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

To: Zeev Hed who wrote (16936)	12/11/1999 9:57:00 PM
From: Larry Brubaker	Read Replies (2) \| Respond to of 27311

<<Mooter, the current annual burn rate is $35 MM, and that is without actual production, how can $40 MM annual sales be break even?>> Exactly. Lev was asked during the last conference call about whether they will aggressively or conservatively ramp up production. He talked about how they have to be conservative, because the one thing that would cause the company to fail is if they "ship 5,000 bad batteries." In saying this, he said, "as we train second and third shifts, we're gonna be very cautious with them." Present tense used in "as we train." Future tense used in "we're gonna." Given that the conference call was on November 11, well after the September 27 date of closing the last quarter, I think it is quite reasonable to conclude that the operating costs as reflected in the September quarter (over $9 million) will increase substantially after a 2nd and 3rd shift is added. Obviously, a lot of other costs will increase as production is ramped up in addition to personnel costs. Personally, I think you are optimistic in your assumption that they will reach break even by this time next year. I also agree with you that it makes no sense to create overly optimistic projections. Unless, of course, you are simply looking for a hype-based spike to sell into. A truly long-term investor should want to see realistic projections made. Which have been pretty rare on this thread.

To: Zeev Hed who wrote (16936)	12/12/1999 2:17:00 AM
From: I. N. Vester	Respond to of 27311

Zeev, as usual you really ought to look closely at the financial statements before treating us to you analysis which includes false assumptions about what's included in the numbers you quote. You claim that the $36M burn rate includes no depreciation and no production costs. You are wrong on both accounts. Depreciation is included in the $9M/Q loss, at $4.3M over 6 months. The company now has close to 200 employees in NI. They are all working on production and production QA. Surely they are costing at least $10,000 per person per quarter on average. That's $2M of production costs included in the $9M/Q burn rate. How many more employees are needed to run 3 shifts is anyone's quess, but one investor talked with some employees outside the plant about 4 months ago and learned that they were already working 2 shifts at that time. Also note that the company has been shipping a lot of batteries even in the last quarter, and some material costs are also included in the $9M. I agree that we should not set ourselves or anyone else up with unreasonable expectations. But surely it's not serving the truth to assume as you do that gross margins will have to cover $36M/pa in R&D plus ALL depreciation. That's a gross misinterpretation of publicly available accounting statements from the company. At least 1/2 of the $36M burn actually consists of production costs and depreciation. Mooter may or may not be slightly optimistic, but I think it clear your estimates are based on a faulty reading of the 10Q's because you have not read the details and are failing to make some common sense conclusions about how much production costs will increase. The people are already on board and well trained to start full scale production. The company has been paying their salaries for several quarters. And they are depreciating the equipment already. I think you need to do more homework. Everytime you post analysis here it's flawed.