What do Microsoft Corporation (NASDAQ: MSFT), Micromet Inc. (NASDAQ: MITI) and BioLargo Inc. (OTCBB: BLGO) have in common? The answer: A platform technology.
The Value of Platform Technologies
Platform technologies are defined as those technologies that enable the creation of products across multiple industries. Companies that develop these technologies are generally extremely profitable, since a single platform developed can target numerous vertical markets through licensing, joint ventures or simply traditional development.
There are two keys to successfully commercializing a platform technology. First, a company must have a game changing technology that has an economic driver, like increased market share or lower cost. And second, the company must help licensees see that the project risk has been reduced to an acceptable level to help justify the investment required to launch the products or services. In the end, this business model profits diversification and leveraged returns to investors.
Some Quintessential Case Studies
Microsoft Corporation (NASDAQ: MSFT) developed an operating system that enabled other companies to build software on top of it. By reducing the complexity of computer use for end users and encouraging developers to build software for its platform, the company gained enormous market share in the 1990’s and 2000’s that built its empire.
A more recent example of a platform technology is Micromet Inc. (NASDAQ: MITI), which was recently acquired by Amgen Inc. (NASDAQ: AMGN). Micromet developed a biotechnology platform that programs the body’s immune system to go after tumor cells. This single biotechnology could be applied to target many different forms of cancer.
BioLargo has the Key Ingredients
BioLargo Inc. (OTCBB: BLGO) is an up-and-coming company that has developed its own unique platform technology called CupriDyne®. By combining minerals with water from any source and delivering “free-iodine” on demand, in controlled dosages, the company could revolutionize several different industries by balancing efficacy with concerns about toxicity.
The company specializes in delivering iodine that is incorporated into products and systems for controlling odor, moisture and for disinfection. Its applications include water treatment and a host of medical products as well as all sorts of industrial and consumer applications.
The company has already entered into its first big deal with a major client, Central Garden & Pet Company that includes minimum purchase obligations and a promised national roll out. Amazingly the same technology that helps control odor and moisture in the pet industry looks to have game changing applications in the oil & gas, food & beverage, as well as, the medical & wound care industries.
Benefits for Investors & Shareholders
Platform technologies provide two key benefits for investors and shareholders. First, the large number of targeted end markets leads to greater diversification, which increases risk-adjusted returns over the long run. And second, the licensing aspect of the business model yields greater leverage, which means less capital outlay and greater free cash flow over time as the company continues to load its pipeline of products.
Companies that successfully develop platform technologies often benefit from higher price-earnings ratios, greater dividends and strong value creation for shareholders over the long term. Combined, these same aspects make up-and-coming platform technologies, like BioLargo’s CupriDyne® worthy of careful consideration by investors today.