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

To: Jacques Tenzel who wrote (26291)	6/21/2004 1:38:47 PM
From: George8	Respond to of 27311

VLNC remains a long shot speculation. Trade it to make money if one can.

To: Jacques Tenzel who wrote (26291)	6/22/2004 12:17:04 PM
From: P. Ramamoorthy	Read Replies (1) \| Respond to of 27311

Jacques, Understand your frustration. I was a bit surprised by the jv termination but it is better to terminate the inefficient Chinese business - early than later in the game. I think Stephan and his team are being honest with shareholders, maybe a bit too conservative but not "smoke and mirrors". They are being careful about giving out optimistic projections like Lev used to do. They have learned their lessons in the past two years on the difficulties of integrating their battery technology with OEM's while trying for lower manufacturing costs by moving to Asia in a changing global economic climate. They are trying to do too many things too fast. Probably they allow themselves to be "customer-driven" (for example, Tyco, American Power, ev auto makers, etc.) for the low-cost production in Asia. How TYC can bid competitively with a battery that costs $7.75/wHr even though it has several advantages - safety, performance, etc.? Lead acid battery banks, although not safe, are much cheaper with known hazards. VLNC is going after the large-scale battery installations to replace the lead acid in the telecom sector - worldwide. Each application has to work out the economics of their products. Will people buy an EV auto run by VLNC battery at higher cost or will the auto maker profit by selling those EV's? If they achieve 35-40/wHr, VLNC will be a tough low-cost competitor and adversely impact the market share for those big battery companies. Here are some thoughts. Fengfan jv termination: The purpose of this jv is to leverage VLNC's working capital needs for large volume production. So far, they got the jv approved by the government and hired the management team. Remember, the original jv agreement with FengFan did not include the large format cell production at FengFan. Since Fengfan wanted to include the large format Saphion, they revised the jv agreement and resubmitted it for government approval (see "conf call notes"). It caused some delay. It is not as if Stephan was not being realistic with his prediction of the jv approval date. The delay was not VLNC's fault. Think about this: if VLNC did not include the large format in the original jv agreement with Fengfan, VLNC must have had other plans for the large format cell production at facilities other than FengFan? Maybe Fengfan was going to be their second source of large format cell production. Therefore it is reasonable to assume that the jv termination should not impact VLNC business plan for the large format cell production for TYC and others as discussed in the last conference call. The impact of jv termination is on VLNC's working capital needs and subsequent cash flow break even projection for the FY2005. Carl Berg's funding to support the move to Asia should have been in the cards, not a "sudden" reaction to the jv termination, jmo. TYC agreement: It is an Exclusivity Agreement, not a licensing agreement, not a purchase order. The agreement only covers who supplies the Li batteries to TYC for the Telecom application. Nobody puts down a $ figure on the exclusivity agreement because it is not a purchase order. They did give guidance on the minimum quarterly volume to TYC and the potential purchase of $38MM for this agreement. $38MM in three years with minimum quarterly sales works out to about $13MM per year or $3MM/qtr. Add the $3MM/qtr to NCharge sales of $2-3.5MM/qtr plus sales of UCharge in FY2005 for a company that will cut down their burn rate to $3-4MM/qtr from $15MM/qtr. Is it approaching the cash flow break even? Moving in that direction? I assume VLNC will announce the purchase order after TYC confirms their orders of ELiTE from Tyco's telecom customers. TYC is just like Best Buy which buys NCharge to sell to retail customers. People did not question why Best Buy did not put the $ figure in their purchase orders nor any quarterly minimum sales on their agreement from Best Buy or Brookstone. VLNC did mention that by the end of this summer, they will be shipping the second generation Saphion KCharge and UCharge batteries cylindrical version) for large format application this summer. While news of purchase orders (with or without the $ figure) may drive the stock price - up or down - for VLNC, I like to follow their the long term business plan, their efforts, and the results. When their gross margin improves to a level consistent with others in the sector and when the revenue ramps up after TYC orders, the stock price should respond accordingly, between Nov 2004 and Jun 2005. jmo. Ram