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

To: Douglas Nordgren who wrote (25912)	2/2/2000 3:48:00 AM
From: Douglas Nordgren	Respond to of 29386

For those who might want to learn more about the importance of R&D in evaluating companies - Philip A. Fisher: Common Stocks and Uncommon Profits foolmart.com

To: Douglas Nordgren who wrote (25912)	2/2/2000 7:53:00 AM
From: Craig Stevenson	Read Replies (1) \| Respond to of 29386

Douglas, Applying any known valuation model to the Fibre Channel companies, and extracting anything reasonable is virtually impossible. My point was simply that for any investor to invest in ANCR at this point in time requires that person to pay a higher price for the stock than they would have had to a year ago. I don't disagree with you that Ancor must continue to spend on R&D. It would be foolish not to do so. However, I must continue to be a burr under everyone's saddle about one point. Earnings. (As in POSITIVE earnings.) R&D does no good if the company isn't profitable at some point. Cal's statement of two or three years ago was, "We'll show you the numbers." So far, the numbers haven't looked too much different. Every dollar of R&D has translated into red ink. Having said that, and before everyone jumps on me for it, there is a logical and plausible explanation. If you imagine the much talked about but never seen "hockey stick ramp", there is a point just before the ramp, where R&D and SG&A expenses will increase to support the impending ramp. However, at this point in time the ramp itself hasn't occurred, so expenses will seem out of line. (As they do now.) A quarter or two down the line from this point, the exact opposite will occur. The expenses will then seem low compared to the revenues being generated. If this is where Ancor is, then everything is indeed on track. As I said in an earlier message, as long as Ancor's revenues take off in line with the competition, they will do fine. But it is still something to watch for. Craig

To: Douglas Nordgren who wrote (25912)	2/2/2000 9:30:00 AM
From: Craig Stevenson	Read Replies (2) \| Respond to of 29386

Douglas, "PS - Compaq is encountering problems with component scalability within a fabric and are finding that what they really need is a cross connect architecture. Ancor is undergoing evaluation with some cpq engineers. ZOOX may count all the switch revs they want, but the Capellix is not really a switch, it's a FC-AL router cum switch. They could call it a space shuttle for all I care, it still wouldn't fly." It really doesn't matter what Gadzoox chooses to call it. The fact remains that this supposedly inferior product, that "wouldn't fly", outsold the MKII/SANbox combination from Ancor in the most recent quarter. That's the reason for concern. Perhaps those captive hub relationships are more valuable than previously thought. <g> Craig