From a consumer perspective, the wearable technology industry has, over the last five years, seemed to stagnate. Sure, people are using fitness trackers to monitor daily activity and smart watches are slowly gaining traction at the fringe of the technologically savvy consumer group, but the industry remains a long way off forecasts put in place as little as a few years ago.
And it is not just about perception β the numbers support the above statements. Apple Inc.'s (AAPL, Financial) Apple Watch sales are in decline having never really peaked, Fitbit Inc.'s (FIT, Financial) product portfolio is going the same way and Jawbone is pretty much dead in the water.
This is not to say the wearables space is finished β just that, for whatever reason, consumers are not buying the hardware as quickly as, or in the volume that, analysts expected they might.
Perhaps consumers just are not ready for this technology right now. In five or 10 years, things might be different.
For many investors, this realization might be something of a disappointment. This was, after all, hailed as a potentially lucrative space and there is plenty of speculative investor capital tied up in it right now. What many of those behind this capital have yet to realize, however, is there is a side of this space that is taking off and expanding faster than analysts initially expected.
Further, speculative capital is being pulled out of the consumer side of the space and reallocated toward said side of the industry.
The subsector in question is commercial and industrial wearables. Analysts expect the industrial augmented reality (AR) market (with AR here being the concept that underpins Smart Glasses, a major component of the wearable technology space) to grow to $100 billion in annual sales by 2024. A number of companies stand to benefit from this dramatic growth. These companies are the types of opportunities investors were promised by analysts would present themselves in consumer-side wearable technology and that have failed to materialize.
This time around, the analysis is not just based on expectations β there are companies that are already benefiting from increased adoption of wearable technology and AR integration and, as such, are positioned to continue to do so as the wider industry expands.
One of these companies is Vuzix Corp. (VUZI, Financial).
Vuzix is a New York-based company that has a portfolio of products rooted in its proprietary AR technology. The company's lead product right now is called the M300, which is a Smart Glasses product designed to allow the user to view and control a screen-type image sitting in their field of vision and that can be harnessed to incorporate pretty much any type of image or software. At the consumer level, this sort of technology might be used to view a map or read an email β the same sorts of things an individual might use their smartphone for β without having to use their hands.
That is novel and, for first adopters, it might justify the product cost. Google Glass already failed to win over consumers with this sort of application, however.
For Vuzix, that does not matter.
The company is pushing its products to industrial customers β warehouse operators, manufacturers, design operations, etc. β and it is enjoying a large amount of success doing so.
A couple of recent announcements serve to both illustrate this success and to explain the concept of the product for those not yet familiar with the use case. Both are rooted in a partnership with a company called Ubimax, which is a software development company that builds applications and software that integrates with Vuzix's M300 device.
The best way to think about this relationship is through drawing a comparison to the smartphone industry. Alphabet Inc. (GOOG, Financial) (GOOGL, Financial), through Android, makes the software that runs on mobile devices made by Samsung Electronics Co. Ltd. (XKRX:005930, Financial). Under this framework, Ubimax is Google (Android) and Vuzix is Samsung.
That out of the way, we can look at the announcements.
The first details the implementation of a system that incorporates the M300 Smart Glasses into the production line at a German manufacturing plant of Deere & Co. (DE, Financial). The initial stated goal was for Vuzix and Ubimax to deliver a hands-free smart glasses vision picking solution to John Deere utilizing the Vuzix M300, with the aim being to reduce errors, improve picking speed and eliminate the need for a hand scanner within their machinery plant.
As of July 20, this goal has been realized.
The system combines Vuzix's M300 hardware with a software Ubimax developed, called xPick, to allow users to locate and confirm availability of the items they need to carry out their individual manufacturing tasks with what amounts to a zero error rate.
Within two weeks of deployment, the error rate at the plant was reduced to near zero for those workers using the technology and all of the predefined production tact readiness, productivity and quality targets were met. That is a great result for Ubimax and Vuzix, not just because the two companies have successfully implemented the system (a system that saves money, which is what this is ultimately all about) at a household name global manufacturer, but also because said implementation offers the companies an example to draw on when pitching this sort of hardware-software implementation at other, big name entities.
The second announcement was similar in concept in that it involves the two companies (Ubimax and Vuzix) teaming up again to deliver a solution to another German manufacturer, Γ WS Kunststoff-Service.
For those not familiar with WS, it is a product assembly company that builds a whole host of things, ranging from industrial machines to vehicles to electronic devices.
While the John Deere rollout involved a software called xPick, however, the WS rollout incorporates the inclusion of what is called xMake in the M300 hardware. The workers at the WS plant can use the product to help them construct the items they are tasked to assemble. Again, this was a successful implementation, with the announcement Vuzix just released reporting the plant's error rate reduced to near zero pretty much instantly and productivity across the part of the workforce using the device increased substantially on implementation.
This impact was further reinforced when WS, on the back of the initial rollout's success, chose to take on a second piece of software from Ubimax (again, delivered through the Vuzix hardware) called xAssist. This software eliminates the need for workers to leave their production line positions to consult with shift leaders when questions or errors arise.
These are just two examples of this type of technology changing the way people work, but they are strongly illustrative of the potential of this type of product in the industrial world. They are also just two of a whole host of successful rollouts that Vuzix, in partnership with Ubimax, has achieved over the last couple of years.
Right now, the list includes BMW (XTER:BMW, Financial), DHL, Daimler (XTER:DAI) and many others, all of which have adopted hands-free smart glasses solutions from Vuzix.
The bottom line here is this is a side of the industry that is growing fast, but remains somewhat under the radar. It is not going to remain this way for long, however.
For an investor looking to pick up an exposure to a company projected to grow in line with the above-outlined industry estimates and that has already established itself as a leader in the space, Vuzix could be a wise choice.
Disclosure: The author holds shares of Alphabet (GOOG, Financial) but has no positions in any of the other stocks mentioned in this piece.
