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

To: w2j2 who wrote (24944)	11/22/1999 8:55:00 PM
From: Greg Hull	Read Replies (1) \| Respond to of 29386

Walter, << If the stock price rises above $74.50, it would even be profitable for Sun to buy switches, throw them away, and keep the stock.>> Said another way, if investors believe ANCR is worth more than $74.50 even without any sales to SUN, SUN would have a very strong financial interest to buy $100,000,000 worth of product to vest their 1.5M shares. These sales should deliver at least $40,000,000 for Ancor to invest in SG&A or retain as profit. SUN would have no financial interest to buy beyond $100,000,000 in product unless the switches were useful to them. Greg

To: w2j2 who wrote (24944)	11/22/1999 10:48:00 PM
From: George Dawson	Read Replies (1) \| Respond to of 29386

Walter, I think you need to consider benefit to Sun and benefit to Ancor shareholders as separate issues. If you look at it as straight non-cash financing from Ancor's perspective, the only cost is dilution. Looking at a usual balance sheet metric of basic earnings per share versus diluted (assuming conversion of all warrants, options, and convertible shares) earnings per share is a good way to look at it. When I run the numbers just looking at the 1.5M additional shares, I get a 6% reduction in earnings per share to all shareholders. I would not see that as a significant deterrent to buying the stock if you believe the data on projected increases in sales for FC switch companies or even potential total sales to Sun. The unknown here is the Black-Scholes method described for the accounting issues. Greg posted the relevant sections of the 8-K: techstocks.com I have seen that this will be counted as a non sales discount - but have not been able to find that specific term anywhere. The only Black-Scholes information I can find is on options pricing. I would also appreciate the opinion of someone who understands how a non sales discount per the Black Scholes method impacts on a balance sheet. The opinion of the non experts I have read is that it does not seem significant, but as you can see from the example in the 8-K, the price fluctuates by this pricing method and negative margins are possible. At no point would it make sense for Sun to buy the stock and throw away the switches, they would be losing substantial equipment assets. I don't think that the stock price is relevant to shareholder equity, since the dilution is the critical factor. George D.

To: w2j2 who wrote (24944)	11/22/1999 11:03:00 PM
From: Lhn5	Read Replies (1) \| Respond to of 29386

<<George, I have a question that has perhaps been answered before, but it didn't seem relevant till now. If Ancor stock reaches $74.50, Then when Sun buys $67 of switches and pays $7.50 for a share of stock(warrant), they get 1 share of stock worth $74.50 plus product worth $67 for a total price paid of $74.50. If the stock price rises above $74.50, it would even be profitable for Sun to buy switches, throw them away, and keep the stock. Why would an investor buy stock for, say, $80, when the higher the stock price goes, the more it costs the investor(s) in equity when they sell switches to Sun? >> Walter--2 points: 1) With ANCR price well above $7, just assume SUNW owns the 1.5 mil shares now. They are just benefitting along withus other shareholders. And they have been very activist, helpful shareholders, be happy for them. 2) As soon as SUNW buys there quota to get the shares, every additinoal penny they spend we all share equally--all shareholders benfit equally.