Larry, Here's my post again, in case you forgot what I said
Value of Valence Patents- Can anyone verify these numbers?
I was recently reminded that the Japanese and other large Li-ion producers now pay over $500 million in royalties to produce batteries using cobalt and lithium.
I heard it was suggested by an analyst that these dollars plus another $100 million should shift to Valence for use of their patents for manganese oxide and phosphate cathode formula, for an estimated total of $600 million per year royalty income.
I would value the opinion of Midwest Patents on this issue, and any thoughts on how to start with the size of the rechargeable market multiplied by appropriate penetration fraction and royalty fee. Perhaps it would work out to around $600 million.
If Valence's manganese oxide batteries now perform as well as cobalt, with their inherent safety and lower cost before applying the phosphate formula, it alone should be worth paying royalties for. Would royalties then be paid separately for Valence's phosphate formula?
How long should it take for the large battery producers to shift to the Valence's manganese oxide and phosphate formulae if they are made available, considering their superior performance?
Is the $600 million a valid number? If half of these current cobalt users pay royalties instead to Valence in calender 2000 it would amount to $300 million profit to Valence or $10 per each of the 30 million outstanding shares. If 25% of them switch, it amounts to $5 per share etc, without considering income from Valences production or joint ventures. I will resist stating the $/share if all of them switch, in an attempt toward conservativism!
Before hearing these numbers, I remember a comment from Valence management that that royalties from Valence patents could very well exceed profits from their battery production. Another comment was "if the market understood the value of Valence's patents, the stock would double overnight!"
We have heard that the phosphate formula increases cathode performance about 60% and overall performance by about 40%. We are also aware that Valence competitors make li-ion battery packs from multiple small canisters with cobalt-oxide cathodes and pressure relief mechanisms at 50% yields and relatively low energy density because cobalt is not safe in larger sizes. This appears to leave Valence alone with the capability of making the larger, solid polymer portable computer batteries safely and inexpensively with manganese-oxide cathodes.
Any thoughts what to expect from Valence's patents? If most of lithium ion mfrs now pay royalties for the cobalt canisters, will they be left behind with their higher manufacturing cost and lower performance of their multiple cobalt-canister approach?
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