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

To: George Dawson who wrote (25005)	12/4/1999 3:09:00 AM
From: Whitmore G.	Read Replies (6) \| Respond to of 29386

This nut is about to crack (down)! Any prudent investor would not invest in Ancor after doing the most limited DD. In their last SEC filing they as much as said they will earning NEGATIVE margin on their sales to SUN for as much as the first 100 million dollars in sales, due to the 1.5 million warrants they granted SUN: biz.yahoo.com ....Conversely, the value of the warrant shares, and the corresponding sales discount, decreases as the Company's stock price decreases. Since the value of the Company's stock cannot be estimated, it is not possible to estimate the amount of the non-cash sales discount that could be recorded, but it could be significant. Consequently, gross margins could be impacted significantly by the vesting of the Sun warrant shares. For example, if the Company's share price is $40.00, the value of a warrant share would be $37.60 based on the Black Scholes model. This means that for each $67.00 in gross revenue to Sun, we would record a non-cash sales discount of $37.60. Depending on the Company's stock price, this sales discount could cause the Company to report a negative gross margin on sales to Sun... Now lets do a little math. If the SUN warrants are worth $37.60 when ANCR shares are at $40 then they must be worth (reasonably assuming equal interest level as well as other out of the box calculations in the model) approximately ( according to the Black-Scholes option pricing) $56.40 when ANCR is trading at 60. We'll subtract $56.40 from $67 and you get a whopping $10.60 Ancor will earn for every $67 dollars in sales to SUN. If this price holds as the average for the entire 1.5million warrants then for 67x1.5million= 100.5 million dollars of sales that gives Ancor a messily $15.9 million dollars! That is not even enough to cover the price of the material to build the products not to mention the overhead! The genius at ANCOR who signed them up for this is probably in the same league as the guy who signed San Diego County up for the Derivative Investments that bankrupted them! This company already loses 7 million dollars for every 12 million in sales it has and it is NOT a start up company so they can't use that excuse. Wake up people!!!! Your going to lose your shirts on this one if you hang around too long! I don't have nor have I ever had any investment in this company's stock long or short! biz.yahoo.com