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Ouster, Inc. (OUST)


Dietl
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    Comparison of lidar revenues. OUST looks undervalued, where Velodyne's technology as legacy and internal problems are behind their valuation. 

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    Anyone notice TAO Capital Partners investment in OUST w/ 6.6% of company. 13G filed 2-14-22. Pritzker family office in SF and OUST big chunk of portfolio(17%). 

    https://fintel.io/i/tao-capital-management-lp

    https://pitchbook.com/profiles/investor/95533-93#analytics

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    I actually think that the price revenue ratio for Ouster would be in the range of 11 to 12 instead of the current 7.9. However, using the forecast for 2025 estimate of $1B, reduced by 37% from $1.5B versus a reduction of 21% in 2022, the current ratio would offer Ouster value of $7.9B or $46 per share. Of course, there are many questions. One would be is possible to build revenue from 2022 in three years to that amount? Second, is the market really going to leave it at 7.9? I am using Cognex as an example with around an 11.44 ratio having also $1B revenue currently. The company is known in the sector as a machine vision company. Their 10-year CAGR was 14%, last year OUST predicted theirs to be 143% average CAGR, which would actually produce better PS. So increase to 11.1 right now would warrant $5.51 and in 2025 a $64 per share. The key is the revenue, and the likelihood of winning revenue is the technology win over competition, not per se in automotive, where 2025 may see others succeed to have series programs. Automotive wins beyond 2025 will be more important when technology win materializes for the solid sensor. If Gort is is right, and I hope he is, Ouster's dominance in a spinning sensor, will drive that first $1B revenue, considering this is only 3 years away, the ratio standing as is, and the current price is a fantastic opportunity to win 12 times return or 17 times return if dynamic changes.

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    Claim against Ouster 

    Claim 1 of the ’558 patent reads as follows:
    1. A lidar-based 3-D point cloud system comprising:
    a support structure;
    a plurality of laser emitters supported by the support structure;
    a plurality of avalanche photodiode detectors supported by the support
    structure; and
    a rotary component configured to rotate the plurality of laser emitters and
    the plurality of avalanche photodiode detectors at a speed of at least 200
    RPM.

    Velodyne argument 

    40. The Accused Products (e.g., Ouster’s OS0, OS1, and OS2 sensors) include, literally
    or under the doctrine of equivalents, a support structure. For example, Ouster’s OS0-64 device
    includes a support structure with a mounting base and an enclosure, as well as support structures
    internal to the device. The foregoing allegation has evidentiary support and/or will likely have
    evidentiary support after a reasonable opportunity for further investigation or discovery.
    41. The Accused Products (e.g., Ouster’s OS0, OS1, and OS2 sensors) further include,
    literally or under the doctrine of equivalents, a plurality of laser emitters supported by the support
    structure. For example, Ouster admits that a key component of the OS0 devices is a high efficiency
    laser array, which integrates all of our lasers onto a single semiconductor chip.”

     

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    The Accused Products (e.g., Ouster’s OS0, OS1, and OS2 sensors) also include,
    literally or under the doctrine of equivalents, a plurality of avalanche photodiode detectors
    supported by the support structure
    . For example, Ouster’s OS0-64 device includes a single photon
    avalanche diode (“SPAD”) array
    (plurality of avalanche photodiode detectors)

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    This is Velodyne plurality of emitters and detectors 

    Velodyne Patent 7,969,558

    image.png

    Patent Velodyne 8,767,190image.pngimage.png

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    Dietl...

    You can get Pacer docs for 20 cents a page... just have to register...

    Oust got extension to Aug 7 to respond.

    https://ecf.cand.uscourts.gov/cgi-bin/DktRpt.pl?396837

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    27 minutes ago, jakeman said:

    Dietl...

    You can get Pacer docs for 20 cents a page... just have to register...

    Oust got extension to Aug 7 to respond.

    https://ecf.cand.uscourts.gov/cgi-bin/DktRpt.pl?396837

    Thank you Was the Quanergy case included in theirs?

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    I believe one of the cases was reassigned to a judge that worked the previous case.

