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

To: Eric Somers who wrote (26077)	2/10/2000 10:52:00 AM
From: Greg Hull	Respond to of 29386

Eric, <<Your statement is premised on the assumption that without the warrants, SUN would get a 50% discount on ANCR switches. I do not believe this to be the case (baed on limited experience with major networking companies). If that were the case, given the size of the SUN business, it would blow ANCRs margins away. I do not think ANCR, BRCD or anyone else gives 50% discounts, even to major customers.>> Ancor has guided expectations for Gross Margin to be 40-45% of sales for the future. The bulk of the sales would be to OEMs at a significant discount. There has also been talk on this thread a year or two ago that the OEMs would get a 50% discount. This may or may not be the case. My experience is that the product is priced for the GM required for the Average Selling Price, which Ancor expects to be the OEM price. The discounting schedule is determined after the ASP and GM are determined, essentially to back-calculate what the List Price should be. It is possible that Ancor will never sell a switch at List Price, but end users will probably end up paying List Price when they buy from a VAR or one of the storage vendors. A big OEM would get a higher discount than a small OEM or VAR. Whenever I hear or read "%", I always ask "% of what?" This almost always clears up the problem. I can believe that SUN or other major OEM would buy at half the price of an end user (List Price) without blowing away Ancor's margins. Gross Margin as a percentage of List Price is probably in the vicinity of 75%. Greg

To: Eric Somers who wrote (26077)	2/10/2000 5:21:00 PM
From: Eleder2020	Read Replies (1) \| Respond to of 29386

It always has been assumed that SUN asked that the warrants be tied to revenues in our discussions here. I'm not sure that that is a correct assumption. It's possible that it was Ken's idea for such a deal in which case the headlines of 100 million tied to warrants would be stronger then an announcement that was SUN taking a 5% equity stake in Ancor. I'll live with the 5% dilution anyday in exchange for our present stock price and alternative dilutive ways of funding Ancor. I was thrilled with the structure of the SUN deal then and thrilled with it now. Ed