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

To: FMK who wrote (5046)	11/14/1998 5:37:00 PM
From: gvander	Read Replies (2) \| Respond to of 27311

FMK, The analysis you are doing assumes Valence can sell all that it can produce. This will not be the case. Everyone on the thread has "assumed Valence will sell all it can produce" without challange. What you need to do is make a top down estimate to check your bottom up analysis. Estimate total lithium-ion polymer battery demand and then allocate it among the companies running production lines (pilot/semi/full/high-speed). The critical analysis is determining the unit demand for the bellcore derivative batteries (in addition to all the others). No one here has done that and I am not going to give away my number. But, at the very least, the elements that must be determined at the beginning is an accurate analysis of competitors and currently producing competitors (and anyone else w/in a year). Then you have to look at other developmental companies and batteries (including miniture fuel cells). Allocate unit demand amoung all those viable within 1 to 3 years. Most of this information is very hard to come by and most keep such info off the internet--unlike Valance who lets whispers go on their every move (MCI, etc.) while their competitors out flank them. That is the best I can do for you. I am not going to give away my unit or production capibility information because I can only outperform if my battery companies' strategies stay private. (I have only made three investments). The mixed demand issue is touched upon in this article--might be helpful to you: techweb.com Also you have to determine how long the technology will produce revenues and at what margin. As more move in the margins will decrease (they gennerally decrease at a fairly predictable rate--check the journals on innovative products they give the formulas). After you have applied a product life and margin analysis to your revenue projections then you can try to value the company. In this analysis you have to try to estimate how much of the products will be reinvented. This depends on how innovative your company is--what's its track record -- do they have any other successful products? How about their other Li-ion lines or other batteries -- how have they done? In your current analysis, you kind of lose the forest in the detail of the trees. Very dangerous to do. Regards