Best stock to invest in – Can Rubicon Hire Bring Shine Back To Sapphire?



Best stock to invest in –

by Debra Fiakas CFA

On Friday Rubicon
Technology, Inc.
(RBCN: 
Nasdaq) announced the appointment of a new chief operating officer
to manage the company’s sapphire materials production.  Rubicon
is a producer of materials used in electronics components, including
the company’s specialty, monocrystalline sapphire
materials.  

Rubicon chose a seasoned operator for the COO post, which now
encompasses functions previously carried about by managers in two
different positions.  The new hire, Hany Tamim, was previously
with SunEdison (SUNE: 
Nasdaq), the developer and producer of solar cells and
modules.  He has experience in managing crystal growth and
wafer production, two steps Rubicon needs to get right to keep costs
low.   By elevating these job functions to a position in
the corporate suite, Rubicon seems to be signaling a new view on the
importance of operational success to the company’s future.

Rubicon needs to find its groove, so to speak.  The company has
experienced a decline in fortunes over the last three and a half
years due to what it calls a slump in the market for materials
intended for electronics.  Rubicon’s products include sapphire
core in two to six inch diameter cylinders, patterned sapphire
wafers, and sapphire shapes in various sizes.  The sapphire
cores are sliced for use in Light Emitting Diodes (LED) or as lens
covers in mobile devices.   Patterned sapphire wafers are
also used in LED applications for better efficiency in extracting
light.  There are additional uses for the company’s sapphire
components in electronics destined for the communications,
aerospace, and other end markets.

Business for Rubicon peaked in 2011, when sales totaled $134.0
million.  That was also the last year the company reported a
profit.  Since then sales have slumped, declining to $33.0
million in the twelve months ending June 2015, and resulting in a
net loss of $40.0 million.  Operations only required $21.4
million in cash to keep the business going during the last twelve
months.  Even though the company had $36.0 million in cash on
its balance sheet at the end of June 2015, and could potentially
support operations for another year, it is understandable why
leadership at Rubicon would give Mr. Tamim a shoutout. 
‘Help!  We need to cut costs so we can survive until the world
reawakens to the merits of sapphire materials.’

Rubicon has only tangentially benefited from the exit of GT Advanced Technologies (GTATQ: 
OTC/PK) from the sapphire materials sector, following the breakdown
of GT’s relationship with Apple,
Inc.
  (APPL:  Nasdaq).  Apple and GT have
differing stories on who was at fault in the demise of Apple’s plans
to use sapphire glass on its iWatch and iPhones.  The iWatch
eventually debuted with sapphire glass components, but iPhone 6 has
been produced with conventional glass alternatives.  GT
Advanced Technologies declared bankruptcy to get away from the toxic
sapphire glass production alliance it had with Apple.


No one has stepped up to take GT’s mission to bring sapphire any
closer to handheld electronic devices than the optical lens
components.  There is no surprise there.  In the end it
seemed more a passing dream by Apple engineers and designers, who
were not willing to accept the limitations of sapphire crystal
growth and the high costs associated with new product development.

The benefit Rubicon may have enjoyed from GT’s exit is not in terms
of new sales.   GT’s former vice president in charge of
crystal growth systems development has joined Rubicon as that
company’s chief technology officer.  So besides Mr. Tamim,
Rubicon has a CTO who is also highly sensitive to cost issues in
sapphire crystal manufacturing.

Rubicon appears to have its back to the wall with continued losses
and dwindling cash resources.  We have kept the company in the
Materials Group of our Mothers of Invention Index of companies that
are contributing to energy efficiency because we believe sapphire
materials will have a place in 21st century advanced electronics
picture.  

Debra Fiakas is the Managing Director of Crystal Equity
Research
, an alternative
research resource on small capitalization companies in selected
industries.
 

Neither the author of the Small Cap
Strategist
web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
Crystal Equity Research has a Hold
recommendation on GTATQ.
 

– Best stock to invest in

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