional-quality photos. And Sony also makes the state-of-the-art 3D sensors that power the X’s facial-recognition system.
In other words, Sony’s 2015 stealth-mode decision to invest $1 billion in its image sensor unit to meet growing demand is providing a big payoff.
Sony ranks as is the world’s largest maker of complementary metal-oxide-semiconductor (CMOS) sensors. Besides smartphones, CMOS sensors are also used in robotics and connected cars
The latter is Sony’s other stealth zone move.
In 2015, the firm invested less than $1 million for a 2% stake in ZMP, a Japanese startup developing robotic cars. By combining the robotics technology of ZMP and its own image sensors, Sony is going to play a major role in the rollout of self-driving cars.
Sony’s game plan here is simple. It intends to become the market leader in image sensors for autonomous cars by the time these vehicles hit the mainstream, possibly as early as 2020.
That could give it a stranglehold on components critical to this field. It’s simple. You can’t have self-driving cars without onboard cameras, and those devices need image sensors.
IHS is projecting that by 2020 global sales of automotive cameras will increase more than threefold to 102 million units. And this is a high-margin business. Car cameras are projected to sell for four to five times as much as those that Sony sells for smartphones.
In other words, the New Sony is a very different company than it was just two years ago as it transforms itself from a broad consumer electronics firm into a high-tech powerhouse.
And don’t forget videogames…
Same as It Ever Was – but Even Better
Despite the rise of mobile gaming – that is, videogames on your smartphone — Sony’s biggest hit remains the PlayStation 4 (PS4).
This console features advanced graphics processing and a custom-made, high-speed processor that deliver hyper-realistic scenes referred to as “immersive.”
Sony says it expects to sell 19 million PS4s during the current fiscal year, raising forecasts by 1 million units, a 5.5% increase from its former projections.
When Sony announced its stunning fiscal earnings forecast last week, shares rallied nearly 12% in a single session. After such a big move, you might worry the stock will get hit on profit taking.
Well, check this out…
Sony piled on additional gains over the next two days. That’s a flashing, beeping, blinking sign of bullish momentum.
Over the past year, Sony has crushed the overall market. The S&P 500 is up 15% so far this year. By contrast, Sony has gained 60%, or four times that of the overall market.
Now that its turnaround plans are hitting their stride, Sony looks to be a great stock you can count on for the long haul. One you can use to get on the road to wealth.
And you don’t have to make any stealth moves to get there. Just buy the stock – and accumulate more when it dips.
Have a great weekend.
See you next week.