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

To: Eric Somers who wrote (26055)	2/9/2000 4:04:00 AM
From: GuinnessGuy	Read Replies (1) \| Respond to of 29386

Eric, RE:If you take to identical companies, and one sells the shares to SUN at $7.30 per share last May and banks the money, and the other one issues warrants as ANCR did, and they both sell the same amount fo product, the one that sold the stock and has better GAAP earnings is the one that I would invest in (and that I would argue would be valued at a higher level). This is an interesting choice. Certainly having the money 'up front' takes away the uncertainty of ever getting it, and money in the bank now will always(deflation excluded) have a higher present value. The disadvantage is that the company can become relatively complacent if there is no longer any need to met the needs of the client(since they've already ponied up), except for the usual possibility of lost profits. The warrants also give the warrant taker a reason to have more patience with the vendor(assuming they couldn't just go out and make a similar deal with another company). Also, I understand from someone who took notes at the BofA conference, that the sales discount is tax deductible. If that is the case, then I would think that the dilution caused by the issuance of the additional shares will be negated(and then some?). Craig(another dead horse beater -g-)

To: Eric Somers who wrote (26055)	2/9/2000 6:45:00 PM
From: nick chacos	Read Replies (1) \| Respond to of 29386

I'm not sure you are comparing apples to apples. It is my understanding that in deals of this nature, the selling company (Ancor in this case), typically offers a VERY significant sales discount to the buyer (Sun) in order to effectively guarantee their business. If you accept this as being the case, and consider the warrants as a substitute for a routine, say, 50% sales discount, you might make a different decision. In the present case, Ancor gets ALL the cash vs. getting 1/2 the cash. Even with the $100 million cash in the bank, they get to take a tax deduction on the discount they are offering through higher stock prices, making the effective cashflow difference even larger. Furthermore, in the present case, the vesting of warrants virtually guarantees exclusivity from Sun (at least until they have all their warrants) whereas in the other case they might simply use it as a negotiating tool to get better prices from Brocade or another switch vendor and not buy exclusively from Ancor, thus further reducing the actual cashflow Ancor sees. Given these considerations do you still think an outright sale of shares and a large sales discount would be more advantageous to Ancor than the current situation?