Price Drop

[John F]

Well, I've followed the Segway since it's unveiling (before that while it was just the speculated "It") and one thing that kept being mentioned over the years was an inevitable price drop because chips would cost less and yada, yada, yada...

It's been something liek 3 years since the Segway started being sold to general consumers... Besides the price drop that made the i-Series 4495 instead of 4995 (in the US) a few years back, why hasn't there been a further price reduction yet?

Just wondering.,

[Desert_Seg]

John,

Many of us have been hoping for a price drop but before that can happen sales of Segways have to hit critical mass. To date I'm not sure that has been reached and there is still a lot of R&D money and Investment money that has to be recouped.

Yes, sales might likely increase with a price drop but the corresponding loss in profit may not offset the increase in revenues. The old catch 22....lower the price and (potentially) make less money or keep it where it is and make the "normal" money.

BTW, we have lowered our prices once again so we remain a great value for those outside the US and within our territory!

Steven

One day to go and then all is once again right in the world!

[luckie]

Well, I've followed the Segway since it's unveiling (before that while it was just the speculated "It") and one thing that kept being mentioned over the years was an inevitable price drop because chips would cost less and yada, yada, yada...

It's been something like 3 years since the Segway started being sold to general consumers... Besides the price drop that made the i-Series 4495 instead of 4995 (in the US) a few years back, why hasn't there been a further price reduction yet?

Just wondering.,
I guess the only change in pricing actually was a small increase of $500 as a result of the fact that latest Segways come with high-end "Saphion" Lithium Ion batteries (24 miles at $1300) instead of the older NiMHs (12 miles at $600).

With the new batteries, Segway Inc is likely revisiting a number of potential commericial clients in hope of increasing sales of fleets to companies with many warehouse facilities (GM, Ford, FedEx, UPS etc), mail carriers (US Postal Service), security and police (Airports, local PDs), parking gas meter readers, etc. Those clients would be willing to pay the current price or even higher.

I believe these vertical markets are where Segway Inc can make some significant money in the near term, much more than in sales to consumers.

[amturnip]

The 2003 price got you an HT from the manufacturer after long delays and some exciting but inconvenient training. Today it's cash-and-carry from a dealer, who might charge less than MSRP, throw in extras, extend free financing, or broker a deal for a used unit instead of new. In short, MSRP doesn't tell the story.

The sales price doesn't pay for the scooter even today; the company runs on venture investments. So, it is a bit early to expect reductions from the $5K on technical reasons like a drop in the price of a microchip.

[yosgof]

Is Segway still eating up venture capital while Valence is making a heap?

Surely this is wrong.

[fredkap]

Valence Technology is losing approx $3 million per month. It has an accumulated deficit of $485 million and has largely been supported by a wealthy venture capitalist named Carl Berg. Their sales are up approx. $2.1 million dollars per quarter over last year. If Segway Inc is paying $1,000 per set of lithiums AND if their entire increase in sales is due to sales of our Saphion batteries that would equate to sales of 700 sets of lithium batteries per month.

The following financials aren't formatted properly but I have highlighted key points for their financials for the 9 months ended Dec 31, 2005.

-Fred

http://phx.corporate-ir.net/phoenix.zhtml?c=72609&p=IROL-sec



December 31, 2005 March 31, 2005

---------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,832 $ 2,500
Trade receivables, net of allowance of $99 and $115 as of
December 31, 2005 and March 31, 2005 3,940 1,464
Inventory 5,172 2,564
Prepaid and other current assets 2,352 920
----------------------- --------------------
Total current assets 13,296 7,448
Property, plant and equipment, net 3,125 2,383
Intellectual property, net 314 400
----------------------- --------------------
Total assets $ 16,735 $ 10,231
======================= =====================

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 3,458 $ 3,251
Accrued expenses 4,393 4,607
Deferred revenue 406 1,241
Note payable to stockholder 1,000 -
----------------------- --------------------
Total current liabilities 9,257 9,099
Long-term interest 14,772 12,536
Long-term debt, less unaccreted debt discount 17,822 -
Long-term debt to stockholder, less unaccreted debt discount 32,986 34,656
----------------------- --------------------
Total liabilities 74,837 56,291
----------------------- --------------------
Redeemable convertible preferred stock, $0.001 par value, 861 shares
authorized, issued and outstanding as of December 31, 2005, and
1,000 shares authorized, 861 issued and outstanding as of March 31, 8,610 8,582
2005, liquidation value $8,610
----------------------- --------------------

