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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: mooter775 who wrote (6996)1/11/1999 10:14:00 PM
From: Zeev Hed  Read Replies (1) of 27311
 
Mooter, when you start and ramp up sales from zero to let say your number of $40 MM, cash flow also includes changes in working capital, namely accounts receivable and inventories (and few other less important items). Typically, one should assume that an increase (YOY) of $10 in sales requires an increase of $3 in working capital. If VLNCindeed get to the point of shipping, however, that should be taken care of with IDN financing.

The second issue I have with your post is the assumption of 60% gross margins, such gross margins in this type of business are not going to be there long, if you know the "umbrella" principle. Is there some source that give us assurance that such high gross margins are available, particularly with a start up operation where yield are going to be initially much less then 80% and the cost reduction on the learning curve is not yet in place?

Zeev
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