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

To: kolo55 who wrote (16270)	11/19/1999 6:18:00 PM
From: kolo55	Read Replies (2) \| Respond to of 27311

The announced PO is an indicator of a longer term relationship. I am not sure some on this thread understand the significance of the PO announced by Valence. The press release says that the PO is "...from a major satellite and cellular phone customer. This initial order, which represents approximately three months of customer requirements, is for over $2.0 million, including engineering setup charges. Further orders from Moltech will be based on performance and customer demand." There are only a few satellite phone makers, and one of them (MOT) packages their own batteries. The only satellite phone that has been announced as a Li-poly unit is the Globalstar phone made by Qualcom. This phone has been delayed, along with the start of the Globalstar network, until the first Q of calendar 2000. This timing is consistent with Valence's forecasts of shipments under this PO early in the first Q. The phone was announced in October, and that doesn't quite fit the timing, but even this timing is consistent with the fact that Valence got this PO when another supplier couldn't deliver. I think the PO is for the Qualcom/Globalstar phone. Some on this thread and elsewhere have dismissed the $2 million as insignificant. But this is just a PO for 3 month supply of batteries, and this for a potentially rapidly expanding service. The customer has certainly spent a significant amount of time and money engineering the product around the Li-poly battery. Furthermore, they will spend some more money on "engineering setup costs". It is extremely unlikely that they will switch suppliers. This means Valences annual sales for this product will depend primarily on the success of the product. For a starter, we could estimate that the sales should run about $8 million this year, and perhaps $10 million next year, based on a moderate growth in the number of new Globalstar customers. Now how much business could come from this deal? That depends on the number of handsets sold, and the number of spare/replacement batteries sold per handset. These handsets are quite expensive (over $500 a pop), and air time at $1.50 a minute isn't cheap either. The power users who buy these handsets, will likely spring for a few extra $20 battery packs. I can't imagine a reporter in Kosovo trying to get by on 7-8 hours of stand-by time. Finally, this deal appears to be for a top of the line mobile handset, and will give Valence an inside track on other products by Qualcom, and perhaps, by Qualcom licensees. All said, this is a pretty good first PO. Paul