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

To: MGV who wrote (3343)	7/13/1998 10:56:00 AM
From: Matthew Leo	Read Replies (1) \| Respond to of 27311

Thanks all for the steady flow of info and opinion. I came accross this and wanted to add it to the mix. Best wishes, matt Frost & Sullivan: Rapidly Growing Rechargeable Lithium Battery Market Challenges Primary Battery Manufacturers MOUNTAIN VIEW, Calif., July 13 /PRNewswire/ -- Lithium can offer higher energy-density storage than any other material, and therefore, lithium batteries are considered to be the ultimate batteries. Due to their superior performance compared to other battery chemistries, the lithium battery market is experiencing a growth in demand. The price of lithium batteries is expected to come down because of increased production volumes and economies of scale benefits, which will make them more price competitive, and will lead to increased demand throughout the forecast period 1998 to 2004. According to strategic research conducted by Frost & Sullivan (www.frost.com), World Lithium Battery Markets, total revenues reached over $2.3 billion in 1997, and the market is expected to continue its rapid growth. The six segments included in this study are lithium-sulphur dioxide, lithium-thionyl chloride, lithium-manganese dioxide, lithium-polycarbon monofluoride, lithium-ion and lithium-polymer. The lithium-ion rechargeable battery market will increase its market share to 79.8 percent in 2004, due to its explosive growth in portable computer and cellular phone applications, says Frost & Sullivan Analyst Arne Johnsen-Sollos. However, lithium-ion batteries are anticipated to experience a declining growth rate toward the end of the forecast period, as lithium-polymer batteries begin to secure market share. Opportunities stem from lithium batteries' excellent performance characteristics, and the growing markets for computers, cellular phones, photography, and consumer electronics. In addition, the automotive market for primary batteries will increase, due to toll tags and keyless entry systems, and demand will grow in the automated utility meter reading market because of the utility industry deregulation. The rechargeable lithium-ion battery segment will soon be the major revenue generator, and it will offer the best profit margin over the forecast period, at the expense of the primary battery markets. However, the introduction of lithium-polymer rechargeable batteries will seriously affect sales of lithium-ion rechargeable batteries. Multinational battery manufacturers outdo smaller battery manufacturers by offering their products to large OEMs globally. These large manufacturers can also provide packaging design and assembly. However, small battery manufacturers are a necessity in this market, because they fill the need for niche markets, such as the use of lithium-polycarbon monofluoride batteries for medical implants or customized military applications. Frost & Sullivan's study, World Lithium Battery Markets, provides revenue forecasts for the following end-user industries: Computers, telecommunications, consumer products, automotive, industrial electronics and instrumentation, military and aerospace, and business and retail. This report also provides major market trends, competitive issues, and profiles of company backgrounds, product offerings, and strategies. This battery industry research has integrated the Market Engineering consulting philosophy into the entire research process. Critical phases of this research include: identification of industry challenges, market engineering measurements, strategic recommendations, planning and market monitoring. All of the vital elements of this system help market participants navigate successfully through the lithium battery market. The companies participating in this market include: Alliant Techsystems, Battery Engineering, Inc., Bluestar Battery Systems, Duracell International, Inc., Eagle-Picher Technologies, Inc., Eastman Kodak Company, Eveready Battery Company, Inc., Erich Tech Industrial Co., FDK Corporation, FRIWO Silberkraft, Fuji Film Celltec, Gould Electronics, Inc., GP Batteries International, Ltd., GS-Melcotec, Hitachi Maxell, Japan Storage Battery Company, Ltd., Lithium Technology Corporation, Matsushita Industrial Company. Ltd., Moli Energy, Moltech Corporation, Philips Lighting, PolyPlus Battery Company, PolyStor Corporation, Power Conversion, Inc., Rayovac Corporation, Renata SA, Saft, SANYO Electric Co., Ltd., Signaal USFA, Sonnenschein Lithium GmbH, Sony Corporation, State-run Fty., No. 755, Tadiran Israel Electronics, Ltd., Tokyo Takasago Dry Battery Co., Ltd., Toshiba Battery Company, Ltd., Ultralife Batteries, Inc., Valence Technology, Inc., Varta Batterie AG, Wilson Greatbatch Ltd., Yardney Technical Products, Inc., Related Companies: Eagle-Picher Industries, Inc., FDK America, Inc., Gillette Company, GP Batteries (U.S.A.), Inc., GS Japan Storage Battery (United States), Hawker Batteries Group, Japan Energy Corporation, Maxell Corporation of America, Panasonic Industrial Company, Power Dex, Ralston Purina Company, Renata Batteries U.S., Saft America, Inc., Saft America, Inc., SANYO Electric Company, Ltd., Sanyo Energy (USA) Corp., Sony Electronics, Inc., Tadiran Electronic Industries, Inc., Toshiba America Electronic Components (TAEC), Varta Batteries, Inc., Industry Associations: Association of Battery Recyclers Association of European Accumulator Manufacturers, Battery Association of Japan (BAJ), Battery Council International, BMWT (Dutch Battery Association), British Battery Manufacturers Association, Electro Chemical Society, Inc., Electronic Industries Association, European Portable Battery Association, Independent Battery Manufacturers Association, Inc., International Cadmium Association, Lead Development Association International, Original Equipment Manufacturers Association, Portable Rechargeable Battery Association, Rechargeable Battery Recycling Corporation, VEI (Central Association of Electrical Engineers). Frost & Sullivan is an international marketing consulting company that monitors the battery industry for market trends, market measurements and strategies. This ongoing research is utilized to update a series of research publications such as #5584-27 U.S. Battery Markets, #5585-27 World Markets for Rechargeable Batteries for Portable Applications, #3467-27 European Lithium Battery Markets, and #3307-27 European Industrial and Four C's Battery Markets, and to support industry participants with customized consulting needs.

