Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Kerry Lee who wrote (27215)	6/1/2000 1:11:00 AM
From: Kerry Lee	Read Replies (2) \| Respond to of 29386

Selected Excerpts from the Q&A ( from SEC filing ): 1. <<<Art Grey: Yes. Great quarter. I had spoke with Tom a little bit about this issue but I wanted just to bring it back to the floor. The comments out there regarding and this is regarding the Ancor acquisition I guess from some of the competitors are that the alliances and relationships now are severed if you will and I'm speaking specifically possibly Brocade as is. I think that there is some misconception out there about what your relationship is with them and what really goes on with that relationship. If you could walk us through what you see going on long term with the Ancor relationship and why it will not be a negative relative to the rest of the switch companies out there I would appreciate it. Thank you. 8 <PAGE> 9 H.K.: This is H.K. We have taken a total look at the industry. We have looked at every switch supplier and we have talked to. We have been in this business for a long time. What we see is the key is what is happening in the industry is that there is a big question about a few things that are happening. One: the customers, the OEM customers telling us for a long time now that they are looking for a second or alternate viable switch supplier. So that is one point we looked at. The second important point is: that there are also all the switch suppliers, except one, also believe strongly in the interoperability issues. It is not happening in the industry so we want to take the leadership with that. The second important point is we don't sell anything to Brocade, we don't market anything with the Brocade and Brocade doesn't help with getting any design wins. What we have done is on our own. So we really don't worry about this thing. So whatever the Brocade is saying. So we have a terrific relationship with Dell and IBM and Sun and you name it. They buy our product. They not just buy Host Bus Adapters. They are buying a lot of product from us. They are buying enclosure management. They are buying SCSI product. They have a broad portfolio of the product that they are buying. Some of the customers, OEM customers, are looking for one strategic supplier who can provide them everything and they are asking us their questions. So we do whatever our customer asks us to. We have done that when we acquired RAID. We have done that when we acquired the enclosure management. We are exactly doing that with the switch product, and that is what we are doing. I think that's what is important. Tom: Yes. I would just like to add one other thing. The combination with Ancor can really help the industry move to an open Storage Area Network standard which we think will benefit all of our customers. Art: Just a follow up on that. You got the Gadzooks, Vixel, Brocade and what was it about Ancor's technology that really attracted you to that company versus some of the competition. What is it about Ancor that you see? H.K.: Yes. If I can do that. One is that we talk to the customers. We always talk to the customers because they are the one who said who has the best technology. What they say is they have the best technology. So that is why we bought it. If you look at really -- and then you also always look at the competitor of Ancor and who are really making Brocade keep saying that Ancor is the biggest competitor. So we believe that Ancor is the right technology and what we find out in the last three days receiving phone calls from our OEM customers, large OEM customers, and what they told us is that this is the best thing you have ever done, this is best for the industry and they are looking for a second supplier so nobody can have a market share more than 90%. Art: Thank you. Sounds very exciting. 9 <PAGE> 10 H.K.: Thank you. Operator: Your next question comes from Steve Denigray. Please go ahead with your question. Steve: Hello. A lot of the question is about the Ancor transaction. I wanted to ask you it sounds like without synergies you're still really positive about the accretion next year. Clearly the Sun relationship must be the meaningful portion of that. Can you give us some sense of when you think that might ramp for you and for Ancor and I have some follow up questions to that. H.K.: Yes, I think, remember our comment about us that we will see some revenue. We always are shipping some revenue to Sun for on the host bus adapter for the work group servers and our dual channel card is going to start getting in production this quarter. Start slowly ramping up and the second half is the one which we will start ramping up more. Ancor has the same situation and we have looked at the numbers and we have talked to Sun. The second half is the one that will start ramping up Ancor product.>>> 2.