Stockholders' equity (deficit):
Common stock, $0.001 par value, 200,000,000 shares authorized;
89,745,984 and 87,061,639 shares outstanding as of
December 31, 2005 and March 31, 2005 90 87
Additional paid-in capital 426,737 415,745
Deferred compensation (120) (89)
Notes receivable from stockholder, net of allowance of $1.2 million
as of December 31, 2005 (3,890) (5,164)
Accumulated deficit (485,862) (461,328)
Accumulated other comprehensive loss (3,667) (3,893)
----------------------- --------------------
Total stockholders' deficit (66,712) (54,642)
----------------------- ----------------------
Total liabilities, preferred stock and stockholders' deficit $ 16,735 $ 10,231
======================= ======================

The accompanying notes are an integral part of these condensed consolidated financial statements.









VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(Unaudited)


Three Months Ended Nine Months Ended
December 31, December 31,

------------- -------------- ------------- ------------
2005 2004 2005 2004
------------- -------------- ------------- ------------
Revenue:
Licensing and royalty revenue $ 254 $ 94 $ 571 $ 279
Battery and system sales 4,565 2,453 13,171 8,019
------------- -------------- ------------- -------------
Total revenues 4,819 2,547 13,742 8,298
Cost of Sales: 5,971 4,305 18,642 11,858
------------- -------------- ------------- -------------
Gross profit (loss) (1,152) (1,758) (4,900) (3,560)
Operating expenses:
Research and product development 1,185 1,962 3,961 5,597
Marketing 420 859 1,661 3,146
General and administrative 3,759 3,415 10,224 9,463
Depreciation and amortization 178 154 528 713
(Gain) Loss on disposal of
property, plant and equipment 11 (4,172) (611) (4,643)
Contract settlement charges, INI 0 957 0 957
Contract settlement charges, other 0 541 0 541
Asset impairment charge 170 - 170 87
------------- -------------- ------------- -------------
Total costs and expenses 5,723 3,716 15,933 15,861
------------- -------------- ------------- -------------
Operating loss (6,875) (5,474) (20,833) (19,421)
Interest and other income 138 114 425 265
Interest and other expense (1,524) (1,064) (3,996) (3,135)
------------- -------------- ------------- -------------
Net loss (8,261) (6,424) (24,404) (22,291)
Dividends on preferred stock 43 43 130 130
Preferred stock accretion 7 142 28 577
------------- -------------- ------------- -------------
Net loss available to common stockholders (8,311) $ (6,609) $(24,562) $ (22,998)
============= ============== ============= =============
Other comprehensive loss:
Net loss (8,261) $ (6,424) $(24,404) $ (22,291)
Change in foreign currency translation
adjustments 36 90 226 121
------------- -------------- ------------- ------------
Comprehensive loss $ (8,225) $ (6,334) $(24,178) $ (22,170)
============= ============== ============= ============
Net loss per share available to common
stockholders $ (0.09) $ (0.08) $ (0.28) $ (0.29)
============= ============== ============= ============
Shares used in computing net loss per share
available to common stockholders, basic and
diluted. 89,715 82,431 89,223 79,575
============= ============== ============= ============

[fredkap]

The latest Form 10Q states that Segway accounted for 57.9% of Valence Technology's sales which would equate to $2,643,000. If the price that Segway pays for the lithiums is $1,000 that would be 2,643 sets of batteries for the quarter or 881 units per month. Valence also states that they are having problems meeting Segway's demand for product.

Assuming that I am somewhat close with these guesses, this isn't bad news, quite frankly the Saphion batteries are exactly what were needed for our segs and if Valence picks up their production so will Segway. We may be on the cusp of an explosion of Segway sales.

-Fred

[Desert_Seg]

In my own humble opinion, there is a lot riding on Valence being able to deliver, and continue delvering, the Saphion batteries.

Based only on my outside studies of the component product stream into Inc, there is a heavy demand being placed on Valance and, since Inc uses JIT sourcing, an even heavier demand on the disties / dealers being able to forecast properly.

While I agree that we are on the cusp of an explosion of Segway sales (not maybe, we are), our ability (as dealers / disties) to deliver product when the client demands it is critical. Of course, INC's ability to meet our demand is even more critical. If either one fails to delivery properly, sales will sink...quickly!

Only time will tell but being dependent on only one battery manufacturer has to be causing many sleepless nights at INC. Valence's comments can't have made matters any better and then if you add in the recent battery problems that were noted, I can only imagine that there has to be pressure to identify a secondary battery source!

