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

To: Jay Lowe who wrote (6091)	12/19/1998 9:11:00 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 27311

Jay, an excellent start to estimate future cash flow and profits. Here are few refinements you may want to consider. In 1999, they will not be shipping much for another three to six months, since they do not have quals and this time. Profits margins increase as volume increases, but on the other hand, competitive pressures may cause price squeezing, somehow your model should have a peak of profit margins vs time. Right now, I believe that VLNC probably has about $100 MM of tax losses on their book, so the tax issue is not critical, but the market always looks forward to the time that normal profitability (inlcuding taxes) is established, so you may want to take a tax rate into account. I agree with Larry that 20% penetration is the most optimistic outcome feasible for VLNC, and thus for modeling purpose you should not assume more then 10%, particularly in cell phone where TNB is already in the market and is establishing a "fighting floor" for VLNC to overcome. Zeev

To: Jay Lowe who wrote (6091)	12/19/1998 2:03:00 PM
From: gvander	Respond to of 27311

Don't forget changes in working capital investment. This is a common mistake even professional analysts make in analyzing high growth companies. They underestimate how much cash flow is eaten up by WC requirements and given the short product cycle the company never gets ahead of ramp up curve and ends up never showing a profit. However, this kind of analysis may be premature given Valence's other challanges (especially those posed by the competition).

To: Jay Lowe who wrote (6091)	1/4/1999 1:00:00 AM
From: kolo55	Read Replies (1) \| Respond to of 27311

Suggestions for your spreadsheet. Use 25% growth rates for both the portable computer and cellphone markets for at least the next five years (over 1999 forecasts). Furthermore, the forecast for 1999 cellphones is around 150 million units and portable computers at 15 million units. Accelerate these sales at 25% annually in future years. Incidentally, in 1998 there were about 12 million new laptops sold, and 120 million cellphones; these figures are wrong on the spreadsheet as well. I only know of three companies that have said they can produce now, and Valence has the largest production capacity. Furthermore TNB is using cobalt cathodes, and I believe this will retard market acceptance. From what I see right now, I expect Valence will get at least 50% of the Li polymer market in 1999 and 2000. For grins, try that in your spreadsheet. Your price estimate of $75 for Valence's laptop batteries, and $20 for the 5 WH cellphone batteries seem reasonable. Beyond laptops and cellphones, there are markets for camcorders, PDAs, etc. I suspect that these battery markets could number in the 100 million units per year range, with manufacturer's pricing ranging from $10 for a Palmpilot unit to $20 for an extra length camcorder unit. My guess is that Li-poly's share of this market could easily exceed $200 million within two years. But if you want to make it simple, then ignore these markets for now. Finally, I suggest you use the annual revenues and set a Valence market cap of 5-7 times revenues. This is what the S&P traded at this year, and we can avoid arguing about precise profit margins. I believe the spreadsheet margins are too low. As other posters have suggested, use 30M shares for 1999. Hope to see the revised spreadsheet soon. Paul