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

To: Zeev Hed who wrote (5027)	11/14/1998 2:45:00 PM
From: FMK	Read Replies (2) \| Respond to of 27311

Zeev, I must confess I haven't analyzed your posts in great detail, especially since you are a latecomer to this thread, but if you use the mortgage analogy, someone could similarly do homeowners a great service by posting warnings that many who failed to make their payments have lost their homes due to foreclosure. I don't know if you have the percentages for all financial arrangements that involve convertable preferred. Perhaps 5% of these companies fail and perhaps 2% of homeowners lose their homes due to foreclosure. As you know, I am on record as having estimated Valence's chances of failure at less that 0.2%. Since you have specialized in such warnings, you may have a better idea of what percentage of companies financed this way actually have failed. If so, could you give us the percentages rather than just naming a few examples?

To: Zeev Hed who wrote (5027)	11/14/1998 3:15:00 PM
From: FMK	Respond to of 27311

Zeev, I just studied your post further. I believe line 1 alone should be capable of turning out 2500 good batteries per 8-hr shift. I also believe it will be a 7 day per week operation so I would then count 2500/day x $75 x 350 days/yr resulting in about $65.5 million revenue per year for just that one shift. I understand one of the challenges is to get the production numbers up. What would be easier than to go to 2 shifts and then to 3 shifts once enough personnel are hired and trained? It would also make sense to direct some attention to the high speed lines and eventually to the total of 10 production lines the factory presently has room for. I believe their present coater/laminating capacity might be limited to about 80 million cells per year. At least, its reassuring that just the first line should be able to exceed the breakeven point by (7500 - 1800) or 5700 batteries per day. How would you then estimate the profit contribution from 5700 batteries per day at $75 each? Remember that the first 1800 per day already paid all the bills and there are about 27 million shares outstanding.

To: Zeev Hed who wrote (5027)	11/14/1998 3:34:00 PM
From: kolo55	Respond to of 27311

Thanks for the compliment. Lets take the upside a little further. Valence has the second small battery assembly line scheduled to ship this month. There are several more lines scheduled over the next several months. Each line could add about another $100M to revenues. The market for new cellphones is estimated to be 100M next year, so the OEM demand for batteries cells at say $12-15 per unit manufacturer's price is $1.2 to $1.5B. Spare and replacement batteries increase the potential market size. Valence's small battery line is purported to turn out somewhere around 15-25 batteries per minute, or say somewhere around 7000 to 12000 per shift. If this line runs two shifts for a year, they can produce about 5M to 8M a year, approximately 5-8% of the original equipment cellphone market. Using a conservative unit price of $12, the line will generate about $60-100M. If we see $15 pricing for the 5 Wh batteries, then we could see as much as $120M from this line. The potential revenue run rate one year out for Valence could be close to $300-400M. More in the next post. Paul

To: Zeev Hed who wrote (5027)	11/14/1998 3:41:00 PM
From: mooter775	Respond to of 27311

Thank you, both Paul and Zeev, for your comments. FWIW, my take has always been that the convertible security was entered into at a time when most financing options required the existence of a contract at the time of financing. This option did not, but it provided the holder (Castle Creek) with some assurance that they could readjust their pricing and interest in the company should the company not fulfill its commitment to have some sort of material transaction by 1/27/99. So I think that there is real potential for the stock to take a dive should they not full this material arrangement. But - to me, at least, the insider buying 2-3 months after the financing's initial tranche closed, as well as Roberts' joining the Board certainly imply that someone at the company believes Valence will indeed meet the obligations of the financing. That is not to say there might not be some shorting going on, depending on how close we are to 1/27/99, or the markets, etc.etc. For now, though, I'll keep my money invested with Dawson, Shugart, Archibald, Berg, and Roberts.