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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: J. M. Burr who wrote (8315)2/14/1999 12:46:00 PM
From: Larry Brubaker  Read Replies (1) of 27311
 
JM, I wouldn't be surprised if there are more buying opportunities in the future. IMO, Lev did a fairly clever job of evading the question about when they are likely to see a purchase order. Here was his response to this question.

"Q How close are you to a battery contract?

A We sell to people ..who sell to people ..who sell to an end user.
Our batteries go to packagers..who may put (for example) some electronics in it...who then resells it to an assembler who in turn sells it to an end user. The people we deal with put their name on
the product (as well as our name). What we deal with ... are
programs. WE help people who have some promising product with the
design program ..and a verification of the entire product. At the end
of a successful design and testing cycle Valence would receive a PO almost simultaneously with shipment of this new product by our customer to their customers.

We are working very closely with several prominant manufacturers
and repackagers of batteries .. to date very successfully."

Notice that nothing in this lengthy response actually addresses the question. This response could mean they are anywhere from days to several months from a purchase order, because we don't know where they are in the design and testing cycle. We don't know that the design and testing cycle will ultimately prove successful. And we don't know where the potential end users are in their own design cycle.

We do know they have only been shipping production samples "in earnest" since early January (at the earliest). We do know that their filings indicate their customers will require a lengthy testing program before they are likely to buy the product. We do know they will be out of money again by March 31. And we do know they have recently had trouble raising money under favorable terms (shareholders just last week approved unlimited dilution of the stock related to their last financing).

Given what we don't know and what we do know, I wouldn't expect the stock to shoot straight up from here. A $16 price would equate to a market cap. of about $500 million. I doubt that such a lofty market cap. would be reached, or if reached would be sustained, until there are a lot of uncertainties put behind this company.

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