FWIW,

Steven

[mario-ramos]

The latest Form 10Q states that Segway accounted for 57.9% of Valence Technology's sales which would equate to $2,643,000. If the price that Segway pays for the lithiums is $1,000 that would be 2,643 sets of batteries for the quarter or 881 units per month. Valence also states that they are having problems meeting Segway's demand for product.

Assuming that I am somewhat close with these guesses, this isn't bad news, quite frankly the Saphion batteries are exactly what were needed for our segs and if Valence picks up their production so will Segway. We may be on the cusp of an explosion of Segway sales.

-Fred

Does anybody (perhaps a dealer that is a member of this site) know the percentage between sales the two kind of batteries?

[Dragan]

I have no idea, I can tell you that we have not sold a single nickel machine since last July, when the lithiums became obtainable with a level of regularity. When our customers have looked at the price difference buying with lithiums vs. nickels, and the cost of upgrading later, they have all bit the bullet and gone lithium at the start.
Wayne

[Desert_Seg]

I have to concur with Wayne.

Ever since the LIons came out we haven't even gotten an inquiry regarding the Nickles....nary a one. And, to be honest, I would encourage any buyer looking at a Nickel to buy a LIon....

Steven

[segwaycf]

As well, we have not sold a ni-mh battery in six months. (Outside of the p133 sales).

[Sal]

As well, we have not sold a ni-mh battery in six months. (Outside of the p133 sales).


... that has been asked before...

Does INC have any plans to make available LiIons for the P series?

If the P Series is not going to be discontinued, then it only makes sense to make a short run / regular run of LiIons for the P, or sell all NEW P series with the LiIons at the same pricing ($3995) as current P NiMHs, but reduce the current NiMH P series price by $500 ($3495).

I know dealers are already making great deals on the P series selling NiMH P series for just around/above $3000.

I think INC might have a goldmine for a P LiION "priced to go."

Does anyone think that's a good idea, or am I talkin' crazy?

-Sal

[fredkap]

Sal, this is a guess, but I think that the current form factor of the Saphion individual batery cells adds an inch of depth to the I series. I'm not sure that the P's could take that added depth.

At some point in time the saphions will come in more than one form factor and a suitable battery will be made for the P but that could be a year from now.

[bystander]

... that has been asked before...

Does INC have any plans to make available LiIons for the P series?

If the P Series is not going to be discontinued, then it only makes sense to make a short run / regular run of LiIons for the P, or sell all NEW P series with the LiIons at the same pricing ($3995) as current P NiMHs, but reduce the current NiMH P series price by $500 ($3495).

I know dealers are already making great deals on the P series selling NiMH P series for just around/above $3000.

I think INC might have a goldmine for a P LiION "priced to go."

Does anyone think that's a good idea, or am I talkin' crazy?

-SalYou're not talkin' crazy, but there seem to be technical reasons why the current p-series design isn't practical for a Saphion upgrade.

Maybe a future model in the p-series size class can accomplish this.

-------------------------

Edit:
Oops, it took so long for me to reply, I didn't see Fred's post.

I am of the opinion that the differences in capabilities between the NiMH & Saphion battery chemistries required the newer Saphion packs to be built so bulkily in order to maintain the safety level when balancing at top speed.

The doubled range was a side effect (IMO). A very good side effect, but secondary to the safety factor. The cells inside the Saphion packs are arraigned 23 cells "tall" by 4 cells "wide". They could have made the arrangement 2 or 3 cells "wide" to save space, but the glide would feel like going uphill on an old NiMH pack that needs reconditioning.

[mario-ramos]

I guess the only change in pricing actually was a small increase of $500 as a result of the fact that latest Segways come with high-end "Saphion" Lithium Ion batteries (24 miles at $1300) instead of the older NiMHs (12 miles at $600).

With the new batteries, Segway Inc is likely revisiting a number of potential commericial clients in hope of increasing sales of fleets to companies with many warehouse facilities (GM, Ford, FedEx, UPS etc), mail carriers (US Postal Service), security and police (Airports, local PDs), parking gas meter readers, etc. Those clients would be willing to pay the current price or even higher.

I believe these vertical markets are where Segway Inc can make some significant money in the near term, much more than in sales to consumers.



http://www.segway.com/solutions/business_customers.html

As James Carville would say: "It's the corporations, stupid"

[poohbear]

All I can say is... if they made a lithium battery for my p, I would be over the moon!

