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Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: WhoLovesYa who wrote (22945)	6/22/1999 1:13:00 PM
From: eric sahlin	Read Replies (1) \| Respond to of 29386

More Valuation magic. With BRCD in the 90s lets see what the smart money "might" be thinking. Assume FC switch market = 500 million in 2002 BRCD gets 71% of the market or 350M in sales (With BRCD announcing IBM the market might be thinking BRCD will capture a large 70% of the switch market). Using a P/S of 15 on the 350M, dividing by 29M shares out and then discounting back 3 years at a 25% discount rate gives $92.69 per share. (Using a P/S of 12.5 gives $77/share and a P/S of 10 gives $62 per share) ANCR gets 150M (~30%) of the 500M in 2002 Using the same P/S of 15 on the 150M and dividing by 27M shares out and discounting back 3 years at 25% results in a stock price of $42.7 per share. (Using a P/S of 10 results in $28.4 per share a P/S of 8 gives $23 per share). If SUN alone gives ANCR 100M alone in 3 years ANCR will have more than 150M of the 2002 market (the 500M market projection for switches in 2002 could be off also). Again ANCR managment will be upset with less than 33%. The P/S ratio of 15 or even 12.5 seems pretty optimistic to me. A more reasonable 10,8,7 (I read a Kinnard report where they think a P/S of 6,7 is reasonable for ANCR) seems more likely. Once switch market projections and market shares become more easy to predict as more OEMS get announced and FC switches start being sold the P/S ratios assigned to ANCR and BRCD should converge. My last valuation post was based on ANCR achieving 42.5% of the market in 2002 or 208M in sales. Again using 208M and the same process above with a P/S of 10, 27M shares out and a 25% discount rate I get about $40 per share. A P/S of 15 raises this to $60. In conclusion and in my opinion with BRCD trading at $90 per share; ANCR is severely undervalued. ALL IMHO Eric