Roger, from what I know, VLNC product will definitely work. It might have some advantages over competing products in the following areas, cost (manganese vs cobalt, but I doubt that is much more than few percentiles), energy density (they have been reported to have make important advances, no third party verification on that, only the company's own assertions). As for the odds of them manufacturing profitably, it is, IMHO, a question of the "learning curve", initially their yields will probably be low, but as production ramps up, these yields should increase to profitability. My back of the envelop estimate is that they have to ship at a rate of about $75 MM annually to break even and above that they should have margin contributions well in excess of 30%. The main question, and quite a possible downside risk is if the Japanese competitors will buy market share by operating on minimal margins, as they often do. Then, we might have a situation like in the DRAM industry in the last two years where no one makes money. Such a scenario may be disastrous since right now VLNC does not have financial depth to finance such market share grabbing activities. All just my opinion, of course.
Zeev |
