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Technology Stocks : The New QLogic (ANCR)

QLGC 16.07

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Aug 24 5:00 PM EST

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To: Kerry Lee who wrote (22562)	6/12/1999 1:38:00 AM
From: Greg Hull	Read Replies (2) of 29386

Kerry, Thank you for notifying us of this filing, and posting these portions. I have just given it a cursory reading (I'm not done washing Larry's cars yet) and so I may have missed something. My first thought when the Sun deal was announced was "Oh great, here's the financing for the second half of the year." When I read further and saw that the warrants vested with purchases, I deduced that it seemed unlikely that Sun would purchase $100M of switches this year, and that most if not all of the $11M received for the underlying common stock would be after 1999. Why would Sun exercise the warrants prior to expiration unless they want to sell the common shares immediately? The answer may be in the filing and I did not catch it. By the time Ancor receives the funds from Sun they probably won't need the cash. I wonder if the warrants were creative selling, or shrewd purchasing by Sun as has been implied by more than one poster. If the common hits $74, Sun's net expenditure will be $0. Cal has said that they would prefer an equity investment by a customer rather than to have a secondary offering. The recent IPOs/secondaries may have changed that thinking some what. The added attention caused by the underwriters peddling the offering may add gas to the fire. 1-2M shares sold could bring in $30-40M today. That ought to last until they are cash flow positive. The INRANGE deal carried warrants with it and so did Sun - why didn't HDS ask for them? Will every heavy weight now expect them? At what point is it not in Ancor's best interest to offer warrants? Maybe the next announcement of an OEM will include warrants (or common) with $10-20M up front. If this were to happen would Ancor still want to have a secondary offering for the attention it brings, including analyst coverage that ANCR is sorely lacking? Greg

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