    My guess is this will take time to sort out. Many factors including public welfare. Hall's comments on lidar making the world safer comes to mind when reaching licensing Hesai deal. VLDR moved manuf to Thailand so domestic industry argument is weakened imo and OUST is not some foreign company dumping cheap knockoffs. Did OUST reverse engineer VLDR's products? Seems like Quanergy and Hesai spinning lidar are much like VLDR's... the patent appears to be broad but the infringement level seems "different" imo unskilled opinion. Oust attorney seems pretty strong... Will Hesai and Robosense settlements come into play w royaltys and lump sum... courts have used previous licensing deals in establishing royalty rates...  Hesai settled just before planned IPO so was under the gun to settle. Will VLDR risk losing due to different design or settle? Oust has the margins and pricing power if they have to pay royalty and only applies to US  $30 mil in sales 2019-2021... 

    And VLDR hired Dr. Gupta from Sense Photonics as vp of eng... seems like a countersuit in the making (stealing trade secrets etc) and both sides don't need additional legal battles...

    I think there is incentives for both parties to work this out. It will be interesting to see the calculation for profits "lost" by VLDR when their cost to manufacture are so high... 

    Factors in settlements...

    https://www.ropesgray.com/en/newsroom/alerts/2013/07/IP-Attorneys-Prov-de-Insight-on-Settlement-License-Agreements-and-Negotiations

    https://www.crowell.com/files/20210517-Early-Focus-On-Damages-Can-Streamline-Patent-Litigation.pdf

    https://www.cooley.com/people/matthew-brigham

    https://www.academia.edu/35552270/REASONABLE_ROYALTIES_IN_PATENT_LITIGATION_METHODS_EVIDENCE_AND_EXPERTS

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    as for comment regarding counter litigation, seems like common practice to go on the offensive so no knowledge of any wrongdoing or allegation, just the way the legal system works these days... 

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    2 hours ago, jakeman said:

    as for comment regarding counter litigation, seems like common practice to go on the offensive so no knowledge of any wrongdoing or allegation, just the way the legal system works these days... 

    Have you had a chance to read actual order?

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    yes... did not download... was a request to transfer one case to judge that just worked on case...quanergy case.... looked like just admin stuff... sign up for that pacer link.... costs me 30 cents

    here's a good read... this will get worked out... 

    https://www.dinsmore.com/content/uploads/2018/11/2018_02_Remedies_01_Patents_A_Royalty_Damages.pdf

    Read the footnotes in VLDR's 2020 annual report. In a nutshell they reported gross margins of positive 26%... a negative 1% from product GM and big positive coming from settlement fees.  Likewise in 2019, most of gross margin came from settlement fees. The fees were from two Asian companies ($30 mil total) and the fee drops off to about $3 mil a year between the two. VLDR needs a settlement as much as OUST... now the dance of what it's worth. In a way OUST let the others do the blocking and tackling (and legal fees) and the settlements prob reflected legal fees...

    So it comes down to a number and OUST has the pricing power and it will be a level field on royalties... 

    And the GOV is not going to shut OUST down ..... David Hall's words on Lidar saving lives will help, particularly with another Bay area home team. ITC would have a hearing on public interest before any import ban .... And the court proceedings will be free advertising on why OUST is better and how badly VLDR managed their biz.... Not a good path for VLDR.   Like 95% of infringement cases get settled. Just expect a lot of sword waving in the meantime.

     

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    In my head I thought Ouster is not impacted and being unique with a digital lidar. Just feels not complete and harmful so early in the journey. We will see what happens. 

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    2 hours ago, jakeman said:

    yes... did not download... was a request to transfer one case to judge that just worked on case...quanergy case.... looked like just admin stuff... sign up for that pacer link.... costs me 30 cents

    here's a good read... this will get worked out... 

    https://www.dinsmore.com/content/uploads/2018/11/2018_02_Remedies_01_Patents_A_Royalty_Damages.pdf

    Read the footnotes in VLDR's 2020 annual report. In a nutshell they reported gross margins of positive 26%... a negative 1% from product GM and big positive coming from settlement fees.  Likewise in 2019, most of gross margin came from settlement fees. The fees were from two Asian companies ($30 mil total) and the fee drops off to about $3 mil a year between the two. VLDR needs a settlement as much as OUST... now the dance of what it's worth. In a way OUST let the others do the blocking and tackling (and legal fees) and the settlements prob reflected legal fees...

    So it comes down to a number and OUST has the pricing power and it will be a level field on royalties... 

