Hi, Everyone,
I guess I gotta get my 2 cents worth in on the Barron's article too. I coulda put in 3 or 4 cents worth, but I won't. (I expect to hear cheering from here.)
While I am pleased to see more attention being given to the li-poly battery industry, I am underwhelmed by the Barron's article. Real underwhelmed. It contained absolutely nothing new (except for the charming Bellcore story), and omits much too much. Its contents can be of little solace to either Valence bulls or bears. It is not up to Barron's' standards.
Before a few other comments, let me indulge my frustrations with an ad hominem attack on the author. The story reads like a popular press article written for a magazine like Money by an apprentice journalist given an easy and inconsequential assignment. I can just hear the grizzled old editor with better things on his mind telling the cub reporter, "Just go find out a little about the product like its history and potential market, then find the American companies trying to produce it, interview their CEO's, check the SEC filings, ask around about what the industry people think's going on, draw your conclusions, and write it up with some kind of angle. You're bright, you know what to do -- just have it on my desk in 2 weeks." Reminds me too much of endless college newspaper articles I've read. The fluff produced by bright kids knowing essentially nothing about the subject matter -- but with attitude. Reporting by formula; colored by facile opinion which every school kid is taught nowadays to have as evidence of -- and usually a substitute for -- "critical thinking."
Worse, if irrelevant for our purposes, I suspect the possibility of plagiarism. The comments of both the Motorola spokesman Myszka and the unidentified "veteran of the battery industry" sound awfully familiar. Haven't we read them in some of the links provided by gvander and others over the past 6 months or so? I'm not interested enough to search them out, but each was provocative enough at the time to sound familiar now. Indeed, except for the Bellcore stuff, the whole article seems to be hardly more than an amalgam of a number of articles we have seen in recent months.
I think what irks me more than anything else about the article is the glib way the author draws the sweeping conclusion that the Japanese will dominate the industry. I expect sweeping conclusions to be compelled by hard evidence and air-tight reasoning. Absent either, I expect the conclusions to be accompanied by appropriate conditions, qualifications, and reservations. Absent either, I expect an author -- where a modicum of intellectual honesty is appropriate -- to acknowledge that his argument is a product not only of the evidence and reasoning he offers, but also of his best estimation of where his evidence and reasoning seems to be leading him -- which is to say, of his educated hunch. I expect the author to signal the need for caution with some form of "I think" when his evidence and logic is anything less than compelling. As I have noted before, I just hate glib, conclusionary rhetoric. It is one of my passions.
In the Barron's article, there is no doubt the author could ultimately be right about Japanese domination, but the author gives precious little evidence or reasoning for why that is the most likely outcome. The grounds for the author's conclusions are at best tenuous. The conclusion seems to be grounded on the notion that the American players are weak and the Japanese are strong, that the American players are "woefully shy of ... financial muscle (and) marketing savvy" while the Japanese have "considerable manufacturing and financial clout..." I will certainly grant these propositions as arguable premises suggestive of the author's conclusion, but missing from the article are all the logical steps between the premises and the conclusion. Instead of logical steps, the author offers silly nonsense.
The silliness of all this is revealed early in the article when the author admits, "Because the battery industry is so secretive, it is difficult to call the race." Despite this, the author proceeds to call the race. As evidence, the author cites two principal sources: an unnamed "veteran of the battery industry" and Ed Myszka of Motorola. As told by the author, neither's story is particularly compelling.
Of the two, Myszka's comments are more interesting. He is first quoted saying "‘...no one is shipping product in what I would consider high volume,'" and "‘To be realistic, the technology is not there yet.'" Nevertheless, according to the author, Motorola "expects to be a big consumer of plastic lithium ion batteries in 2000" -- which by my reckoning is about a year from now. Those Japanese better have something big up their sleeve ‘cause apparently the Americans don't. I don't know what to make of his comment that the cost per watt of the li-poly battery is double that of "existing batteries." If no one is producing in what he would consider high volume because no one can produce in high volume because "the technology is not there yet," then how does he know the cost per watt of the li-poly battery? The cost per watt to produce the battery will depend on all those variables not yet known because high volume production is not yet underway: economies of scale, yields, and so forth. Myszka's purported story just doesn't hang together very well. I suspect there's more to his real story than is reported here -- but then I doubt Motorola would let him tell it here anyway. It's part of being secretive in a secretive industry.
