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

To: Zeev Hed who wrote (5928)	12/12/1998 5:59:00 PM
From: FMK	Read Replies (2) \| Respond to of 27311

Zeev, thanks for volunteering to shed more light! For breakeven I started with the 1800 laptop batteries per day (at $2.50 per watt hr or about $75 each revenue) as stated by Lev Dawson. Anything more would be profitable and line 1 should be able to make 2500 per shift with an ultimate 4 million per year. exchange2000.com If the first 1800 laptop batteries breaks them even, the revenue from additional line 1 batteries and all additional revenue contributes more directly to profits. If you look at the 1 mln cellphone batteries per month for the Hanil joint venture, we know they believed it was a good business decision to invest 100% of the capital for their plant and still feel ok about things when they give half the profits to their JV partner, Valence. What I infer from this arrangement, is that Valence's profit margins should be about twice Hanil's profit that they built their plant for, and are therefore quite high. The NI tax rate is something like 8% of the cost to produce multiplied by a general 33% rate resulting in about 2.6% tax. There should be about $35 million in subsidies from the Irish government, pro-rated when Valence ships their first $4mln in product. As far as US tax is concerned, it would appear there should be no effect on approximately the first $140 million profit because of losses carried forward on their 9 years without revenue, other than the $50k per month from Delphi during their joint R&D. So there are some numbers for you to start with. I would be interested in your own earnings estimates per category of battery's and per production line. I understand we should expect another Italian machine before long and there could be two more on order for early to mid next year. Obviously, as more staff and equipment are added, it will gradually take more than the first 1800 batteries from line 1 to break even. As I see it, they will soon have to work an entire 8-hour shift and maybe part of the second shift to break even as head count increases.

To: Zeev Hed who wrote (5928)	12/12/1998 7:36:00 PM
From: Larry Brubaker	Read Replies (1) \| Respond to of 27311

Zeev: Here's a few numbers for you. Red Chip Review did an article on VLNC over a year ago before dropping coverage last spring when VLNC failed to deliver. Red Chip's numbers: Line 1 (slow speed line) for laptops. Production capacity (3 shifts per day) = 2-3 million units. Selling price per unit = $20. Line 2 (high speed line) for cell phones. Production capacity (3 shifts/day) = 7-8 million units. Selling price per unit = $8. The first line is in the process of being qualified. As of the last CC (November), the CEO said the line was running at "some speed" but would not acknowledge it was producing production samples for OEM testing. The second line had not yet been delivered as of the last CC, but the CEO said it was expected in a week. Red Chip assumed a gross margin of 40% by the 5th quarter of production and an operating margin of 15% at the same time. They assumed a gradual ramp-up of production beginning with one line on one shift with a gradual expansion of lines and shifts. They assumed net earnings of 15 cents per share during that 5th quarter of production, based on 24 million shares outstanding. Three lines were assumed to be producing by this time, but not at full capacity. Based on their assumption of 15 cents per share by the 5th quarter of production, their 12-month target price was $18. They assumed a p/e of 30 applied to 15 cents per share for the 5th quarter of production. Red Chip's numbers have been described as extremely conservative on this thread, but so far they have proven to be very optimistic. For example, they assumed their would be 24 million shares outstanding during the 5th quarter of production when actually there is likely to be at least 30 million, and possibly many more shares outstanding by that time. And they assumed that VLNC would currently be in its 4th quarter of production. The Red Chip numbers did not include any estimates of revenue or earnings from joint ventures with Alliant or Hanil.