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

To: I. N. Vester who wrote (1264)	11/4/1997 6:18:00 PM
From: mooter775	Read Replies (1) \| Respond to of 27311

I haven't read the Red Chip review on VLNC yet, but my understanding is that the 4th fiscal quarter (ending 3/99( he is expecting $ 21 mm of revenue and $.15 eps (using no tax rate). He then annualizes this to $ .60/sh/yr and at a 30 PE gets a target of $ 18.00. I think he is clearly hedging both the revenues and the margins in his assumptions. If line capacities are 2 mm for line 1 at $ 20/share and 7-8 mm/lines 2 and 3 at $ 8/sh, then, as you say, annualized revenues are $ 140 mm - $ 150 mm, or between $ 35 - $ 40 mm/quarter, not the $ 21 mm he estimates. So he is hedging himself with a slower rampup or some softness in pricing, or something. As an analyst, the last thing he needs is to lower his estimates - he loses credibility in the market. If he can project VLNC as an interesting story on these numbers, then it is quite easy for him to raise estimates as the stock moves higher. This is modus operandi for Wall Street analysts. We'll know about production rates in Q1 1998 if the company begins to ship by then in any quantity - and we can revise accordingly upward or downward. Until then, all we're really doing is guessing. The main things are: status of battery quality, shipments to OEMs for testing, OEM contracts, status of each line, schedule of lines to be installed. As for much of the recent discussion about market size and just how many Li ion polymer batteries can be shipped, that is also not somehting to be worried about. My bet is that VLNC or ULBI or anyone else will be able to sell all they can produce for a number of years, pricing and margins will hold, and NiCad and Nimh will lose market share faster than Javelyn or any distributors of batteries are willing to predict.

To: I. N. Vester who wrote (1264)	11/5/1997 1:32:00 AM
From: Larry Brubaker	Respond to of 27311

IN: I agree the Red Chip analyst is being cautious with his revenue projections. The only way I can figure it, the ramp up to full production will take longer than a year. I don't see any point in arguing with him, however. IMO, there is nothing wrong with being conservative in projecting out an operation that has not yet gotten underway. Red Chip is paid by their subscribers, and nobody else. I would imagine their subscribers would rather have positive surprises than negative surprises.