The purported story of the unnamed "veteran of the battery industry" is less interesting than that of Myszka, but the importance claimed for it is certainly more amusing. The unnamed veteran is quoted as saying "‘it's likely that the Japanese will control the pace of the rollout of the technology in this industry, the way Intel controls the chip industry,'" and "‘you have to remember that Sony kept a very low profile before it introduced the lithium-ion battery.'" He evidently warned "...no one should view the lack of announcements from the Land of the Rising Sun as evidence that the Japanese aren't making progress." Much is made in the article of the lack of announcements from Japan. Somehow it is suppose to be a major logical pillar supporting the conclusion that the Japanese will dominate the market.
Of course I will buy the warning that "...no one should view the lack of announcements from the Land of the Rising Sun as evidence that the Japanese aren't making progress." Indeed, I'll buy any of the three equally plausible interpretations that the lack of announcements could have. The lack of announcements might "imply" that the Japanese are carefully avoiding tipping their hand while they work furiously to ready li-poly production as Sony did with lithium-ion. But then again, the lack of announcements might equally well "imply" that the Japanese are working leisurely on li-poly because they figure their dominant position in li-ion will protect them until they are ready with li-poly production in a couple of years. After all, they cut prices on Eveready before, and I guess they figure they could do it to li-poly too. Still again, the lack of announcements might equally well "imply" there is nothing to announce because they aren't working on li-poly at all. While the reality is probably a mix of the first two, with these three possibilities to digest, I just can't find the logical pillar. In fact, I don't think the lack of announcements "implies" a damn thing. I admit there may be a subtlety in there somewhere I am missing, but for now the logic escapes me.
There is no subtlety, though, in the author's use of an unnamed "veteran of the battery industry" who allegedly knows enough to call the race within an industry known to be "so secretive it is difficult to call the race." Am I to believe the unnamed "veteran of the battery industry" is privy to all the inside information from all the potential American and Japanese competitors despite all that secretiveness? Am I to believe he is so knowledgeable about the financial, technical, production, and marketing status of every potential competitor that he could tell us now who will win and who will lose, were he so inclined? I think not. I don't think I am missing any subtlety here. This just doesn't hang together at all.
In the end, I think the author simply wants to have what he cannot have from the information provided. He wants us to conclude that this secretive industry will be dominated by the Japanese producers and the Americans will fail. Again, there is no doubting the strengths attributed to the Japanese or the weaknesses attributed to the Americans, and in the end those strengths and weaknesses may decide the case in his favor. But this article adds nothing to the present cases of either the Valence bears or bulls. The article is all sizzle -- no steak.
Finally, two last points:
First, while the article is certainly underwhelming on its merits, it is interesting to wonder what its final impact on the share prices of the American companies may be. It will lower their prices by scaring some present investors away (and drawing in some new shorts), and raise their prices by attracting others through its publicity for a new technology with significant potential. We will get some idea of the net effect this week. Given I think the article woefully misrepresents the strengths of the American companies, and Valence in particular, and given I think those strengths will become apparent sooner than later, I think the long-run effect of the article will be to raise share prices. The poor quality of the article is unfortunate, but the publicity is good.
Second, I think we posters, bulls and bears alike, can take some collective pride in the results of our thread. I think our thread reveals far more about the situation than the author's article. At times I get disgusted enough with the thread to wonder why I bother with it, but after reading the Barron's article, my confidence in the value of our thread is restored. A tip ‘o my hat to us all!
Regards, lws |
