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

To: Greg Hull who wrote (27171)	5/29/2000 1:55:00 AM
From: Douglas Nordgren	Read Replies (1) \| Respond to of 29386

Greg, Pemstar's S-1 had this to say on that. Shortages or price fluctuations in component parts specified by our customers could delay product shipments and adversely affect our profitability. Many of the products we manufacture require one or more components that we order from sole-source suppliers. Supply shortages for a particular component can delay production of all products using that component or cause cost increases in the services we provide. In the past, some of the materials we use, such as capacitors and memory and logic devices, have been subject to industry-wide shortages. As a result, suppliers have been forced to allocate available quantities among their customers and we have not been able to obtain all of the materials desired. I imagine Ancor specifies the components and Pemstar sources the parts for assembly. QLGC has three primary ECMs, I remember reading somewhere, will track it down in a 10-Q. Pemstar is not one of them, so they gain another one. That gives them flexibility wrt product cycles and market focus affected by supply forecasts. Don't know how many components Ancor and QLogic hold in common to achieve economies of scale. Future product development would move towards some consolidations there. But if there were a component that Pemstar couldn't get enough of for Ancor, QLGC ECM allocations could augment the supply. When the price crunches start coming from the customer and the suppliers, the companies with the most headroom will stand the tallest. Looking forward to the Roof Raising in September. This market be damned in the meantime (like we didn't already know that). Douglas

To: Greg Hull who wrote (27171)	5/29/2000 5:20:00 PM
From: Douglas Nordgren	Read Replies (1) \| Respond to of 29386

Greg, Found a reference to "several" but no confirmation of my imagined "three" ECMs. From Management Discussion of Risks 10-K 2/9/00. The Company currently relies on several independent foundries to manufacture its semiconductor products either in finished form or wafer form. Generally, the Company conducts business with some of its foundries through written purchase orders as opposed to long-term supply contracts. The Company is using multiple sources of supply for certain of its products, which may require the Company's customers to perform separate product qualifications. The Company has not, however, developed alternate sources of supply for certain other products and its newly introduced products are typically produced initially by a single foundry until alternate sources can be qualified. In particular, the Company's integrated single chip Fibre Channel controller is manufactured by LSI Logic and integrates LSI Logic's transceiver technology. The Company's ability to obtain satisfactory wafer and other supplies is subject to a number of other risks. the Company's flexibility to move production of any particular product from one foundry to another can be limited in that such a move can require significant re-engineering, which may take several quarters. These efforts also divert engineering resources which otherwise could be dedicated to new product development, which would adversely affect new product development schedules. Accordingly, production may be constrained even though capacity is available at one or more foundries. (so much for my comment about flexibility) In addition, the Company could encounter supply shortages if sales grow substantially. The Company uses domestic and offshore subcontractors for die assembly of its semiconductor products purchased in wafer form, and for assembly of its host adapter board products. The Company's reliance on independent subcontractors to provide these services involves a number of risks, including the absence of guaranteed capacity and reduced control over delivery schedules, quality assurance and costs. TRANSACTIONS TO OBTAIN MANUFACTURING CAPACITY; FUTURE CAPITAL NEEDS The Company is not currently experiencing any difficulties in obtaining sufficient foundry capacity due to the current availability of worldwide semiconductor fabrication capacity. However, the Company and the semiconductor industry have, in the past, experienced shortages of available foundry capacity. Accordingly, in order to secure an adequate supply of wafers, especially wafers manufactured using advanced process technologies, the Company may consider various possible transactions, including the use of "take or pay" contracts that commit the Company to purchase specified quantities of wafers over extended periods or equity investments in, or advances to, wafer manufacturing companies in exchange for guaranteed production capacity, or the formation of joint ventures to own and operate or construct foundries or to develop certain products. (costly if necessary, but affordable if prudent). Douglas PS - Still haven't found anything in the 10-Q or 8-K worth Herb's admonition. Does he even know what he's talking about?

To: Greg Hull who wrote (27171)	5/31/2000 6:41:00 PM
From: Douglas Nordgren	Read Replies (3) \| Respond to of 29386

EMC to Spin Off McData Unit's B Stock in IPO dailynews.yahoo.com WASHINGTON (Reuters) - Data storage equipment leader EMC Corp. (NYSE:EMC - news) filed on Wednesday for an initial public offering of Class B common stock of its McData Corp. unit. McData, which develops, makes and sells switching devices for enterprise-wide, high-performance storage networks, is looking to raise $100 million from the IPO, using the proceeds for general corporate purposes, including repayment of $1.9 million in outstanding debt to McData Holdings Corp., a subsidiary of EMC. McData also plans to use some of the proceeds for capital expenditures and working capital, according to the filing with the Securities and Exchange Commission. McData has applied to list the shares on the Nasdaq stock market under the symbol ``MCDT'' (Nasdaq:MCDT - news). EMC shares were down 1-8/16 to 119-5/16 in afternoon trade on the New York Stock Exchange. The exact number of B shares, their price range and other details will be disclosed in a later SEC filing. The offering will be managed by Credit Suisse First Boston, Deutsche Banc Alex Brown and Merrill Lynch. EMC owns about 85 percent of McData and plans to distribute all of its McData Class A common shares to EMC stockholders on a pro rata basis about six to 12 months after the IPO. However, EMC is not obligated to complete the distribution, which is subject to EMC getting word from the Internal Revenue Service that it will be tax-free to EMC and its stockholders, according to the filing. McData, based in Broomfield, Colo., was acquired by EMC in 1995 and was established as an independent entity in 1997. Since 1997, when it focused its business on the design, development and manufacture of fiber channel switching devices, it has incurred losses in all but the two most recent fiscal quarters. The company depends on EMC for a significant part of its total revenue. Sales to EMC, an original equipment manufacturer, represented about 71 percent of total revenue for the three months ended March 31. International Business Machines Corp. (NYSE:IBM - news) accounted for about 19 percent. McData anticipates that future operating results will continue to depend heavily on sales to those two companies. ``Therefore, the loss of either EMC or IBM as a customer, or a significant reduction in sales to either EMC or IBM in any fiscal period, could significantly reduce our revenue,'' the company said in the filing. (Revenues at McData rose to $47.1 million during the first quarter of this year from $13.2 million for the comparable period in 1999. The company had first-quarter net income of $5.3 million this year, reversing a $1.9 million loss for the first quarter of 1999.) McData also has alliances with leading software companies like Microsoft (NasdaqNM:MSFT - news) and Tivoli, a division of IBM, to integrate its products with theirs. The company said its biggest competitor in the market for fiber channel switching products is Brocade Communications Systems Inc. (NasdaqNM:BRCD - news). [I can understand them not wanting to mention ANCR-QLGC's FC Directors, but who are they kidding but themselves? Where's BRCD's 32 port switch? They are "working on it." Time for McData to sink or swim? EMC shareholders may swallow a buy out on the open market that EMC might have found unpalatable as a private exchange. Wouldn't be surprised if BRCD is still "working on it" 6 - 12 months down the road.] Douglas