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

To: P. Ramamoorthy who wrote (25378)	2/15/2002 8:39:33 AM
From: P. Ramamoorthy	Read Replies (3) \| Respond to of 27311

February 14, 2002 conference call notes The theme: "R&D is done, commercial production has started." VLNC now is a business. Product focus: Saphion technology (the road map) and large-format, flat batteries. Example: N-Charge Power System introduced this month at DEMO 2002. The N-Charge Power System is transitioning into production at the NI plant. 0.5" x 8.5" x 11". See VLNC web site for product specifications. Has four cavities in which 4"x4" cells are stacked. The product design was started in September 2001 after Stephan's August conference call. The product was introduced in February 2002 at DEMO 2002. Audience reception at DEMO 2002 was phenomenal, evident from news coverage in CNet, Washington Post, ZDNet, etc.. The mobile-computing community has a clear need for this product. VLNC's Saphion technology (based on iron phosphate) is the only technology to allow the commercial manufacture of large-format, flat cells. (note: Cell and battery are interchangeably used here.) The Saphion technology is protected by VLNC patents. Stephan does not bother with the earlier technologies - cobalt or manganese. He seems to stay away from any efforts in the cobalt and manganese technology areas (note: VLNC started "writing down" Telecordia intellectual property and part of the NI plant.) Safety and environmental advantages will lower the cost by 30-40%, in two areas: (1) the cheaper raw material (cobalt at $30-35/kg versus phosphate material at $5-7/kg) affecting the variable cost of production, and (2) the safety of Saphion technology does not require additional control circuits for regulating the current during a charge cycle. The control circuits can add more to the cost of a battery. The inherent safety of the phosphate technology will differentiate VLNC from other possible large-size battery technologies in the future. The Saphion technology is expected to enjoy a favorable price differential in the market place due to the high recharge cycle in excess of 800 cycles: VLNC's conservative spec is 600 cycles. In response to a question about Electrofuel's battery, Stephan mentioned that the key is the number recharge cycles. VLNC battery specs of 600 cycles at room temperature versus supposedly about 30-40 cycles for the Electrofuel battery. The NI plant is currently producing N-Charge Power Units for an order (from ACER?). Production started in February, 2.5 months ahead of schedulIe. In his August 2001 Conf call, Stephan expected to go into production in Spring 2002 (April). He also set a production target of 5Million wh/month for the NI plant. Currently they will ramp up production to 1 Million wh/month. At 5 Million wh/month, I estimate roughly a modest revenue: 5 MM wh x $2/wh = #10 MM/month or $120 MM/year. At a gross margin of 30%, VLNC could earn $36MM/year or approximately 80-85 cents/share. Even if they show earnings of 40 cents/share in 2003, that will be good. The 5 MMwh/month is the final target capacity for the NI plant. Stephan feels that the 5 MM wh/month is sufficient for all the markets he plans to compete for now. (Comments: After meeting the current production target of 5MM wh/month, Stephan has to come with a plan for ramping up revenues in the future, beyond 2003.) Additional revenues will be from licensing which will take time. Another source of revenues is cylindrical cells. VLNC is talking to several possible partners on the manufacture of cylindrical cells using their Saphion technology. VLNC will not modify the NI plant or invest new capital to make the cylindrical cells. Targeting $3-5MM revenue for the March quarter but can not confirm until the end of the quarter. Stephan thought that the load-leveling application was a good idea, suitable for the large format cells. Stephan mentioned that the memo of understanding with Wistron is for the product specifications required for the manufacture of a handheld computing device for a Wistron's customer. The customer information and the type of product are confidential. This is a design win Stephan wanted by January 2002. VLNC burn rate was cut down from $9MM/month to $6MM/month. Stephan expects revenues from production and sales to kick in by June 2002, probably at the target of 1 MM wh/month, which could mean 1 MM wh x $2/wh = about $2 Million/month revenue. Pogo - More orders are expected from Pogo, UK and Germany. Plant yield issues - Stephan will not get into details because the yields can vary depending upon which process step you are talking about. All he is concerned about is meeting the target production of 1 MM wh/month and ramping to 5 MMwh/month. Insider purchase of VLNC stock - Stephan said it is a personal decision to buy or not. He did not buy Dell's stock when he was in Dell. Conclusion - Stephan's credible plan, aggressive marketing effort, and good communications with shareholders will help the stock price. Investors need not speculate any longer. People can actually buy a VLNC battery (Pogo, N-Charge or Wistron's product) in the market place in a month or so and check its performance. Finally... we are going somewhere! Ram