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

To: Larry Brubaker who wrote (6335)	12/27/1998 11:29:00 PM
From: mooter775	Respond to of 27311

I think part of the confusion regarding samples from line 1 to potential OEMs may in fact be due to some different interpretation in terms. For example, I think that what has happened with line 1 is that each of the separate segments has been run successfully as a piece - Lev said as much during either the August or the November conference call. Now I think that the output of these efforts has been sent to OEMs for a number of months. And I think that the line has also been run, as a fully-automated line, though perhaps as slower speed for a number of weeks - and that output has also tested out successfully not only at the company but also at OEMs. So the work since, say October, has consisted of ramping up the line speed as well as completing its automated integration - and this output has not only been tested at the company but also sent out to OEMs. We think we have enough evidence of that, at least, for Everready to have shown the batteries in laptops of several laptop, palmtop, and perhaps cellphone manufacturers at Comdex. Now let's say that the line 1 just began to ramp up to near its projected capacity, say in the 5 to 8 batteries per minute, in late November or early December, ie, in time for the analyst visits the week of 12/3. Now the company can quarantine these for 30 days and test them, or they can choose a lesser time - I was told by Archibald some months ago that "fine-tuning" testing of the line output could occur in as little as two weeks, since recently-produced batteries can be compared quite accurately with earlier samples regarding a variety of their operating characteristics. I don't know if the company chose to quarantine and test its "fully-ramped up" output for 2 or 4 weeks or more beginning in late November/early December. But there clearly could be a scenario in which the company is quite satisfied with its ramp up speed and output quality, but still not have shipped large quantities of batteries off line 1, while that line was running at or near rated capacity. Therefore, the lawyers could put in a fact - that as of 12/21 the line 1 had not sent (fully quarantined and tested batteries to OEMs from line 1). Now that doesn't mean to me that the S-3 said or strongly implied that investors have been stiffed for another 6 months. Those investors whose choose to interpret the S-3 as meaning we have a 6 month delay, can certainly do so. I'm pretty confident they're wrong, however. As regards line 2, the initial Italian Arco line, my guess is that samples have also been tested and sent to OEMs while the equipment was in Italy. But since the line was delivered and installed in NI in late November/early December, it was also a fact correctly stated in the S-3 that no product had been sent to OEMs from that particular NI line - indeed as a NI line it didn't have time enough to produce, quarantine and ship to OEMs. Conservatives investors can and should wait for confirmation in the way of the contract - more aggressive investors can just as well stay long of add to their positions. I've stated that I'm more aggressive - I think there is very little probability that the batteries don't work as designed and that the lines aren't currently working as designed. And I am highly confident that the company will not be forced to engage in highly-dilutive financing - in fact I would expect that we might well see some customer financing of the capital equipment in order to be guaranteed production quantities in 1999. And I think longs will be very well rewarded for maintaining their position. I look for further clarification in the February conference call or annual meeting and a very strong 1999.