At a time when putting the "nano" prefix in a company's name can spark a speculative frenzy, it's probably an encouraging sign that a publicly traded company with a proven and potentially disruptive technology involving nanotech steers clear of any and all nano labels. Cambridge Display Technology ( OLED), a U.K.-based company whose stock debuted on the Nasdaq last December, is just that company. It's pushing to make its light-emitting polymer technology a fixture in future generations of flat-panel screens used in everything from 40-inch TVs to mobile phones to automobile displays. But scan its Securities and Exchange Commission filings and you won't find any references to nanotechnology. Even its Web site is free of all but a few sparse uses of the term. For all its efforts, though, Cambridge often behaves like a nanotech stock. After topping out at $13 on its first day of trading, the stock has languished along with other nanotech plays, and it's subject to bouts of sudden, irrational volatility. On Tuesday, shares fell more than 10% to $7.60 without any announcement or analyst report to trigger the drop. That kind of volatility isn't unusual for a company involved in emerging technology, especially one laboring to introduce a new standard in a highly competitive field such as electronic displays. The bulk of Cambridge's revenue has come from licensing fees and royalties from its 69 patents (with another 160 patents for which it has applied) to companies such as LG.Philips ( LPL), DuPont ( DD) and Dow Chemical ( DOW). On May 24, Cambridge announced its first joint venture to supply polymer materials to Sumitomo Chemical. "Consumers will be drawn to flatter, more vibrant displays that use less power at reasonable prices," says Jonathan Dorsheimer, an analyst at Adams Harkness, which has an investment banking relationship with the company and a market-perform rating on the stock, primarily for its near-term obstacles. "Cambridge Display is still basically a development-stage company. We believe that to gauge
its progress, investors are primarily looking for news of company and industry milestones."
Unlike companies collecting scattershot nanotech patents in hopes of holding the winning lottery ticket, Cambridge's patents are focused around a technology developed at Cambridge University in the late 1980s. Still, investors in this sector can't help but remember Candescent Technologies, a Silicon Valley company that raised hundreds of millions of dollars over more than a decade to develop a potentially revolutionary new display technology, only to sell off its patents to Canon for roughly $10 million. But in the consumer-driven global economy, the appetite for cheaper, thinner, sharper screens seems bottomless, opening up a chance for a new display technology that can deliver all three. Three years ago, flat-panel display screens overtook the boxy cathode-ray tube monitors and are now expected to account for 70% of the estimated $90 billion display market, according to research firm DisplaySearch. The flat panels are not only sleeker and more stylish, they are lighter, more energy efficient and can be viewed from a wider angle. A similar disruption may occur inside the flat-panel display market, which is now dominated by liquid-crystal displays. New screens that rely on polymer light-emitting devices promise to deliver screens that -- when compared with LCDs -- are sleeker, lighter, more energy efficient and can be viewed from an even wider angle. Plus, they are flexible, which opens them up to a broader range of electronic devices. Unlike most other LED screens, PLEDs rely on polymers, or very long organic molecules that emit light when stimulated electronically. Modifying the structure of the molecules can change the light that's emitted. The layer of polymers, which is less than 100 nanometers thick, is sandwiched between a metallic electrode and a transparent electrode. Displays using organic materials such as PLEDs are expected to generate $5.3 billion in sales in 2008, or about 6% of the flat-panel display market, up from $235 million in 2003, according to DisplaySearch.
Cambridge will have to do battle with Eastman Kodak ( EK) to gain an upper hand in that growing market. Kodak uses a different approach to organic light-emitting diodes, and it has two advantages: Its technology has been on the market longer, and it has partnerships with more manufacturers. But Kodak's technology is based on a complex process involving vacuum deposition that is less flexible and more expensive; Cambridge's technology uses a process similar to ink-jet printing to create screens as large as 40 inches in diameter. Robert Stone, an analyst at SG Cowen & Co., which has an underwriting relationship with Cambridge and a market outperform rating on its stock, says the company has a good shot at delivering a next-generation technology for flat-panel screens. However, he sees several short-term questions, such as how fast its technology will be adopted in the industry, how it can fare against competitors, and what its ability is to scale up production in a way to give it clear edge. This may not be the overnight success story that many investors are hoping for in nanotech-related products. In fact, it's more typical of the future of nanotech, which depends on as much uncertainty as promise. But with 80 scientists toiling on its technology, Cambridge has as good a shot as any company of making it.