Stop reading this article for a moment and look at a point on the wall. How much of what you see is represented in high resolution? The Verge took a break from politics and wrote an excellent article on how the human eye sees things. Only about 0.1% of what you see in your field of view is represented in high resolution. The rest is blurry, but he never realizes it. It is because your eye contracts very quickly to represent a scene and your brain fills it all in so that it looks like everything is high resolution.
Distilled rendering is a term used to describe a virtual reality rendering method that only shows high resolution in 0.1% of your field of view that can see it. Think about how much bandwidth you can save by showing only someone high resolution where your gaze rests. To achieve a much desired representation, you can track the movements of the eye with incredible speed and accuracy. This is the kind of thing a Swedish company called Tobii (TOBII.ST) does.
About Tobii Stock
The last time we examined Tobii’s actions was in late 2018, when we wrote The world leader in eye tracking technology. Since then, Tobii has doubled in size to reach a current market limit around, a return of + 174% against a return of the Nasdaq from + 142% during the same period of time. As the company approaches a $ 1 billion market cap, it appears on our radar as stocks we might consider investing in (we only invest in companies with a market cap of $ 1 billion or more). The problem is that next year’s Tobii will look very different from today’s Tobii.
Tobii Stock Vs. Tobii Dynavox Stock
The three main business segments in which Tobii operates are:
- Tobii Dynavox (58% of income): The world’s leading provider of products that allows users with disabilities to speak and communicate effectively with 40% market share.
- Tobii Pro (28% of income) – World’s leading provider of eye monitoring solutions to understand human behavior with a market share of 60%
- Tobii Tech (14% of income) – Provides eye tracking technology for integration into consumer electronics and other high volume products
Early next year, Tobii Dynavox will become an independent company. The other two divisions, Tobii Pro and Tobii Tech, will become a single company, Tobii, which will be able to choose to segment its revenue in several ways. So why did the company choose to split its business? It may have to do with the slow growth of Tobii Dynavox.
Tobii Dynavox
Offering products that allow disabled users to speak and communicate effectively is a fantastic thing. It is also a total aaddressable marc (TAM) which is limited by the number of people with disabilities who can afford this product or by the number of organizations that have a budget to purchase these solutions. Until he played The Rona, Tobii Dynavox was enjoying steady growth. (The three income charts below are in Swedish Kroner, so divide them by 8 to get about USD approximately.)
The fall in revenue is due to the pandemic and a disruption in the supply chain, which caused revenues of 70 million sequential crowns to pass in the third quarter of 2121 (therefore, the next quarter should be good). We will not spend much time in this segment, as it will soon be marketed separately and does not reflect the type of disruptive technology use cases we are looking for (which is part of the reason it spread).
Tobii Pro
The eyes are called the windows of the soul for a good reason. Seeing someone’s gaze tells you a lot about what they are thinking. Therefore, researchers use eye monitoring solutions to measure the human response to all kinds of stimuli. Tobii provides the tools to make this possible, such as the recently launched mobile eye tracking solution or the portable eye tracking solution encapsulated in a pair of glasses.
Tobii Pro has a global market share of over 60% and its customers include more than 3,500 companies and 2,500 research institutions with more than 2,500 research articles referencing Tobii Pro solutions. As expected, revenue has been hit by the pandemic, and Tobii has mentioned “a temporary budget freeze for China’s universities.”
This brings us to the latest segment that will join Tobii Pro to form Tobii 2.0.
Tobi Tech
Tobii believes that most computers, VR and AR headsets, cars, and a host of other products will increasingly be equipped with easy-to-use sensor technologies, such as eye tracking. Tobii estimates that the total long-term market could amount to a billion units with annual eye monitoring, which is expected to take place gradually over several years. The competition consists mainly of small players specializing in a particular market segment, and Tobii’s growing intellectual property portfolio will help them maintain their leadership position.
The automotive thesis
About a month ago, Tobii announced its entry into the mass market automotive integrations with the launch of the driver control system, Tobii DMS, and the acquisition of Phasya, a Belgian startup that offers solutions to detect drowsiness and measure eye movements. Tobii will pay up to $ 4.75 million for Phasya, half of which depends on the performance of the next five years. According to a Silicon Canals article, which talks about how Phasya uses AI to process “biometric signals such as eye tracking or heart rate to control cognitive states, including drowsiness, cognitive load, and distraction.” The technology can also be used in other verticals, such as virtual reality.
The thesis of virtual reality
At the 2018 Oculus 5 virtual reality conference, Anton Kaplanyan, Facebook’s lead researcher at the time, spoke about what the most coveted representation would look like in four years time along with eye tracking. Sounds good. Today you can buy the HTC Vive Pro Eye virtual reality system with Tobii eye tracking technology for just $ 1,399.
Tobii technology can also be found on other virtual reality hardware devices, including the HP Reverb G2 and Pico Neo 2 Eye virtual reality headsets, priced at $ 629 and $ 699 respectively. Having your technology in high-end headphones is great nonetheless, but how far is the TAM for a $ 600 VR headset? Virtual reality has not gone as expected, and it remains to be seen whether the emergence of the rendering feature is what virtual reality needs to reach Gartner’s “productivity plan.” Meanwhile, Tobii Tech’s revenue appears to be the least affected by the pandemic.
Do you need to buy Tobii shares?
When the derivation occurs and Tobii trades in two different shares: Tobii shares and Tobii Dynavox shares, each entity will have its own market capitalization. Theoretically, this should “unlock value” in the new Tobii, where higher growth is expected to impose a higher valuation. Whatever that valuation is, it’s likely to be significantly lower than the company’s current market capitalization of $ 840 million, which means it now has to grow a lot more before it achieves a market capitalization of $ 1 billion. dollars. So we’re on the sidelines until that happens. This will also give us a chance to see what Tobii looks like after the corporate event.
While researching Tobii, we came across another Swedish pure gaming eye tracking company called Smart Eye (SEYE.ST). It’s a company that gets most of its revenue from automotive eye tracking apps, even though they just spent $ 74 million on acquiring Affectiva. One can’t help but think that a corporate event could feature on Smart Eye and Tobib cards, but in the meantime, we’ll try to cover SmartEye in an upcoming article. A good number of companies are developing driver control solutions and market research companies are only setting the TAM at a few million dollars in five years.
Conclusion
Whenever a series of corporate events come together, such as what’s going on with Tobii, it’s always best to wait for the dust to settle and see what we have left. Tobii’s approach to automotive is baffling because there are many other competitors that offer driver control solutions. The progress they are making in enabling the manufacture of VR hardware with eye tracking is great, but how many units will they sell? We’ll take a look at Tobii next year when the company has successfully split.
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