Published on February 23, 2006|
Positive Publicity, Negative Returns
By Don Bauder
'Who is Woody Norris? Quite simply, Woody Norris is a visionary, a futurist." Those are the opening words of the website www.woodynorris.com. It is exaltation and exultation, paean and panegyric -- all for Elwood (Woody) Norris, San Diego inventor and sponsor of the website that lauds him so lavishly.
He is a "creative mastermind," enthuses an essayist quoted on the site. He has "reinvented acoustics," raves another writer. Prestigious publications such as the Wall Street Journal, Newsweek, USA Today, the New York Times, Popular Science, and Forbes have sung his praises for inventions in the field of acoustics and, more recently, a single-passenger helicopter that he is co-developing in Las Vegas.
Last April, the day after he was featured on TV's 60 Minutes, he won the $500,000 Lemelson-MIT Prize, sponsored by the Massachusetts Institute of Technology, for his inventions, particularly the hypersonic sound technology that directs sound the way a laser beam directs light. You aim the device at someone 100 yards away, and only he or she can hear the message, like pinpoint ventriloquism. Norris says it will eventually be almost ubiquitous in advertising, retail stores, and vending machines (as you pass, a voice will say to you alone, "Wouldn't you like a Coke?").
Referring to himself, Norris told Newsweek in 2002, "It's rare when you have a Thomas Edison who actually gets fame and success in his own lifetime." It isn't the only time he's compared himself to Edison. He used to show reporters around his 20,000-square-foot, $4.4 million Poway hilltop mansion until it burned down in the fire of fall 2003. He's building another mansion and boasts about how rich he is.
Yeah, Woody, but what about the people who have invested in you? Have they become rich? Not the ones who stuck with you, Woody. Norris's inventions make great copy in popular publications, but they haven't yet panned out in the marketplace. His publicly held companies pour money into research and development, hoping one of his inventions will pay off. But it doesn't happen. Red ink flows for years -- and so, too, does the hype.
Effervesces Norris on his website: "If you're an inventor and you start out poor the way I did, you need to know how to speak publicly, to convince people to invest in you. So the drama that I did in high school was the best thing I ever did."
So true, snorts Wall Street. In Norris's companies, "There always seems to be a lot of hype and very little, if any, real meat behind it," says Bud Leedom of San Diego's California Stock Report. "There may be a quarter or two of good results and then they are back where they started. He is the master salesperson. A small group of people jump on whatever he is talking about." In the madcap 1990s, those who listened to Norris were day traders. Stocks of his companies would run up and down on big volume. Now they are down and their results are uniformly dismal.
Norris controls 16 percent of the stock of San Diego's American Technology Corporation and is chairman of the board. This is the company that is developing the hypersonic sound technology that Norris touts as his invention. The company has lost money every year since 1996, the year Norris started work on the technology.
American Technology manages to lose about as much as it takes in. Last year, it lost $9 million on revenues of $10.2 million. The prior year, it lost $6 million on sales of $5.8 million. Not surprisingly, it has a cumulative deficit of $52.2 million.
Last year's sales rose sharply because almost 90 percent went to the military, which uses a variation on hypersonic technology called a long-range acoustic device. The military -- particularly in Iraq -- is testing it to warn people approaching checkpoints, among other things.
However, in American Technology's most recent quarter ended December 31, 2005, government business plunged 86 percent as total sales plummeted 57 percent. Military business is often volatile quarter by quarter, so it's too soon to say that armed forces are souring on the long-range device. The same quarter, commercial business -- such as use of the hypersonic technology for point-of-sale promotions -- did pick up, but it's also too soon to say that this increase is sustainable.
On his website, and in interviews with the media, Norris has claimed that his hypersonic technology will have uses in the field of music. In a car, the parents in front hear Bach while the kids in back hear rock. On the dance floor, each individual could be hearing different music, and bumping and grinding -- or waltzing -- appropriately. (Saturday Night Live could have fun with that one.)
That's all hogwash, says F. Joseph Pompei of Watertown, Massachusetts, who has a Ph.D. from MIT and is a longtime critic of Norris's proclamations. "There is no way [hypersonic] could be used for music," says Pompei, whose company, Holosonic Research Labs, has its own product, Audio Spotlight. Hypersonic's "audible distortion is 20 to 50 percent. Most loudspeakers are 1 percent. It doesn't hit low notes. The listening experience is absolutely atrocious."
Floyd Toole, vice president for acoustics at Harman International, has similar reservations. "It's awfully hard to get anything at low frequencies," says Toole. "It is only useful for speech communications. This is not a hi-fi device. There is lots of distortion. It is a niche product."
American Technology's early hypersonic model "was essentially a prototype of the one published in 1983 in the Journal of the Acoustical Society of America," says Pompei. Two large Japanese companies looked at the technology in the 1980s and abandoned it because of poor sound quality, he says. Then American Technology attempted to improve its prototype by picking up ideas from a paper that Pompei published in 1998. "They are not interested in making a product. They are interested in selling hype, selling stock."
Pompei says that American Technology's military long-range acoustic device "is a large loudspeaker, not focused sound. The military could get the same thing for a third the price."
Back in 1999, when he was still a grad student, Pompei went on Internet investor chat rooms to refute American Technology's scientific claims. It was hilarious colloquy. Pompei would cite scientific references and use technical jargon. Day traders would denounce him in ungrammatical bursts laced with four-letter words. Finally, the then-chief executive of American Technology answered Pompei with a letter that quoted Galileo, Einstein, and Stravinsky but didn't address the heart of the question.
American Technology has problems of different kinds. One is keeping straight books. Last year, the company confessed that it had "material weakness" in its financial controls. Last year, the outside accounting firm resigned in June, the president and chief operating officer left in October, and the chief financial officer departed in December, but the company still admits that there could be misstatements in its financial reports.
The company has manufacturing woes. In its most recent quarterly report, it set aside funds for potential warranty claims on a hypersonic product "as a result of discovering possible deficiencies in the manufacturing process." The company suffered similar problems in 2003.
The last two years, American Technology has spent the equivalent of half its sales on research and development. The average for high-tech industries is 8 to 12 percent of sales. No company can make a profit spending half its sales on research.
In previous years, Norris has been a board member and officer of two other San Diego companies: e.Digital and Patriot Scientific. The former has lost money every year for the past decade. But the stock ran up to $24.50 in 2000 while top executives were dumping it. It's now below 10 cents. Patriot Scientific also has a ten-year run of losses.
Norris is involved in a fourth public company, Las Vegas-based AirsScooter. It says it is developing a personal helicopter that doesn't require a license and that one can learn to fly in half an hour. Its stock can be purchased, but it doesn't report results publicly. You just have to take Woody's word.
Norris and the spokesman for American Technology did not return my calls requesting comment.
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