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

To: John Curtis who wrote (1235)	11/1/1997 11:30:00 AM
From: Larry Brubaker	Read Replies (1) \| Respond to of 27311

John: I agree the Red Chip review is not bad, after all, they are predicting more than a double, and they don't do that for many stocks. Regarding their revenue model, they assume 3 lines at 50% capacity for one shift for 4Q 1998, but a gradual expansion in utilization and shifts for FY 1999. They don't say what their projection is for capacity or number of shifts running at the end of 1999. So, its hard to say if they are assuming the Northern Ireland plant is running at full speed by the end of FY 1999. They also don't mention the $32 million? rebate I've seen mentioned on this thread, and they don't appear to be assuming any kind of revenue from joint ventures. So, yes, their projection appears to be conservative.

To: John Curtis who wrote (1235)	11/1/1997 11:32:00 AM
From: FMK	Read Replies (1) \| Respond to of 27311

How conservative IS the Red Chip Review article? (Thanks John,for your summary.) Here are some of my recent numbers and assumptions. Machine Capacity - During the July conf. call, Cal Reed stated the production rate for the high speed lines is 240 bi-cells/minute and cellphone batteries require 10 bi-cells each. It was very straightforward to conclude that the each high speed line can produce 24 cellphone cells per minute. The Laptop capacity was more tricky to determine, and the best I could do from the conf call data was to start with the statement that it requires 4 to 6 bi-cells for a laptop cell. The mid-range figure results in 48 cells/min. I divided by 3 cells/battery for the 16 batteries/minute that corresponds with the rate indicated by Mooter in post #774. If the machines were run 360 days per year and 22.5 hours per day, they would operate 486,000 minutes/year. Maximum rates would work out to 11.66 million cellphone batteries and 7.78 million laptop batteries per year. This is substantially lower than the approximately 20 million and 10 million per year the company had indicated in February. The article stated the cellphone capacity as 7-8 million per year, or about 2/3 of the reduced recent maximum. Sales price - Valence's May '97 spec sheets (after which considerable improvements have reportedly been made) indicate 3.8 volts x 1350 ma-hr = 5.13 watt-hr per cell for cellphones and 3.8 volts x 4.7 amp-hr = 17.86 watt-hr per cell for Laptops at slightly less than 300 recharges at 80%. Over a year ago we were using $2 per watt hr as an estimated sales price to OEM's. As pointed out by Javelyn Bjoli in post #1210, "They will only be able to get $1.50/W-hr by the time they ship." Applying this low value of $1.50/ watt-hr to the May '97 specs results in sales prices of $7.69 each for cellphones and $27 each for laptops. I believe the watt-hr capacities have improved at least 10% since May which would correlate with Mooter's recent conclusion that sales prices should be approximately $9 or $10 for cellphones and over $30 for cellphones. So how conservative were Red Chip's estimates? I AM EXTEMELY PLEASED with their conclusion that the company would be profitable at the end of next year with only 3 (of the likely 5 or 6 lines) running 50% of 1 shift per day at about 2/3 maximum capacity at 80% of the likely sales prices with only 15 to 34.5% profit margin! What makes it even better, is my belief that they have may have neglected the $32 million rebate from the Irish Govt and assumed much higher U.S. taxes while the Irish rate is approx only about 2.7%! Does anyone have more recent or more accurate data? Again, I encourage anyone to do his own calculations as the above numbers represent the best I could do with the information I was able to acquire. Please refer also to my post # 1209. Regards, FMK