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Technology Stocks : The New QLogic (ANCR)
QLGC 16.070.0%Aug 24 5:00 PM EST
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To: Craig Stevenson who wrote (18225)9/25/1998 12:00:00 PM
From: Kerry Lee  Read Replies (2) of 29386
 
<< Here is where my assumptions may break down. I am calculating about 25 Million
shares outstanding. $1.9 Million divided by 25 Million is 7.6 cents per share.
Multiplying that by 4 (assuming that this can be maintained) yields 30.4 cents per
share on an annualized basis. 20 times that is $6.08.>>

Craig, I respectfully disagree with your valuation technique of using the PE ratio for a development stage/start-up company in a new/high growth sector like FC. I believe that analysts are more likely to:

1) value a company like ANCR by looking at valuations of companies in high growth sectors, eg.Gigabit Ethernet, Internet and Biotech companies.

2) Forecast 12-24 month forward revenues and then use Price-to-Sales ratio and PEG ratios

3) Look at takeover value based on what other companies have been sold for,eg. in 1996, Granite Systems sold for $220 million and had zero revenues, Netstar had $5 million revenues and sold for $300 million to ASND...more recent small company data communications deals ( proprietary technology, minimal sales ) seem to be going for $50-150 million. The reality is that IF Fibre Channel takes off in a big way,Industry consolidation is INEVITABLE ( look at TELCO )and companies like Brocade and Ancor will be hard pressed to stay independent 1-2 years from now.
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