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

To: Rich Wolf who wrote (8094)	2/9/1999 12:06:00 PM
From: Mark Johnson	Read Replies (1) \| Respond to of 27311

Thanks Rich: Valence can make big bucks with their production capabilities at this very moment. That is what was understood at the meeting. Lev indicated their yields are higher than industry averages and he was very confident in their product delivery capabilities. Arguing about profit potential at this point is wasteful and antagonistic. Remember production costs for Manganese are much lower than cobalt increasing margin potential. The point is Valence is sitting on a gold mine!

To: Rich Wolf who wrote (8094)	2/9/1999 12:13:00 PM
From: Rich Wolf	Read Replies (1) \| Respond to of 27311

Addendum re: production rates. Lev stated that currently they're running the large battery cell line at 4 cells/minute, and the small cell line at 25 cells/minute. He said the former rate would be incrementally sped up once they get to production, as the max rated capacity is higher. We asked if he runs it every day and he said no. There's clearly potential for waste at startup, so you want to run it continuously once you get it running at speed. After the cells are configured, they are inserted into foil packages which contain an 'extension,' the electrolyte injected, then the cell is charged (or 'brought to life,' as Lev said). This results in an out-gassing, which is trapped in a 'blister' in the foil extension, which can then be clipped off. After a few days for out-gassing, the cells are laid in trays and put into quarantine chambers for 30 days. My only concerns, as I consider how they will commence bringing the entire production into 'balance' (term Lev used, common in production facilities: means input rates equal output rates at each stage), relates to the packaging and quarantine facilities. The cellphone batteries are packaged (as described above) in a fully-automated fashion, but the laptop cells are inserted into the foil by hand. (There was a long chamber, with gloved access for 6-8 workers (I think) to perform this step.) This could be a production bottleneck, although it is so low-tech as to be easily remedied. Lev did tell us afterwards that they're in the process of duplicating the automated packaging of the small cells for the large cells (new equipment coming in), but that that would not prevent him from accepting a P.O. at this point. The quarantine facility may also need expanding as they go to multiple shifts per day. It'll be fun to watch this facility expand. Lev said he is redirecting more effort to increasing production of laptop cells, as currently they have few potential competitors (due to the difficulty in making lithium-cobalt work safely in such large packages). We may find that higher profit margins can easily be maintained here, and for some time to come. The liquid electrolyte li-ion battery makers can't cut production costs below what they are now, and even if they were to dump, Lev indicated he has a lot of wiggle room to still maintain a profit margin, if he wanted to match them. But he didn't expect he'd have to, since his product has many advantages, both in terms of safety and form factor.

To: Rich Wolf who wrote (8094)	2/9/1999 12:32:00 PM
From: Dennis V.	Read Replies (1) \| Respond to of 27311

Rich, this argument has been raised, as you know, since the last CC; at that time, I made the same point that you did,e.g. Lev was discussing cells, since that's their product. Subsequent discovery, including financial analysis, sunk my contention, and the consensus was that 1800 batteries were needed to break even, cashflow. The statement that this could be accomplished on one shift was made by FMK, not Lev. That was then. Apparently, Lev is choosing his words more carefully; when he says cells,IMO he means CELLS. I do not believe that the structure of the cell causes a semantic problem. Lev knows that a battery is a finished product consisting of X cells, regardless of the details of the structure of the cell, itself. From what skyhi and Mark have said, it appears that the line is running at reduced speed, and Larry is correct, but not necessarily complete. The line, from what I gather, can be speeded up as quality control allows. Bottom line, they are not at breakeven on a single shift basis, yet. Maybe soon.