chart hildo, page-11

The issue with Fiberbyte is that it is not a cheap business to run.

Fiberbyte's loss is, and remains, substantial. For example:
F2 = $1.2m
F3 = $1.5m
F4 = $1.35m
F5 = $1.25m
F6/H1 = $600K
F6/H2 = $500K
F6 = $1.1m
F7/H1 = $500K

This suggests that Fiberbyte is still costing in the range of $1.1 - $1.3m in annual losses, bearing in mind that substantial ramp-up costs have since been incurred during this year.

Fiberbyte remains 89% controlled by SLX meaning that the losses actually reported are only reflective of SLX's proportional share.

Earlier this year, SLX also advised that further marketing of Fiberbyte's products was being deferred until the release of the 3rd commercial product. At the time, that was expected within a further short period. That was in late February. Earlier, in September 2006, the timing to release was anticipated to be 'several months' away.

Clearly, there has been slippage with the release of the 3rd commercial product. The extent of that slippage is hard to say, but I cannot for the life of me find any recent PR (since February) alluding to that 3rd commercial product.

My issue, therefore, is that I do not expect to see Fiberbyte contributing anything meaningful to the bottom line until well into 2008.

Certain DCF calculations for SLX may well not take account of Translucent and of Fiberbyte, but with each contributing (together) >$4m in annualised losses, there is a need for those losses to be arrested /reversed in order for the DCF calculations to turn positive.

Even if a lower discount rate were to be used, that rate would now have to be further adjusted to match this new risk averse environment.

My issue (as it has always been) - great, promising technologies, but they now really need to start getting some runs on the board.

Clearly, Fiberbyte has disappointed in its progress to date whilst Translucent shows great forward promise. But really, the only technology that has so far clicked has been that concerning U and even there, we are still some years off of creating a revenue generating business.

At the June 2007 alternative energy conference, SLX updated the following comemrcialisation timetable:
1)
TEST LOOP
- 2 more years duration
- circa mid 2009
2)
LEAD CASCADE
- 3-4 years duration (following on from the TEST LOOP program)
- little overlap
- circa late 2012
3)
COMMERCIAL PLANTS
- following completion of LEAD CASCADE
- arguably, 1-2 years in terms of active deployment
- some overlap with LEAD CASCADE + scaleability
- circa early 2014
4)
REVENUE FLOWS BACK TO SLX
- arguably, commencing in F14, with first full year contributions from F15.
- critical mass arguably, within a further 3-5 year period
- peak earning opportunity, circa F17, or later
- that is still some 10 years out, That's the issue, even with a lower discount rate, adjusted to a new risk averse business environment, the valuations will likely not improve all that much. Indeed, they may still end up being somewhat weaker.

The key here, therefore, is in generating sustained news on the Fiberbyte front, whilst accelerating the U story, and kicking something over commercially regarding Translucent. Then, but only then, will the DCF valuations start reflecting something a bit more solid.