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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Paul Dubsky who wrote (1445)11/25/1997 9:06:00 PM
From: mooter775  Read Replies (3) of 27311
 
An investment adviser friend of mine spoke in the last several days to management and the story is intact for Q1 98 production. There are two production glitches that have to be resolved, and I'm under the impression that the engineers at the company feel they have essentially been resolved.

First, the coating/laminate machine is being started up in Ireland and will produce essentially the same coating/laminate that had been provided from Nevada, but this machine will provide enough for 6 rather than 2 lines. The process is the same and I don't think management feels that there is any real risk in not being able to supply quality laminate to the lines.

Second, the feed machanism has to be adjusted by the addition of one or more belts in order to put all the incoming mterials to the line 2 "in synch". I am led to believe that this has been accomplished in Italy on the third line and remains to be installed and tested in Ireland on line 2. There may be some slippage and of course there is the possibility that this may not work, but all early indications are that this works - the result is that the company can reasonable esxpect to be able to ramp up the Italisn lines 2 and 3 from the current 4.0 mm annual cell phone batteries to a number approaching normal operating capacity, ie 7-8 mm batteries per annum. Management feels that the startup can reasonable be expected in Q1 and will raamp up from there in midyear. This is why CR stated his confidence in being able to supply both cellphone and laptop batteries in q1 98.

Company is still confident in getting a fix on line to produce laptp batteries in line 1 in q1 98 also.

Company will announce contracts since they are material. I have no certainty, but do feel that they will be announced by no later than mid-February, since company will have to finalize their production commitments by then in order to finance as well as generate cash flow from Ireland.

So I'm going to hang in there, and really advise others to do so. I don't know if other institutional or individual investors will let their fear overcome their good judgment, and the stock may indeed trade down from here for several days. But company management feels that there is no doubt that line 2 can produce acceptable quality batteries by q1 98. their real objective is to be able to be confident enough of production levels in order to satisfy all 4 major potential customers that they can supply a reasonable amount of demand from the beginning and do not have to choose from customers.
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