Here's more on ANCR from one the longs call a "shill". I have no position in ANCR, long or short. Never had, and probably never will.
Commentary : Herb on TheStreet
An Ancor Encore and More Excuses at CKE Restaurants
By Herb Greenberg
Senior Columnist
11/15/99 6:35 AM ET
Ancor's away, cont'd (the Hostile React-O-Meter spins outta control): That hootin' and hollerin' you heard Friday was shareholders of fiber-channel switch maker Ancor Communications (ANCR:Nasdaq) responding to an item here that suggested its big snare of a customer, Sun Microsystems (SUNW:Nasdaq), won't be announcing a product with Ancor's switch this quarter, as expected. Instead, Sun said the announcement is likely to come in the first quarter, so what's the big deal?
The big deal is what Ancor itself disclosed in a 10-Q last July: As part of the Sun deal, Sun has received warrants to purchase Ancor stock. What investors either have forgotten or are ignoring is that the conversion of those warrants into Ancor stock, which begins after sales to Sun top $10 million, will be viewed for accounting purposes as a discount to Sun. The higher Ancor's stock, the bigger the discount. And, according to Ancor itself, "Depending on the company's stock price, this sales discount could cause the company to report a negative gross margin on sales to Sun."
Put another way: If Ancor's stock remains high, Ancor could actually lose money on its Sun biz.
Maybe that's what Brocade Communications (BRCD:Nasdaq) CEO Greg Reyes (an Ancor competitor) was talking about when he was quoted here back in August: "No healthy company with competitive products would agree to a set of terms like those."
P.S.: Ancor enthusiasts are trying to say that the lack of income from Sun this quarter isn't really a change from expectations because Sun is receiving test or "beta" units. However, any revenue generated by a beta unit shouldn't be counted as real revenue, for forecasting purposes, because if the tests don't go as well as planned the products will generate no more revenue from a given customer -- in this case Sun.
Indeed, in discussions with a Sun spokeswoman, my assistant, Mark Martinez, mentioned that he knew Sun was a stickler for making sure that nothing goes out the door until Sun knows it works. The spokeswoman wholeheartedly agreed, which is why, she said, the product was still in beta.
In other words, don't count your income until your shipments have hatched. |
