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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: iceburg who wrote (22277)6/3/1999 9:55:00 PM
From: Zeev Hed  Read Replies (2) of 29386
 
Iceburg, I am not sure to what extent I am "off base". Currently the PSR is irrelevant at close to what 75 times last years sales. One measure of valuation I use (and it may not be acceptable to you) is that a fair value for a growth stock would be one times yearly sales three four years down the road. That is the value today. I surely hope you do not expect to get shares of ANCR at your five times sales of todays sales, do you? Based on the $1.4 Billion estimate (which I consider to be conservative, but who knows in such a fast changing market?), I said we are assuming that ANCR will capture 30% of the market then, in four years. If this was an internut company, who knows what valuation would be accorded to it.

Are there any competitors apart of BRCD? It might make sense to try and compare the current and future potential PSR of BRCD with that of ANCR. Unfortunately, I could not get into Edgar to dig out these data, anyone has these handy?

I think it is also important in evaluating ANCR to realize that their balance sheet is quite weak, for instance in comparison to its competitor. A strong balance sheet allows a company to exploit the market opportunity. A strong technology with a weak balance sheet can be problematic (see for instance the failure of TRKN to exploit their excellent technology last year due in part to an overburdened balance sheet), that is why I hope that SUN buys thise shares fast.

I still was unable to determine if the $100 MM deal with Sun is a one year deal or a multiyear PO to be drawn on. Does any one knows the time table for delivery of the goods?

Thanks.

Zeev
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