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

To: john t. brice who wrote (19674)	5/14/2000 12:24:00 AM
From: MGV	Read Replies (1) \| Respond to of 27311

I don't follow Globalstar closely enough to comment on its financial liquidity. It does make sense to me that the satellite phone market is star-crossed. First, the technology isn't ready yet. From everything I have read, the service just doesn't work that well. Conceptually, it only makes sense if the service has no gaps. That is what would differentiate sat-based from land-basd wireless - global roaming. That is what would justify the cost differences. The second reason that makes sense is the cost. The service is expensive. Even if it worked as well as hoped, there are few that would need it. Sat-based wireless is a highly inelastic good except for a very limited segment of the population. It seems to me that presents a catch-22. Price can't come down without scale economies kicking in. But scale economies can't kick in with a highly inelastic demand. The more I think about it. It makes sense that Globalstar could take a flyer with VLNC. They need to lower their expenses so they were attracted by a cheap (in price albeit untested)component product. And, production yield isn't necessarily a concern because demand is not expected to be strong, at least in the foreseeable future. Product quality and design lead times aside, I'll bet that is why VLNC isn't announcing any deals with Nokia or any other blue chip OEMs that would provide significant orders.