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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: John Curtis who wrote (1178)10/18/1997 11:43:00 AM
From: mooter775   of 27311
 
From the horse's mouths (DA and CR) late this week (filtered through an investment advisor with whom I have regular contact):

(1) Line 2 continues to perform, and shows now lamination problems after 5-6 weeks. Company feels the line will produce acceptable cell phones by beginning of 1998, at a production rate of at least 4 million cells per year. This allows downtime to continue to tweak the line to its rated capacity of 7-8 million units per year.

My understanding is that on line 1 the lamination problems began to be detected in the 3rd week and continued to deteriorate through the 6th-7th week, when they decided this was indeed a real problem with the line. They have no such thoughts on line 2, which they consider to be much more capable of producing quality product without any major adjustments. Line 3 will be cellphones, which implies to me, as it does to FMK, that management feels that a substantial contract with major cellphone customers is likely, assuming the company can guarantee production quantities in the new year for an acceptable amount.

(2) Company feels line 1 will continue to make progress and be able to produce 1.5-2.0 mm laptops per year in first quarter 1998.

(3) Management feels the Fortune article is about 12 months out of date regarding the feasibility of li ion polymer batteries.

(4) Management feels that any requisite financing will be done in the first quarter 1998, will likely be debt financing, and is quite feasible given the likelihood of OEM contracts in the first quarter.

My best guess is that we'll have batteries shipped out to OEMs in November and one or more OEM contracts in place by 12/31/97. Keep cool - stock should be at least in the mid-teens in Q1 1998.
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