Barron's ArticleRelated Terms:
The Strange Case of ParkerVision
MONDAY, DECEMBER 3, 2007
By BILL ALPERT
PROMISING THE BIGGEST BREAKTHROUGH in wire-less since Marconi, Jeffrey L. Parker's company ParkerVision has enjoyed the backing of sharp investors like Leucadia National and a member of the Barron's Roundtable. It has also lost $160 million over 17 years without delivering a successful product. So the tiny Jacksonville, Fla.-based firm has attracted generations of short-sellers. The shares (ticker: PRKR) have bounced plenty, between 3 and 56, and were recently going for 10 bucks each.
The company's fruitless persistence has fed a strange online debate. A bear with the ominous screen name "cassandra-oracle" runs a Website called PV Notes that meticulously pulls the wings off ParkerVision's claims of a revolutionary radio amplifier technology. PV Notes even pays to show its link (www.pvnotes.com) when you Google the word "ParkerVision." Defending ParkerVision in hundreds of postings, meanwhile, is a bull named "urspond" who seems to know a lot about the involvement of Leucadia (LUK), a financial firm known more for value investing than tech speculation.
Scientist entrepreneurs Barb Paldus and Mike Farnwald challenge ParkerVision's claims.
Through Internet and legal records, Barron's found "urspond" near Park City, Utah. He's David T. Cumming, the 63-year-old younger brother of Leucadia's chief executive, Ian Cumming. Leucadia has sold its ParkerVision shares, but David Cumming still owns the stock. He thinks ParkerVision has an interesting technology and believes the company is negotiating with major wireless manufacturers. Cumming modestly admits that he's no engineer.
Cassandra -- Oracle is an engineer. She's the 37-year-old Stanford-trained Barb Paldus, who created PV Notes with her 53-year-old husband, Mike Farmwald -- a well-known Silicon Valley inventor, entrepreneur and venture investor who founded Rambus (RMBS), Matrix Semiconductor and other companies. They have the know how, industry contacts and financial resources to test claims like ParkerVision's.
"Once in a while, you stumble across a company with technical claims so outrageously false or stupid," says Farmwald, "that you feel you have to do something about it." What he's done is short the stock, convinced that ParkerVision is worthless. His conviction appears well-founded. He's had the world's leading experts on radio power amps examine ParkerVision's patents. He's talked to the decision makers at companies where ParkerVision has pitched its technology. No one has seen credible evidence that it works. "For these guys," reports Farmwald, "ParkerVision is just a bad joke that won't go away."
ParkerVision's recently-announced collaboration with ITT (ITT) for military radios has already run aground, although ParkerVision's September-quarter report still predicts $25 million in payments from ITT.
But don't begrudge lay investors like Cumming for believing Jeff Parker. "He is in many ways a perfect con man," says Farmwald of the 51-year-old ParkerVision chief executive. "He sounds very plausible, especially to investors...But if you are actually technical, the words he's saying are complete b.s."
Barron's was told that Jeff Parker was too busy to talk, but he had time to write a two-page letter saying that ParkerVision's technologies "should not be confused with or compared to" traditional radio devices. The company has one patent on its latest wireless technology and expects to get more.
ParkerVision was making remote-controlled video cameras when it came public in 1993 through Whale Securities, an underwriter that shut down after paying millions in fines and arbitration awards in connection with its securities dealings. Whale wasn't the only fishy financier around ParkerVision. After its IPO, ParkerVision made $28 million in offshore stock sales through the Banca del Gottardo, a subsidiary of Swiss Life Holding (SLHN.Switzerland). In 2003, the Swiss bank belatedly reported to the SEC that it had held an interest in nearly 23% of ParkerVision's stock since 1996.
The Banca del Gottardo never disclosed whose ParkerVision shares it held. Barron's has learned that both Jeffrey Parker and the company's technology chief, David Sorrells, are long-time clients of the Lugano institution's private-banking division. In his letter, Parker denies that they've ever had private accounts at the Swiss bank.
ParkerVision's camera sales peaked at $15 million in 2000 and then plunged without ever producing a profit. Parker later sold the video business for $14 million. The company has had no meaningful revenue since.