To: MGV who wrote (3343)	7/13/1998 11:09:00 AM
From: John Curtis	Respond to of 27311

Financing is key. This is the only point right now. All other discussion, regardless of the perspective and/or however potentially informative, is mere conjecture and supposition, eh councilor? Me think's the Street's waiting to hang their hat, or walk away, based on this announcement. So, pontificate all you care to, I'm just gonna stand here quietly and wait for VLNC to execute. Meanwhile, will you look at the tech sector!! Somebody shoot Dell, it just keep's going, and going, and going.....;-) John~

To: MGV who wrote (3343)	7/16/1998 4:07:00 PM
From: kolo55	Read Replies (5) \| Respond to of 27311

More information and answers to your questions. >1. You explained the basis for your estimate of 80-90% probability of mass production by September is personal experience in start up manufacturing processes together with comments from Dawson. Anecdotal evidence can be instructive and useful but in this case there are two issues that mitigate greater reliance on anecdotal testimony. First, the balance sheet as it concerns cash flow and working capital. Assuming your instinct is right about mass production in September, it simply doesn't follow that the CFO and CEO would allow short term liabilities to exceed liquid assets unless they had no choice. But the implications of having no choice are wholly inconsistent with high probability of mass production in September. Especially if one considers your opinion w/r/t supposed line capacity and productivity. Second, because Dawson and the company have made comments before and (giving them the benefit of the doubt for sake of argument) been wrong, one of the pillars for your probability estimate - Dawson's comments - must be considered suspect. That by the way, must be a big reason - along with liquidity problems - why the stock price is as low as it is. The street considers the pillar suspect as well, as noted by Dawson himself. The point is that there is good reason for it. My response: Mark, is there a difference between management reporting historical events, and making forward looking statements? In the past, its the forward looking statements that have been off target. Management said that they expected mass production start-up in the first quarter of calendar 1998, and missed that target. This is a forward looking statement, based on their plans, but subject to all kinds of events that could result in the future not turning out in the way they predict. Lev made some forward looking statements in the conference call, that may not pan out. I've already admitted that I believe there is a 80-90% chance that they will be mass producing in NI by the end of September. I'm not using 100%, because this is a forward looking statement, and could be wrong. I based my probability partly on statements in the call where Lev said every piece of equipment for the line in NI has been run satisfactorily at production rates, but not all at the same time in continuous operation yet. I am assuming this to be true, because it is historical information; to say it without it being true, would be illegal. To me, this is a significant statement. It means that all of the unit operations have been debugged, and now the major task is to get all the units to operate in a coordinated continuous manner. In my experience, most manufacturing managers, can more accurately forecast the eventual mass production start-up, once all the units have been debugged and run at production rates. I will agree, that the Street is discounting Lev's forward looking statements at this time in a huge way. >2. You admitted that your capacity estimates stem in part from other internet posts and in part from extrapolating information concerning ULBI. Fair enough. For a speculative company with VLNC's history in a highly competitive industry, the derivation of capacity numbers is too fragile for me to accept for the reasons I've stated in prior posts. It is a point on which reasonable people can differ. My response: The capacity numbers for 3-4 lines is greatly in excess of my own projected run rate of 3M notebook batteries a year by the end of 1999. Some of these production capacity numbers were discussed in conference calls last year. Even if we reduce the capacity discussed here by half, the capacity is still more than sufficient to produce 3M lapotop batteries a year. I really believe that market acceptance and ramp-up will be the limiting factor for the next