I have a p133 and a lithium I180. I am actually more comfortable on my p because I use it the most and it just feels like an extension of myself. When I use the I180, I feel a little scared... too big, too high, too fast. If Fred is right, and a lithium could be made available in another year or so, my life would be complete. I'd also have a 180 to sell. =)

[Desert_Seg]

Please don't shoot me....but I don't agree.

I believe that the p series is meant to be a low-cost, easy entry model. That means it is the "cheap" model and, as such, there shouldn't be any frills. My hope is that the p series price drops even further and that there is no true upgrade path other than buying a LIon i series.

And yes, going forward I believe we should eliminate the Nickle i series.

Steven

[luckie]

I agree with Steven and others ...

Entry level p Series with NiMH batteries $2995
Long-range p Series with Lion batteries $3495

Now if only Segway Inc could actually make this happen. By the way aren't we due (this time of year) for an announcement of some sort from the mothership?

Doug :)

[macgeek]

I haven't spoke at all about rumors and dealers, but...
According to the 'buzz' segway is PLANNING on coming out with a
"low cost" version of a segway.. this is as I said BUZZ!! NOT FACT!!!

I do know for sure, new product announcments come the summer!

Jonathan

[KSagal]

I do not think that the NiMH can be circular filed yet... It is not time to trash them for the I series nor the P series, till the FAA gets over their fear of the LiIons...

Anyone who would board a plane, must have some sort of short range battery that could suffice till the shipped ahead LiIons could be retrieved...

I am keeping my NiMHs conditioned for just that reason... I will fly with my old E-167 and have my LiIons shipped ahead...

By the way, how is it flying outside of the United States with LiIons?

How else will anyone get to segfest?

[Desert_Seg]

Karl,

It's an interesting question you ask.

Flying with a Segway, both international and within the US, has only led to one question....Is it a dry-cell battery?

When the answer is yes there has not been a single more question about NiMH, LIon, or any other sort.

We have a client who has told me that he takes his 180 everywhere with him, all around the world, as baggage.

We have a client who just took some i180s with them to Europe

And I have a sneaking suspicion that our shippers have on at least one occassion brought an order in on a passenger flight.

This leads me to believe that no matter where you are at, or who you are flying, that LIons likely aren't a major issue.

CAVEAT - This doesn't mean I condone flying with LIons, I'm just stating facts and opinions.

Steven

[fredkap]

Steven, I have complete faith in the safety of our Saphion lithium ions. That said, until the regulatory authorities share my opinion, taking a lithium on an airplane AND having someone intelligient know what we have done may be a serious crime if we are caught.

Even more upsetting would be if the airlines said they couldn't easily tell what type of battery was on a Segway and banned all air transit of them.

We are very fortunate to have these state of the art batteries on our magical machines. If we try to get away with sneaking a lithium on an airplane, the result might be so arbitrary and severe that it could ruin a lot of hard work by a lot of people.

Fred

[Desert_Seg]

Fred,

I agree with you. I'm more concerned about knee-jerk banning than about an explosion but at the same time I'm not sure that even the airlines know enough about the batteries to know what they are doing.

Only time will tell.

Steven

[yosgof]

Guys,

I am not sure I am following… I have Li-Ion batteries on my laptop, my cell phone, my iPod, my IO2 pen, my PDA and these are the ones I know of.

No one ever asked me about any of these devices when flying. In fact flying with a laptop is fairly standard (now with the introduction of WiFi Internet on Boeing jets).

Is it only a matter of quantity?

[cmonkey]

It's definitely a matter of mass.
While thermal runaway on a small Lion battery could probably be handled easily. 22lbs of the stuff is not a good thing to have go up in smoke on a plane.

While thermal runaway is not a serious threat from the phosphate (segway) batteries.... the Data sheets as of right now just say lithium. They have yet to cath up to the valence technology

[Desert_Seg]

It's also a little more complicated.

First, as CMonkey states, it is a matter of size / mass / thermal energy.

Secondly, the laptop battery, or any other accessory you mention, is more than likely stored in the main cabin, an area that is easily monitored.

The Segway batteries are more than likely stored in baggage compartment which, while electronically monitored, doesn't have "eyes and ears" on it all the time which means if an event were to occur the likelyhood of a catastrophe is greater.

Therefore, even though the Valence technology might be the best in the world, the fear of one accident is enough to not change the rules.

Steven