    And the GOV is not going to shut OUST down ..... David Hall's words on Lidar saving lives will help, particularly with another Bay area home team. ITC would have a hearing on public interest before any import ban .... And the court proceedings will be free advertising on why OUST is better and how badly VLDR managed their biz.... Not a good path for VLDR.   Like 95% of infringement cases get settled. Just expect a lot of sword waving in the meantime.

     

    was it docket 15, for 5:22-cv-03490?

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    15, for 5:22-cv-03490,

    Order by Beth Labson Freeman, 

    "The parties have filed a stipulation to extend Defendant’s time to respond to the complaint. ECF No. 14. The stipulation is APPROVED.
    The Court also notes that Plaintiff has filed an administrative motion to consider whether this case should be related to a case pending before Judge Edward J. Davila. See ECF No. 10 (citing Quanergy Sys., Inc. v. Velodyne Lidar USA, Inc., No. 16-cv-5251 (N.D. Cal., filed Sep. 13, 2016)). As the June 24, 2022 filing error indicates, the Civil Local Rules require that Plaintiff file the administration motion in the low-numbered case, not this case. See Civ. L.R. 3-12(b). It appears that Plaintiff has not filed the administrative motion in the low-numbered case. Accordingly, the administrative motion filed in this case is TERMINATED WITHOUT PREJUDICE to refiling in the low-numbered case, if Defendant still seeks relation of the cases.
    IT IS SO ORDERED.
    Dated: June 28, 2022"

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    VLDR's 1st qtr 22 CC transcripts...

    https://www.fool.com/earnings/call-transcripts/2022/05/06/velodyne-lidar-inc-vldr-q1-2022-earnings-call-tran/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article

    Key takeaways...

    "our ability to supply this demand has been constrained by shortages of critical semiconductor components, particularly field programmable gate arrays or FPGAs"..... (note FPGA's are estimated to have 52 week lead times per article)

    https://www.jabil.com/blog/global-chip-shortages.html

    We have been able to procure small quantities of the scarce components, albeit at elevated cost, which we have been able to partially recover through price increases. Additionally, we have been able to secure limited quantities of similar components as substitutes. This requires some redesign and requalification of our hardware and firmware, which we expect to be completed in the third quarter..... 

    .... And even if we burn $40 million a quarter, we still got six quarters to seven quarters worth of cash runway.... (how many long term contracts can one sign over the next few q's with limited supply right now, forcing higher prices on customers and having to redesign and test and certify replacement products and with a company facing financial difficulty? Sounds like a way for existing customers to get out of contracts IMO)

    and later on...

    And that's why, that second pillar of our strategy is to develop a very aggressively priced new architecture that we can sell for $200 or $300. So that is the long term secular trend to bring down the pricing. However, that will not start to happen until we have those, those new products introduced which will take, anywhere from 18 months to two years.... (good luck with that timeline)

    (I'd say the trend to bring prices down by having fewer parts has already happened)

    so it will take them two yrs to redesign products and they will have less than two years of cash runway... 

    I doubt they can make much of a profit (if any) over the next 12 months with higher costs.... and next three qtrs will probably be brutal...

    They no longer disclose long term contract values because conversion rates are down...

    QNGY lost the patent case... not OUST for the time being so the case has to be adjudicated which will take time..... and time does not appear to be VLDR's friend at the moment...

    OUST sold $30 mil in US product 2019 thru 2021 at prob 27% gross margin so ballpark $8.1 mil profit off product sales... if courts award damages my guess it will be a portion of that plus some and royalty going forward... not a deal breaker...

    And does one want to go to court to highlight how badly a company has been managed?

    In the meantime competitors have higher costs with more parts and it's a level field with royalties

    Not a bad setup for OUST looking forward imo... 

     

     

     

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    One more thought regarding situation. If anyone has been in the corporate world, lawsuits usually bring counter lawsuits...  VLDR hired Gupta right after his stint at Sense Photonics... any corporate lawyer worth their salt would be thinking of countersuing ... trade secrets, injunctions etc... yady yada... not fun stuff but part of the game in today's legal world... and that litigation would take time to sort out... 

    IMO VLDR survival is predicated on their ability to have the investment world think that another "reboot" is possible despite having gone thru 3 CEO's and products with negative gross margins and not improving anytime soon  ... IMO they probably don't want that potential comeback story to get derailed because they don't have time to develop another one....

    Oust got an extension to reply at around same time q2 earnings come out second week in August...

    Get the popcorn ready...

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