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

To: Dennis V. who wrote (16757)	12/7/1999 6:29:00 PM
From: Rich Wolf	Respond to of 27311

Re: quarantine: We were told by Lev that early into production runs, they might hold the cells for 4 weeks. This is to see if the cells hold charge properly, and to verify that there is no continuation of the off-gassing from the initial charge/discharge sequence. Such off-gassing would appear as bubbles in the vacuum-sealed packets, and would indicate that some part of the extraction or conditioning process was not complete. Once they have been manufacturing from a given line setup for a period of time, and do not come across any problems with the cells, they could elect to not hold the cells for the full 4 weeks. We've been told they could use two weeks or even just one week, once they're 'comfy' with what they're doing. I would think that if the two week period is sufficient margin (we'd heard this is what they were using, more recently) to detect any changes in the product, there's not much reason to shave it to less than that. There will be some tradeoffs between how many cells they can hold in quarantine at a time, and what their daily production rate is at a certain point in time. I'll have to review my notes to get the numbers, but the quarantine chambers were not the production bottleneck, when we considered production rates of the assembly equipment at half-speed (which they've successfully run on a continuous basis, w/ no quality issues... now they have run faster than that...). As Lev delineated in the August conference call, the bottlenecks were extraction, packaging, and conditioning. I think the next few POs, and the time frames indicated therein, will give us the best gauge as to throughput, since they'll be filling up their production queue as they expand the throughput (and vice versa). As many here have indicated, the limits to revenue growth the next few years are simply the rate at which they can add capacity, as more POs validate the desirability of the product. Long and happy today... more to come, no doubt...