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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: Roger Arquilla who wrote (18399)	10/6/1998 9:37:00 PM
From: Kerry Lee	Read Replies (3) of 29386

IMPLICATIONS OF NETMARKS ANNOUNCEMENT 1. Netmarks was already involved with the big CAD/CAM contract ( we all know it was Honda but nobody from Ancor will ever admit to it ) 2. They ( Netmarks )acquired the Fibre Channel personnel and the INVENTORY that was already shipped by Ancor to Hucom. The remainder of Hucom was "re-structured". 3. The $1 million of inventory that was shipped in Q2 by Ancor to Hucom was NOT recognized as revenue in Q2 nor was there any accompanying accounts receivable in Q2 since at the time, Ancor mgmt was aware of likelihood of uncollectible a/r from Hucom even though they had shipped the product and title/ownership of the product passed to Hucom.Ancor chose to be ultra-conservative in Q2 by not recognizing the $1 million and by taking a partial inventory write-off. 4. It is my latest understanding that for Q4 1998, there is a 99-100% probability that Ancor will collect/recognize at least $500,000 in revenue ( cash )from this past due shipment carried over from Hucom and that the prospects for collecting/recognizing the entire $1 million are somewhere between 80-95%. 5. Netmarks is much larger and financially more stable than Hucom and will help Ancor secure significant new FC business in the future if/when the Japanese economic situation improves. Don't expect Japan sales to recover overnight. 6. The fourth quarter ( Oct 1 - Dec 31) revenues for Ancor without taking into effect any other new business, should be in the range of $2.4 - 2.9 Million ( $500,000-1.0 Million from Netmarks plus $1.9 Million Boeing AWACS )and just as importantly, a large of this revenue will result in POSITIVE CASH FLOW GOING FORWARD due to previous accounting/inventory write-offs and the fact that most of the inventory was already built and paid for by Ancor in Q2. IF Ancor collects all the Netmarks and Boeing invoices in Q4 then we are looking at CASH inflows of $2 million ( conservative ) from Boeing/Japan plus the $3 million INRANGE/General Signal installment payment = $5 million cash influx for Q4. Don't forget they just received $3 million payment in Q3 and will get another $3 million payment from INRANGE in Q1 1999. Looking better and better....

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