<<<Operator: O.K. Next question comes from Neil Miller with Fidelity Investment. Neil: Yes. Hi. Clarification on that last point. The share price versus the warrant position Ancor with Sun Microsystems. I thought there was price sensitivity there. Tom: I'm not sure where quite where you are going with this now but QLogic will treat the Sun warrants in the same manner they have been handled as Ancor. The warrants essentially become exercisable as revenue is generated in the Sun relationship. Neil: I need to go back over my thoughts there and notes but I thought that there was a direct relationship between the price of the stock and the value of the warrant and the subsequent dilution so that the higher price of the stock the greater the dilution potential. I guess my real question was how do you expect to treat these warrants? Is there any way of writing those off? H.K.: We haven't even looked at these things anyway but I think the way I understood from the conference call on Ancor is that it is like a sales discount or something to treat that. Neil: Well I don't know. That was an interesting arrangement to say the least. The second question I have in on the second source supplier for switching and I am just kind of wondering what are the challenges that Ancor had was the last mile of the micro code to you know produce a look alike functionality and they couldn't and they were stumped by that challenge. Currently they are and I am just thinking if Brocade would comes out with different series switch how that challenge will be more easily met in the future. In other words, how do you fulfill the prospect of a second source supplier? H.K.: Well it is when we are saying that the second source we are not talking about the second source saying the Brocade switch. What we are saying is what the customer is looking for merely is that they are looking for a viable alternate source and that will be rewarding. We got a after the deal was announced we got a call from every large OEM customer. It's not we call them. They call us and they say this is the best thing you have done for industry and this is the best thing for all of us because now we can go to the other supplier. Mike: Yes but it Brocade is no longer open with you down the road which I assume 16 <PAGE> 17 they won't be. H.K.: No everybody has to follow the fibre channel standard. So as long as you follow the fibre channel standard we can connect with any HB or anywhere. Mike: O.K. I just know that Ancor had a huge challenge here with reverse engineering Brocade's product. H.K.: No. I think you already heard the wrong thing Neil. They don't require to reverse engineer at all. They already have a product under one gig and they are working the two gigs. They are 8 ports. They are working on 16 port switches. They are also working 64 port and so on anyway. Those products will just follow the fibre channel standard and that's all. Mike: O.K. But Brocade's 80% share is based on something. H.K.: They were first to market and there was no second viable source. Mike: Appreciate the thoughts. Thanks. H.K.: Thank you. Operator: Your next question comes from Shaw Woo with Bear Stearns. Please go ahead sir. Shaw: Alright thanks. First great quarter and great acquisition. I just have a one follow up on an OEM question. When you look at when you talk to OEMs when they pick a host bus adapter or a switch does one influence the other in your opinion and how do you, could you, just provide some color on that? H.K.: I tell you that when the OEM picks up the supplier particularly large OEMs like Sun and Dell and IBM they go and pick up the supplier on their own. They look at everybody who has the best performance, who has the best cost, and overall who is the one it is easy to work with and gives them the support on the qualifications and the third point is very important because that's what QLogic is all about. We are the best at supplying the support to the customers and they just love us for that. All OEMs. When we started the business with them they just fall in love with us just because of that and that is important. You cannot tell OEM you think IBM and Dell and Sun will pick up the supplier. They decided on their own. So we work, I'll give you an example of the Dell Microsystems, Dell computers. When we were doing the host adapter there is a one component of SAN wanted to use other host adapter and they kept trying and Dell said absolutely not. We are going to QLogic and they selected QLogic. That is a great example. Same thing happened to IBM when we wanted first times. The storage supplier wants to use somebody else and IBM said no. The host adapter we are going to pick so they decide what it is. The second and important point the host bus adapter is the most important component for the SAN because they are the 17 <PAGE> 18 one with a lot of software investment and we are the most difficult to qualify. We are the one who is in charge of the system environment. They look at the error conditions. They are the one who does that thing. So this is very important and people who have already invested the money are not going to change because some switch supplier said that they want them to change. Shaw: O.K. Thanks. Just a follow up question in terms of the deal is going to close in September. Any thoughts on like timing of integration in terms of the sales force, and engineering, perhaps even the ASIC's. H.K.: We will start. The way we are going to do this the management team of both companies will start working on these things. We already have our integrated process inside the company so we will use that process and we will work and we look at the best people from both the teams. The way both companies are going, the way the revenue is going for QLogic, and the way it is going for Ancor and with the growth we really need people from both parties. I mean I told those guys yesterday and QLogic. We need people from everywhere but we will select the best people of what we need.>>>