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: Greg Hull who wrote (27395)	6/24/2000 5:28:00 PM
From: Bruce Brown	Read Replies (1) \| Respond to of 29386

I think it was this: "He downgrades Brocade using FUD and the stock goes up $60". Yes, that's what I said. Let me offer my apologies to this entire thread for the way I said the above comment. I'm not here to flaunt and taunt. Maybe we could get Kumar to downgrade Qualcomm if the result is the same as the Brocade downgrade. As far as that goes, I wouldn't mind if he downgraded Qualcomm a couple of times. <ggg> On May 22: "In his report, Kumar said a competitor, Nishan, will unveil this week a technology that could pose a threat to Brocade." yahoo.cnet.com Had Ashok Kumar taken the time to contact Brocade (which he evidently doesn't according to the CEO, Greg Reyes) - Kumar might have known more about Brocade's strategy with Cisco with FC over IP in the MAN and WAN markets. Hence, I condsider his downgrade had at last a certain element of uncertainty and doubt in it. I?m not saying he didn?t have legitimate concerns if you read the article at the link above. However, I know his track record with Dell and Intel (both long time investments of mine as I mentioned). Dell actually went as far as to shut him out of the meetings for analysts and quarterly conference calls for quite some time because of Kumar's tactics. How often does that happen? I completely understand the ire that Mr. Reyes displayed towards Kumar. I?ve seen it before from the Dell management team. Thank goodness Kumar likes Intel because that's my families largest holding. His reputation is an interesting one to say the least. I don't know how long you have been following this thread, but it has a rich history of attracting denigrators and FUDsters, especially in 1998 and 1999. The action on this thread has ebbed considerably in 2000....Had we not had a previous acquaintance I would not have responded to you, but I'm sure you'll understand in this light why championing an increase in Brocade's stock can be viewed as yet another shot. Thanks for clarifying your intent was to express your earlier impressions of Kumar. Most here were unaware of your past involvement with Kumar. I actually skim a few posts from time to time, but only since January of this year. I skim because Ancor is on my radar as a possible investment. From the Bridge News article to which you responded: "Added Reyes, "Brocade's got a track record of performance and [Piper Jaffray's] banking relationship with Ancor needs to be seem for what it is: a financial relationship that is highly suspect." Pick up any issue of Red Herring and put 2 and 2 together to see what firms have what relationships with what companies. That's simply part of the business. I have no idea who is behind Ancor as I haven't studied it that far. The balance sheet didn?t allow me to go any deeper yet. However, it would appear that a combination of ire directed at Kumar as well as Ancor was combined in a "pot shot" by Mr. Reyes. Kumar has provoked before and the reaction was typical. When I first posted Kumar's FC comments on the G&K thread, I had no idea of his history, especially regarding INTC. That is not a stock I follow. Too bad you don?t follow it. It's a good old Silverback Gorilla. Went public in 1971 at $16.75 a share and has enjoyed 12 stock splits to date. The 13th will take place on July 30th. The underlying fundamental metrics for such a large company that is approaching its 30th birthday as a public company are beautiful (if you love to crunch balance sheets, here's Q1): * 13% sales growth * 63% gross margins * 30.8% net margins * 9x more cash than debt * .93 for the Foolish Flow Ratio * Intel expects interest and 'other income' alone for Q2 to be $2.3 Billion. Revenues for Q1 were $7.99 Billion. If you run the same metrics for Brocade's last quarter, you get: * 489% growth rate * 58% gross margins * 21.5% net margins * no debt * .685 for the Foolish Flow Ratio Those are two very, very healthy companies from a fundamental look. But what's a long-term FC investor to do if they bought Ancor prior to May, 1999? Sell Ancor immediately and buy Brocade as soon as it became available? Wait until it is obvious that Brocade is in fact a Gorilla? Certainly not sell immediately, but at least take a look at the underlying fundamental business health of the companies to see how they compare. Brocade wisely waited to do their IPO until they were looking very, very healthy. It was a widely anticipated IPO and the balance sheet looked great from the get go. It?s improved every quarter since then. That?s an impressive performance and the market is rewarding it. I'll let you in on a little secret: I, too, own BRCD. I wish I had pressed the buy button on IPO day when it opened higher than my GTC limit order, but I did not. Of course no true Gorilla Gamer would buy an IPO anyhow. I find fault with the sentence that no true gorilla gamer would buy an IPO. Not to mention that the first 21 days that Brocade traded were all good entry points. It could very well be that an application software vendor may not go public until they are in the bowling alley which is the traditional entry point for gorilla gamers. As Geoff Moore has pointed out on the gorilla game listserv, the market is doing a better and better job of forecasting earlier and earlier the early leaders. If you consider Brocade?s game to include software in addition to the hardware, waiting for the tornado (enabling hardware) might not be the best strategy. Bowling alley purchase for the IOS is the strategy I employed by buying so soon after the IPO. I don?t use a full service broker, so had no chance of landing some IPO shares. I own it because I think it may become a King. It is possible that Brocade is in a Gorilla Game as Paul Johnson says, but neither he nor anyone else has spelled out for me what the proprietary open standard is they have. It?s quite possible the game will end royalty as most gorilla games do. The Cisco/Brocade combination could be the S curve tornado that lands the FC over IP into a separate game with different rules and will be exciting to watch. Most current Ancor investors do not expect the market share of Brocade to remain at 90%. Of course we will have a much clearer picture 12 months from now. How will EMC's purchases be split between Brocade and Ancor? How much will Sun ship? Will any of Brocade's current exclusive customers decide to dual source in any significant volume? True. I believe Cisco maintains a 70% share of the router market and Intel maintains an 85% share of the microprocessor market. I?m not sure about the Microsoft OS market share, but presume it is in the high 80?s. Brocade is the safer bet for a new long term investor today, but if you want to avoid the churn, churn, churn aspect what's a several year investor in Ancor supposed to do? Is it really obvious the game is over? Some analysts might recommend selling Ancor today, buy Brocade, and rebalance in 6-12 months if conditions warrant. Since I'm not a trader I'd like to see a little more evidence before shifting entirely to Brocade. I think you are correct about waiting for more evidence. I am waiting for more evidence to shift some investment money Ancor's way. I think we both have time. The good news is that the entire FC market will be carried up the beach with the wave of growth that seems poised to come. Keying in on the companies with the best balance sheets will be a strategy that rewards investors along the way. A true basket approach would include shares from a few of the top companies with consolidation to follow. The Q-Logic balance sheet looks a lot better to me than anything Ancor has provided in the past 5 quarters. BB