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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Larry Brubaker who wrote (16196)	11/17/1999 8:30:00 PM
From: I. N. Vester	Read Replies (2) \| Respond to of 27311

Larry: Vlnc expenses and profit margins I have had some discussions about this with company officials the details of which I am not at liberty to disclose. I will try to dig out the only published financial analysis of Vlnc from Red Chip review this weekend and let you know what their analyst said about margins. Now that you have explained your methodology including your taking a company with very different product and arbitrarily making up a multiplier, and also lumping VLNC with all companies in EI&C industry, I am better able to respond to more of your specific failings. Profit margins vary hugely within an industry. That is true especially where some are selling cutting edge products which are extremely hard to make and others are selling commodities. So your 'take EI&C average and multiply by 3 and that is generous' is highly unsophisticated and completely incorrect. Note that within an industry you'll find companies with completely different types of products and also with very different business models. Comparing Valence which sells a high value-added product (nobody else can make them) to OEMs with Co's selling commodity consumer products is such a stupid methodology that I never would have expected a sophisticated investor such as yourself to even think of making that kind of mistake. So much so in fact that it really makes me think perhaps you did understand how phony your analysis was, but acted in bad faith by pretending that it was meaningful. You mentioned ROV without explaining. I thought this was an accounting stat you were making up (as in ROI). You assumed I knew from the context of Paul K's exchange with the nutcase MGV (posts to/from whom I ignore). Then you would surely understand from that context what was explained to you by Paul K, i.e. that ROV spends 28% on advertising. Last I knew Vlnc's ad budget was 0 and the marketing VP is the only marketing staff expense. Let's also note that Li-Poly is a very different product from NiCAD. Generally Larry, where product demand exceeds the mfg's ability to supply as is the case with Li-Poly now and for the predictible future, the mfg can charge a high premium. this is especially the case where 'barrier to entry' is high, as it is with li-poly where as far as I know only vlnc can supply in quantity and that fact is likely to continue for at least the next few years as demand continues to multiply. Note that even within Li-Poly, Valence's Li-manganese product is far superior to Li-Cobalt. Both cheaper and also much safer. Please go to Dennis Roth's site and find the link to the text of the last Ulbi conference call. The competition, Ulbi CEO, will document that superiority for you, along with his views that everybody wants to make li_manganese, but nobody is able to. Please listen to his explaination of how many parts of the complex mfg process they still don't know how to do. That will help you to better understand the high cost of developing this mfg process. You also need to understand that it's not just a question of spending lots of money. You can't always hire the best brains in a technical field where second best may turn out to be 'no can do'. It's also worth noting that Cobalt prices are high and getting higher. This means that any li_cobalt_poly batteries are significantly more expensive to produce than li_mng_poly. Not that anybody else has demonstrated the ability to produce li_cobalt_poly batteries in production quantities, but even when they do, their costs will be much higher than Valence's. Generally Larry, the low cost producer enjoys much higher margins. It is hard to find the right information to use to try to guess or extrapolate Valence's profit margins. That does not justify a methodology of taking numbers which are completely inapplicable, applying an arbitrary multiplier, and then claiming to have provided insight. Was this an honest mistake or a deliberate attempt to mislead? Call that question 'ad hominem' if you wish, but I suggest readers ask themselves who Larry Brubaker is, why he has continued to post here, what axe he has to grind, and whether he is a sophisticated investor out to deceive them or merely a clever sounding knave with an incredible neurotic need to spend so much time where he 'has no financial interest'.