On a slow news week-end, I found it interesting
to look at a few posts from the SI Ancor thread
around October 29,30 1998.
During this time, ANCR traded at 1.625 to 1.875,
and implications of the Reg D financings were
a large focus for investors. Expectations for the
value of FC firms (ANCR BRCD VIXL ZOOX) proved
amazingly below the market 1 year later.
================================================
To: +Kerry Lee (18974 )
From: +Larry Newman
Thursday, Oct 29 1998 11:04PM ET
Reply # of 24432
I don't see the purpose of the obsession with the accounting treatment of the Inrange money.
The Paine Webber guy, I thought, was nuts to complain that he wanted to see some
improvement in the balance sheet. What is better for the balance sheet than money in the
bank??? The bucks are in the bank--that is what counts, and they are there with no dilutiion.
AND they were put there by a very important company that has begun a multi-year
multimillion dollar relationship with ANCR. If you want to do something really 'scientific' and
value ANCR by a price to revenues ratio, well, then I can see the problem but that is really
missing the boat on all this. Cash is in the bank, and OEMS announcements are thought to be
imminent, if not this quarter than next and next after that. Don't get caught up in accounting
mishigas.
_____________________________________________________________________________
To: +Kerry Lee (18878 )
From: +iceburg
Thursday, Oct 29 1998 11:36PM ET
Reply # of 24432
Tailwind is not our enemy despite their name.
I have to admit the name alone invoked anger in my heart and pocket book. But I am
officially exonerating them from attacks, at least from me.
Ancor traded naturally today FWIWIMHO. Fully dilluted including the Reg-D series C selling
the market cap is $50M, I think 200M will be more accurate in 6 months. That equates to
$8/share. Who knows - a hype spike and perhaps $11 near term...
_____________________________________________________________________________
To: +Craig Stevenson (19015 )
From: +Jeff R
Friday, Oct 30 1998 4:24PM ET
Reply # of 24432
I don't have specifics on which companies are using Brocade vs. Ancor, but I do know that
StorageTek is reselling the Brocade switch.
There will be more details forthcoming at COMDEX in November, regarding the Brocade
market share.
I work in this biz, and right now I say I would buy a Brocade switch if I was to buy.
Brocade seems to have a stronger marketing presence and the market share speaks for itself.
This technology is still very immature. Most companies, including my own are not rolling
SANs into production, but just testing the waters right now.
We are a few years off from large scale sales, but a buyout could happen before then.... I am
calmly waiting for Brocade to go public.
_____________________________________________________________________________
To: +Jeff R (19011 )
From: +Kelly Igou
Friday, Oct 30 1998 5:11PM ET
Reply # of 24432
I think it's important to remember that the total market this year for both Brocade and Ancor
may be less than $10MM.
Neither company is breaking any sales records, and I don't think that the early results
necessarily reflect which horse will win - when we're only at the first pole...
I do think both Ancor and Brocade will probably be swallowed up. I also believe this could
happen in mid 99, and I think it will happen at the $12-14/share level, possibly higher.
Although they were in two very different technology spaces, in some respects AMTX and
ANCR have seen similar histories - high fliers brought to ground, pounded down and
"broken". Both companies were/are primarily engineering/design houses.
However, six months after AMTX hit a low of around 3 3/4, after being pumped to a height
of $40+, it sold to Texas Instruments for $20/share.
Lick your chops and settle in. I think the next 6 months are going to be absolutely wild.
If you think this has been crazy up to this point, you ain't seen nothin' yet...:))
_____________________________________________________________________________
To: +Jeff R (19016 )
From: +Neil S
Friday, Oct 30 1998 6:46PM ET
Reply # of 24432
Jeff,
<<I work in this biz, and right now I say I would buy a Brocade switch if I was to buy.
Brocade seems to have a stronger marketing presence and the market share speaks for itself.
>>
Is this comment based on any specific head to head testing/ evaluation and or price and
feature comparison of the Silkworm Vs the MK II or an overall marketing impression ? Has
your firm talked to both companies ?
To be fair [to quote Cal Nelson] you would have to include Vixel as a switch vendor although
we haven't heard much from them since their acquisition of Arcxel, what do you hear ?
BTW- i think GADZ is a specialty retailer, Gadzoox Networks [ Gibraltar Hubs, Denali
Switch, Ventana Management Software] is the FC [private] company.
<<I am calmly waiting for Brocade to go public.>>
Any SAN industry buzz re if Brocade is planning a post "final" round of financing prior to
coming public ?
<<There will be more details forthcoming at COMDEX in November, regarding the Brocade
market share.>>
Brocade has been very quiet since Brenda C. hit the door. Comdex anxiety coming up next.