But in 1997, Jeff Parker was already pursuing a new idea. He and Sorrells claimed a major radio breakthrough they called direct-to-data, or "d2d." It would extend the range of wireless devices, be they garage-door openers or wireless networks, and shrink the receiver onto an inexpensive chip.
David Cumming says he heard about ParkerVision through Parker's patent lawyer, Robert G. Sterne. Cumming was a director at CNA Surety, but he'd previously spent 15 years working at his brother Ian's Salt Lake City-based Leucadia. In 2000, after some due diligence, Cumming convinced the value investors at Leucadia to join with a unit of Tyco International (TYC) in buying 8% of ParkerVision for about $30 million, at 30 bucks a share. By October of that year, the stock hit $56, putting ParkerVision's value at $750 million.
As 2001 began, investor Oscar Schafer told the Barron's Roundtable gathering that "in the not-too distant future" ParkerVision would have the Holy Grail of the wireless industry-a single-chip radio. ParkerVision would become profitable in 2001, said Schafer, and eventually earn $5-$10 a share.
Parker kept saying that a major d2d design win was just months away. But deals with IBM, Symbol Technologies and PrairieComm fell apart. "It was a laboratory demonstration," recalls John Diehl, who was PrairieComm's chief executive at the time. "Beyond that, there wasn't much more."
Unable to convince any wireless manufacturer of d2d's worth, ParkerVision tried selling its own Wi-Fi cards with the technology. After feeble sales, the company wrote off its d2d products in 2005. Its shares sank below four bucks and its valuation to $75 million.
"Parker has got a history of being too optimistic," says David Cumming, good-naturedly. "Things haven't developed as well or as quickly as they thought they would. But I don't think Parker has a history of saying things that aren't true."
Even as d2d was proving a bust, Jeff Parker had a new angle. He called it d2p, for direct-to-power because it applied ParkerVision's ideas to the power amplifier that boosts the wireless signal at the antenna. Companies like Texas Instruments (TXN) and Atheros Communications (ATHR) have products they call single-chip radios, but in truth, these still need a separate power amp from the likes of RF Micro Devices (RFMD), Skyworks Solutions (SWKS) or Anadigics (ANAD). Made from exotic semiconductor materials like gallium arsenide, these power amplifiers can't be consolidated on the inexpensive silicon used to make the rest of the radio. Parker and Sorrells bragged that d2p would change that. They made the bumblebee their mascot because narrow-minded scientists said that the bee shouldn't be able to fly.
As it lost money at the rate of more than $15 million a year, ParkerVision survived by raising cash in annual private placements of its stock. A few years back, someone asked Mike Farmwald if he wanted to participate.
Farmwald had been a star of Stanford's computer-science department. After building supercomputers for the Lawrence Livermore National Lab, he'd become one of Silicon Valley's more successful entrepreneurs. He'd co-founded the memory-chip interface company Rambus (where he's still a director). He'd sold his graphics-chip company Chromatic Research to ATI Technologies, his networking outfit Epigram to Broadcom and his 3D memory chip maker Matrix Semiconductor to SanDisk.
The Bottom Line:
ParkerVision finally has run up against investors with the technical savvy to measure the stock's worth: probably zero.Farmwald's wife Barb Paldus was a Stanford engineer who founded the laser company Picarro and now runs the software company Finesse Solutions. Together, they've run Skymoon Ventures and backed a half-dozen startups with Benchmark Capital.
But when Farmwald studied ParkerVision, it reminded him of The Panda Project, a firm that had vowed to revolutionize PCs in the 1990s. Instead of backing Panda, Farmwald had shorted it. The head of Panda had gone apoplectic when Farmwald publicly questioned Panda's technology.
Farmwald decided to do the same with ParkerVision, upset that bogus promotions diverted capital from bona fide ventures. He shorted the stock and created the PV Notes Website with Paldus, to explain why ParkerVision's technology wasn't viable. He's gathered evidence from those who've evaluated ParkerVision's technology at RF Micro Devices, Skyworks, Anadigics, STMicroelectronics (STM), Freescale and Samsung. Although ParkerVision hasn't told investors, ITT has pulled its engineers off a project Parker trumpeted in May. "It's been looked at by so many people at this point," says Farmwald. "They all come away thinking it just doesn't work. It's just gibberish."