KJ, based upon your post, and what to me is new disclosure coming from the conference call, I have many, many questions concerning the Inrange deal, and I hope that you can help me out.
Will you please explain to us exactly what is involved in the Inrange deal? When I read the press release, I concluded that Inrange, not Ancor, was designing, int he short term, product enhancements to an existing line of product, and that existing Ancor technology was at the heart of that technology and would be included in its present form. Nothing in the joint press release told me that Ancor had to make design changes to existing product, of undetermined specification, on a collaborative basis with Inrange, and that Ancor would only receive and/or keep "licensing" and "royalty" payments if the design changes worked and Inrange was able to ship product. Thus, my new understanding of the contract (if it is correct) is a very different kind of contract, and certainly explains why revenue on this contract cannot be booked at this time (contrary to much speculation on this Board as to whether the revenue would be booked in Q 3 or Q4, so I believe that others were confused as well), and must be booked over a five-year time period.
In fact, this arrangement sounds very much like the 1996 contract that Ancor had with Sequent (Payments only upon a commercial shipment), which eventually was cancelled because the anticipated technology could not be made to work. Must we now re-live that Sequence? From that perspective what is different about the Ancor/Inrange deal, particularly given my new understanding that the revenue will be booked over a five-year period -- that is quite a long development time frame for an uncertain product not yet identified and dependent upon design/other changes by Ancor engineers of any unknown magnituted, to be accomplished at an unknown cost. This also explains why Ancor could not at this point comment on any margins for the Inrange deal -- it sounds to me like the work has not yet been done, no one can say for sure whether the work will yield a product as anticipated by Inrange, and no one knows how much Ancor will have to contribute in overhead to bring this to a conclusion. . .so I wonder if you can help me out in understanding more about this contract, where any of the foregoing was actually disclosed in the press release (so that I will better be able to "read between the lines" on future press releases), and what you speculate will be the financial outcome for Ancor, and the reasons behind your estimate?
Thanks in advance,
Pat |