<g>
Neil
_____________________________________________________________________________
To: +Kelly Igou (19018 )
From: +Roy Sardina
Friday, Oct 30 1998 8:50PM ET
Reply # of 24432
Wrong.....my guess is that Brocade will do $20-30Million in revenue, and that their captive
price (last round valuation over $125Million) makes them too expensive. ANCR could be
bought for under $50Million.
Roy Sardina
_____________________________________________________________________________
To: +Ken Richard (19030 )
From: +Larry Newman
Friday, Oct 30 1998 9:37PM ET
Reply # of 24432
On the other hand, Roy, perhaps I am going much too easy on you. If OEMs are indeed
granted in the next 7 1/2 months, then I think you are way way way off.
_____________________________________________________________________________
To: +Jeff R (19011 )
From: +George Dawson
Saturday, Oct 31 1998 12:44AM ET
Reply # of 24432
Jeff,
My impression is that the only people actually moving SANs are EMC/McData who are of
course using Brocade ASICs, but seem determined to eliminate those ASICs and put in their
own. The response I have got by people identifying themselves as engineers on the Sequent
thread have said that their NUMA systems are shipping with a single FC switch. My
impression is that things are certainly picking up, but SANs are still few and far between. I
would appreciate any hard numbers.
If things ramp up as we anticipate, I think any major deal could conceivably vault Ancor,
Vixel, or Brocade into the lion's share. I also think that McData as it stands is set up to
directly take market share from Brocade.
Whether to load up or not depends on the end game with the conversion and the
announcement of deals - two topics that generate a lot of discussion here.
George D.
_____________________________________________________________________________
To: +Roy Sardina (19028 )
From: +iceburg
Saturday, Oct 31 1998 2:11AM ET
Reply # of 24432
ANCR could be bought for under $50Million
Join the club. You have finally lost credibility. <g>
_____________________________________________________________________________
To: +George Dawson (19035 )
From: +Neil S
Saturday, Oct 31 1998 7:01AM ET
Reply # of 24432
All: More on 3Com SAN plans:
Cal mentioned during the call that they had heard rumors of Hub vendors moving upstream
to Switches, but had not seen any examples. Here is one, and i expect it is more than just the
Denali area switch in its present form. Given the referenced investment it looks like 3Com
has made their FC move. Others will surely follow. In my view, this is a significant plus in
moving the SAN market forward and will have a positive impact on valuations.
techweb.com
<<The StorageConnect line will include SAN hubs and switches, a host bus adapter for
storage servers and a storage management suite that will be integrated with 3Com's
Transcend network management system. 3Com tapped Gadzoox Networks Inc. to make the
hubs and switches; 3Com also invested a significant amount of money in Gadzoox as part of
the deal, according to sources.>>
Neil
_____________________________________________________________________________
To: +Greg Hull (19017 )
From: +KJ. Moy
Saturday, Oct 31 1998 9:16AM ET
Reply # of 24432
Greg,
My observation the past couple of weeks is that MM's are interested to hold Ancor at a
steady to higher level gradually. They are not eager to raise the bid or drop the offer either.
They know the fire power of RegD guys are diminishing . If and when OEMs are
announced, they can profit from what they have been accumulating in their inventory.
KJ
_____________________________________________________________________________
To: +Neil S (19038 )
From: +KJ. Moy
Saturday, Oct 31 1998 9:33AM ET
Reply # of 24432
Neil,
3COM's initial SAN announcement is indeed very good news.I was a bit surprise to hear it. I
would expect big networking companies getting into the game much later. At a time when
the install base of SANs are wide spread. That's the time distant users arround the world
want to share information of their own SAN. That's the time ATM/FC can take off, not now.
After reading the bits and pieces of the 3COM news, my impression of their announcements
will be only at the software and FC side, no link to the ATM world yet. The fact that they
throw their hat into the ring raises FC to another level. It tells me that networking companies
are gearing up . 'Strategic partners' are extremely important. If in fact Gadzoox gets the
mention in the upcoming 3COM news, it is insignificant. They won't be selling much of
anything soon. In the same news from your link, 3COM is saying they will add new vendors
to this system and said something like they may not be the owner of this after all. It will be
an open system to link SANs together via 'FC only on protocol side' and their software suite
IMHO. What I am expecting from now on is that Networking companies will be more active
in participating in FC/ATM standards. This will be their bread and butter for the next
millenium.
KJ
_____________________________________________________________________________
To: +Eleder2020 (19049 )
From: +Craig Stevenson
Saturday, Oct 31 1998 6:33PM ET
Reply # of 24432
Ed,
I have been tossing around the various scenarios too, and I have a couple of thoughts.
As I pointed out in a previous message, the two lowest ANCR closes within the current
conversion price window took place on October 8th and October 9th. It seems logical to me
that if the Reg D guys were going to make a move, they would do it before those two dates
slid out of their conversion price window. On Monday, the figure should go to 21 days,
which would mean that we should see something before Friday, November 6th and Monday,
November 9th. It wouldn't be impossible for them to force the price down after that, but
they would be working with increasingly higher prices with which to calculate their
conversion price. (Greg and George, I would sure like your opinion on this too.)