two years, not capacity. (Although we have the statement by Gateway representative in a recent news article, that implies that limited supply capacity is restraining their plans to use the batteries.) I know Fred continues to use 4.5-5.0 M notebook batteries per year as an average run rate for next year, whereas I feel 3M is a suitable run rate for the end of calendar 1999. And I think the ramp could be even slower, because I am unsure of the actual market for spare and replacement batteries. If we ran a worst case of 1.5M notebook batteries per year (consistent of annual revenues run rate of $112M), then the capacities listed here are about 5 times this run rate. We know that Valence has provided sample batteries to over a dozen OEMs for testing and design purposes, and that the OEMs had not yet recieved all the samples they had requested by the June 30 conference call. Incidentally, Henderson is probably producing batteries at a rate of 300-500 per day based on the info released in the conference calls. Bottom line is that if Valence can actually make spec batteries, the production capacity they have will easily support the production rate of 3M laptop batteries per year. >3. Your estimates are based on laptop battery prices. What is the current wholesale price in the laptop battery market. Are you using the wholesale price or retail price? My Response: Wow, Mark I can't believe you haven't priced the batteries this company is planning to produce. Here's some information on Li-ion batteries being sold at Fry's here in the Silicon Valley as an examples of retail pricing. Fry's is selling Li-ion batteries for Compaq Presario 1000 series notebook computers for $250 retail. These are Nesco batteries (off-brand name), and would sell for less than brand name batteries from Compaq themselves. They provide 14.4v with 2700mAh (equals 2.7Ah). This is four cell battery. If you multiply the voltage by the Amp-hrs, you can get the battery capacity in watt-hours; this is a useful unit to calculate pricing. These batteries hold 38.8wh. So at retail, the price is $250 divided by 38.8wh for a price of $6.44 per watt-hour. Fred has been using about $1.65 per watt-hour for the the cells in a Li-poly battery produced by Valence. We are not only talking wholesale, we are talking manufacturer's pricing. The Valence battery will hold at least 45wh based on the old specs for a 3 cell battery, and at least 60wh for a four cell battery. The new specs show an improvement, and Valence has been manufacturing the cells with a thickness of 6mm versus 4mm, so we are looking at probably 60wh for a 3 cell battery and 80wh for a 4 cell. These batteries will provide more capacity than existing Li-ion batteries, but I believe the additional capacity won't have the same pricing per watt-hour as the base capacity. The 80wh battery will have more than twice the capacity as the 38.8wh Li-ion battery I just quoted. My pricing of $75 assumed a 45wh battery at $1.65 per watt-hour. >4. Regarding stock research on a company in R&D and no earnings, the investigative research you describe is valuable. My observation in this case thoguh Paul is that it seems its caused a tendency to get mired in detail and gloss over some more obvious and fundamenatl issues. All of the steps you cite have to contribute to a more complete picture. That is indisputable. The problem is the financing issue, specifically what I allude to above in point 1, seems to have been lost in your analysis. My response: I do not agree that studying the market, unit pricing, analyst forecasts for possible competitors, etc are details. From your posts, you only seem to quote the 10K, and don't seem to have addressed the key questions I discussed in my posts #3333 and 3336, with the exception of financing. In my post #3242 I project 5M shares as a conservative case dilution impact, based on the kind of preferred share issuance Lev implied in his last conference call. I have no reason to change this estimate. This is 20% dilution. I think your dilution numbers posted on Yahoo are way too high. You ignored the payment from Delphi, ignore any payments from NI gov, assumed a 2.0 quick ratio instead of a more normal 1.5 for a company like this, and thus came up with capital requirements much higher than the $30M I think they will seek. And I think there is a substantial probability that they will seek to raise less than $30M. You view 35% dilution as almost certain. We should see which view is right within the next 3 weeks. Paul