ANCOR Reports Record Quarterly Revenue on Continued Growth in SAN Shipments
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Ancor Reports Record Quarterly Revenue on Continued Growth in SAN Shipments
SAN Revenues Up 64% From 1999 Fourth Quarter; Ancor Adds EMC Corporation as OEM Customer
EDEN PRAIRIE, Minn., April 25 /PRNewswire/ --
Ancor Communications, Inc. (Nasdaq: ANCR - news) today reported record gross revenues of $7,205,000 for its first quarter ended March 31, 2000, up 374% from $1,520,000 in the comparable 1999 period and up 57 % from $4,587,000 in the 1999 fourth quarter. Sales of Ancor's products into the storage area networking (SAN) market increased 64% from the 1999 fourth quarter.
The company recorded a 2000 first quarter net loss of $1,999,000 on a GAAP basis, or $1,679,000 on a pro forma basis, resulting in a net loss per share of $0.07 on a GAAP basis or $0.06 on a pro forma basis. In the comparable 1999 quarter, the company recorded a net loss of $2,170,000, or $0.09 per share. Pro forma results for the 2000 first quarter exclude a sales discount of $320,000 to reflect the effect of warrants issued to Sun Microsystems. The amount of the sales discount fluctuates depending upon a number of variables, including the price of Ancor's common shares and the number of warrants issued. The number of warrants which will vest as a result of first quarter sales to Sun increased approximately 40% from the 1999 fourth quarter.
``We are off to an excellent start in what we expect will be a year of strong revenue growth for Ancor,'' said Ken Hendrickson, Ancor's chairman and chief executive officer. ``The breadth of our product line, and its performance and scalability advantages, are helping us win new customers in a rapidly developing market,'' he said. The company announced today that it has signed an OEM agreement with EMC Corporation, a world leader in information storage systems, software, networks and services.
Sales of Ancor's products into the storage area networking (SAN) market accounted for approximately 90% of first quarter gross revenues, with sales to MTI Systems, Sun Microsystems and INRANGE Technologies contributing about two-thirds of the quarter's total SAN-related revenues. ``Our SANbox switches are enabling MTI and INRANGE to be very successful in penetrating the growing SAN marketplace,'' said Hendrickson. ``In addition, our SANbox sales to Sun continued to grow at a pace consistent with our expectations and were up approximately 40% from the preceding quarter.
``Looking ahead, we expect to benefit from more dual-sourcing of Fibre Channel switches among original equipment manufacturers and major systems integrators,'' said Hendrickson. He cited today's announcement of Ancor's agreement to provide Fibre Channel switches to EMC for EMC's Connectrix line of departmental switches as an example.
Ancor also recently entered a distribution agreement for its SANbox switches with Bell Microproducts Inc. (Nasdaq: BELM - news), the world's largest value-added distributor of Fibre Channel storage products. Under the agreement, Bell Microproducts will integrate and distribute Ancor's 8- and 16-port Fibre Channel switches in North America, South America and Europe.
``Bell Microproducts is a premier value-added distributor for Fibre Channel products with tremendous market reach,'' said Hendrickson. ``This agreement provides excellent visibility for our products before key value-added resellers and integrators,'' said Hendrickson. Bell recently acquired Rorke Data Inc., a provider of Fibre Channel and SAN solutions serving North America and Europe and with particular strength in pre-press and video-on-demand applications. ``We will continue to complement our direct sales to OEMs with programs to build channel distribution that further increases the availability and support for our products,'' said Hendrickson.
Pro forma gross margin for the quarter was 50%, compared to 56% in the 1999 first quarter and 48% in the 1999 fourth quarter. Hendrickson attributed the higher than expected 2000 first quarter gross margin primarily to product mix.
Hendrickson said operating expenses in the 2000 first quarter were above planned levels, primarily as a result of additions to professional and technical staff required for product development efforts and the company's focus on building channel distribution to complement direct sales. ``To act on the opportunities in our market, we continue to invest aggressively in research and development, engineering and software talent, and marketing, sales and support resources,'' said Hendrickson. ``During the first quarter, we were able to bring new personnel on board faster than we expected given current labor market conditions and we seized the opportunity to do so.
``We are pleased with our first quarter progress,'' said Hendrickson. ``Our SANbox line of Fibre Channel switches continues to enjoy strong acceptance in the marketplace and we are well positioned for further growth. We offer the industry's broadest line of Fibre Channel products, the lowest-latency Fibre Channel switches currently available and the only Fibre Channel products able to connect legacy, private loop servers to newer public loop storage,'' said Hendrickson.
