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

To: FMK who wrote (5053)	11/15/1998 10:08:00 AM
From: Ray	Read Replies (1) \| Respond to of 27311

"I would guess they should have at least 50% profit on all the laptop batteries past the first 1800 per day to break even. If we go conservative and use 40%, we would have $60,000 profit divided by less than 30 million shares or over $2 per share for line 1 alone." As a VLNC owner, I do not want to fall prey to unrealistic projections. Here is what I do not like about your estimates. (Since I do not own a lot, I have not followed this thread exhaustively; so my numbers and understanding may be wrong. I offer them for discussion.) Line 1 has a capacity of 2500 (cells?, batteries?)per day. The most recent number for output is 1800, which I assume is the yield of in-spec product (72% yield). (It could be, of course, that the line is simply not "up-to-speed" and that the yield is higher than I assume.) This is stated by the company to provide break-even on cash flow, not net profit. Note that the per-unit manufacturing costs of the 1800 sellable units are inflated by having to produce 2500 units, and this burden will not change if more shifts are added. With more shifts, fixed costs (such as plant overhead) per unit will go down, but the (presently) inflated "per unit" costs (such as labor & materials) will be the same. My point here is that with low yield, assumption of a high profit rate is not warranted - even for additional shifts. I concerns me that the manufacturing yield problem has not yet been truly solved - just tamed.