I'm not so sure that a 3COM announcement naming Gadzoox as their FC vendor would be
that much of a negative for ANCR. To me, having one of the big networkers enter this space
is a HUGE positive. I remember people ridiculing us when we said that this was a real
possibility a couple of years ago.
Craig
_____________________________________________________________________________
To: +Eleder2020 (19043 )
From: +KJ. Moy
Saturday, Oct 31 1998 9:43PM ET
Reply # of 24432
Ed,
<<<It seems like the SAN's has blurred the lines between Storage and Networking Will IBM,
3COM, Cisco , HP and other be competing with each other for the same dollars in FC or will
they split the business between networking and Storage.>>>
The line is still quite clear. 3COM, CISCO, ASND and the like make their money selling
networking equipments, software and network management systems. They are experts in
carrying data cross state line and cross continents via router or ATM switches or WDM. FC
data is still not in big volume yet until SANs are widely accepted and the install base explodes
in the next couple years. Until then, networking companies can't make money on FC. But
they need to shape the FC/ATM standard to their advantage before they even start making
these FC/ATM interfaces. The announcement of 3COM and Gadzooz is more in PR than in
real substance, i.e. no $ for at least a year or two. I wouldn't be surprised 3COM will have
many FC partners or go buy one for themselves. The news itself give FC a tremendous lift.
You know other networking companies won't sit still.
<<< I guess it's that space in the middle which seems to be Adapters , Hubs and SWITCHES
that these companies will do battle over. >>>
The space is still pretty well defined. Networking companies dominate the WAN/LAN.
Storage and server companies build their systems arround FC. FC hubs, adapters, switches
companies try to offer the best price and performance system to these users. Software
companies such as Veritas try to define their space in SAN management. FC company such
as Ancor wants their switches sold as part of a solution, i.e. OEM. It also wants Networking
companies to get into the game to stir up demand. The more demand for data, the more
storage devices will be sold, the more demand for FC switches in the future. In 3COM's
case, they are testing the water and try to butt head with Veritas. Whether it is Gadzooz,
Vixel or Ancor, IMHO it really doesn't matter at this time.
KJ
_____________________________________________________________________________
To: +Greg Hull (19063 )
From: +Craig Stevenson
Sunday, Nov 1 1998 7:12AM ET
Reply # of 24432
Greg,
<<From my perspective the Series C offering was so much more damaging than the Series B
offering because of the "applicable pricing period." >>
Agreed. I think where most of us got fooled was when Ancor management described these 3
Reg D entities as "patient, long-term investors", insinuating that the rest of us were just
panicky, short-term investors who didn't care about the company anyway. That's one reason
why we didn't figure out what was going on until it was too late. Who would suspect these
model investors of such shenanigans? I think the real patient, long-term investors are on this
thread. (It still irks me, in case you hadn't noticed. <g>)
<<Calling in an airstrike (if we could) would only work if it could be sustained for many
days or weeks.>>
That's true, but since we only had to protect the closing bid price, it might have been doable,
especially if we had some help from the other Reg D guys who were long.
The reason many of us didn't step up big and buy ANCR at $1 was that we simply didn't
know what was going on. Why had the price slipped so much, and how much further down
could it go? This discussion has changed that, because we now have a pretty good handle on
what happened, the dilutive effects, and how much selling there is likely to be in the future.
Even though we don't know exactly when the end game will occur, we can look for signs of
it happening or not happening.
I know some of the other people on the thread don't want us to even discuss this, but I'll use
myself as an example of why this discussion is important. The dollar value of my ANCR
holdings now are only a small fraction of what they were before the Sun debacle. Why?
Because I simply don't have the risk tolerance that I used to have, and I'm pretty sure I'm not
the only one. Lower risk tolerance is a direct result of being blind-sided by the unexpected
time after time.
This is the reason why the INRANGE revenue recognition over five years was disappointing
to me. I was quite confident going into the conference call that we would see the INRANGE
revenue recognized over the next three quarters. That would provide a stable revenue base to
build on, and give other investors an idea of what these OEM contracts could be worth. It
would also significantly reduce the quarterly losses. During the next three quarters, I fully
expect an OEM contract to be announced, hopefully with revenues that would begin just
when the INRANGE revenues ended. That sequence of events would make people really sit
up and take notice.
I'm not arguing the fact that the INRANGE deal was necessary. It clearly was, and it
provided much needed capital in the short term, but it does sound a lot like BullStroke's
"Ancor Inside" deal, with revenues not arriving until 1999. I still think we need to see an
OEM deal for Ancor's MKII-8 and MKII-16 to make believers out of the unbelievers. <g>
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