Hendrickson added that as the market migrates to larger scale SANs, Ancor is particularly well positioned to capture market share. ``With our director-class 64- and 128-port switches and our Multistage multiswitch architecture, we can offer customers a Fibre Channel solution that scales easily to accommodate massive volumes of data,'' said Hendrickson. The company's expects its 64-port switch will be available in evaluation quantities in the current quarter. This switch can replace up to 12 16-port switches to enhance ease of use, reduce cost and improve reliability.
At March 31, 2000, Ancor's cash, cash equivalents and short-term investments totaled $82 million. ``We continue to enjoy the liquidity and capital resources necessary to pursue our product development and marketing initiatives,'' said Hendrickson.
About Ancor Communications
Ancor Communications, Inc. provides high-performance Fibre Channel switches for storage area networks (SANs). The company's customers include Sun Microsystems, MTI Technology Corporation, INRANGE Technologies, Hitachi Data Systems, EMC Corporation as well as SAN resellers, including Bell Microproducts. The company was the first to deliver a Fibre Channel switch and the first to top the one-gigabit performance level. Ancor, an ISO 9001 quality certified company, is a member of the Fibre Channel Industry Association, the Storage Networking Industry Alliance, the InfiniBand Trade Association, the ANSI Standards Committee and the University of New Hampshire Fibre Channel Consortium to promote the advancement of Fibre Channel standards and interoperability. Information on Ancor is available on the World Wide Web at ancor.com
Forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 are qualified by the risk factors outlined in the documents Ancor Communications, Inc. files with the Securities and Exchange Commission.
Statements contained in this news release regarding expectations for revenue growth, the introduction of new products, market trends and operating expense trends are forward-looking statements. Factors which may affect Ancor's ability to achieve the results implied by such forward-looking statements include the actual size and the timing of the orders from Ancor's customers, and whether, as the Fibre Channel market matures, Ancor is able to continue to provide the technology and features required by the SAN market or whether Ancor's products will ultimately meet customers' needs.
ANCOR COMMUNICATIONS, INCORPORATED
STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
2000 1999
(Unaudited)
Gross sales $7,204,516 $1,519,713
Sales discounts (319,649) --
Net Sales 6,884,867 1,519,713
Cost of goods sold 3,580,773 664,805
Gross profit 3,304,094 854,908
Operating expenses
Selling, general and administrative 3,498,759 1,751,833
Research and development 3,217,859 1,326,587
Total operating expenses 6,716,618 3,078,420
Operating loss (3,412,524) (2,223,512)
Nonoperating income (expense)
Interest expense (1,789) (6,183)
Other, primarily interest income 1,415,613 67,435
Net loss (1,998,700) (2,162,260)
Accretion on convertible preferred stock -- (7,681)
Net loss attributable to common
shareholders $(1,998,700) $(2,169,941)
Basic and diluted net loss per common share $(0.07) $(0.09)
Pro forma basic and diluted net
loss per common share $(0.06) $(0.09)
Weighted average common shares outstanding 28,911,688 24,002,103
ANCOR COMMUNICATIONS, INCORPORATED
BALANCE SHEETS
March 31, December 31,
2000 1999
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $22,755,009 $37,139,418
Short-term investments 59,091,353 49,188,332
Accounts receivable, less allowances of
$64,492 and $64,492, respectively 5,841,632 1,973,064
Inventories 2,761,549 2,894,348
Prepaid expenses and other current assets 359,947 663,821
90,809,490 91,858,983
Equipment, net of accumulated depreciation 4,758,130 4,173,257
Other long-term assets, net of accumulated
amortization of $1,017,186
and $943,678, respectively 368,455 434,591
TOTAL ASSETS $95,936,075 $96,466,831
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $28,797 $39,524
Accounts payable 2,215,282 1,688,045
Accrued liabilities 1,219,086 1,883,652
Unearned revenue, current 2,221,761 2,028,714
5,684,926 5,639,935
Long-term unearned revenue, less current 5,091,108 5,414,386
Long-term debt, less current maturities 5,538 6,988
Shareholders' Equity:
Capital stock 137,718,283 135,729,601
Accumulated deficit (52,322,779) (50,324,079)
Other comprehensive loss (241,001) --
85,154,503 85,405,522
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $95,936,075 $96,466,831
SOURCE: Ancor Communications, Inc.
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