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Valence Technology, Inc. (VLNC - $4 9/16) and Ultralife Batteries, Inc. (ULBI - $13) are both attempting to commercialize "better batteries" based on solid polymer lithium ion technology. Simply put, the batteries will offer superior performance characteristics (when compared with existing NiCad, NMH or liquid-based lithium ion batteries)-- greater energy density, reduced weight, enhanced form factory flexibility, and improved safety characteristics.
My thesis is that "Better Batteries" represent an enabling technology which could accelerate adoption of cellular phones, laptops, PDA's, etc. I don't need to explain to you guys what a drag current battery offerings are!
Both companies expect to ship product in Q1:97. ULBI has announced a major order from a cellular manufacturer (believed to be NOK/A) and is working with laptop manufacturers. VLNC has been working with MOT and recently admitted that is has shipped samples, probably to laptop manufacturers.
ULBI may have a better product--VLNC continues to refine its technology to meet cycle design specs, but management believes it has a viable product in its current form.
ULBI has major manufacturing equipment on order that is scheduled for Fall delivery. VLNC is currently ramping its manufacturing facility in Ireland and recently announced a JV in Korea (a sweet deal that doesn't require any cash outlay on the company's part and should be available for production sometime in '98).
Both companies have strong balance sheets and solid cash positions. ULBI has $38MM in cash (or $4.61/sh) and no LTD. VLNC has $54MM in cash (or $2.49/sh) and about $6MM in debt.
ULBI has 8.23MM shares outstanding, of which about 1MM have been sold short--a situation which could lead to a short squeeze if the company is successful. VLNC has 21.7MM shares outstanding, of which management and directors own about 24%.
Currently, investors are not paying very much for either company's technology. While both stocks have been controversial (ULBI dropped significantly when it was abandoned by Morgan Stanley last year and VLNC crashed and burned when it was unable to ramp a different technology several years back), I think they offer a play on an exciting technology and addresses a large market opportunity ($5B in 2000)--at an attractive risk/reward ratio.
Please note that I am long ULBI and VLNC--I'm not sure which stock is better so I've bought them both.
dan o'neill
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