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

To: KJ. Moy who wrote (28390)	2/15/2001 1:22:45 PM
From: J Fieb	Respond to of 29386

KJ., Looks like they want to cut the EMLX dead weight away from the rest of the sector for awhile. Now of Qs SPG could make some news we could ascend with MCDT. We are upgrading McDATA from Buy to Strong Buy after industry concerns and the recent EMC distribution of A class stock have put undue pressure on the price only weeks before the most important product expansion in the company's history. We have been carrying a target of $75-$85, and maintain that the stock and the group will recover as investors realize the defensive nature of storage as an investment and as lower interest rates begin to stabilize the domestic economy. We continue to believe that the company will achieve our current forecasts because of expanded distribution and product offerings. While HBA vendor Emulex's recent downward guidance put pressure on the entire group, we think switching can continue to grow somewhat independently of the sale of servers, where HBAs reside. With the expected introduction of its 32-port switch and preview of its 64-port director on March 19 and prospects for an additional OEM announcement, McDATA likely has enough good news to offset current economic worries. From a valuation standpoint, on our $0.55 estimate for 2001, the stock has now dropped to a P/E:G of about 1x vs. a 1.1x average for a group of technology stocks with a market capitalization of at least $1 billion and expected earnings growth of more than 40% in the next 12 months. While not a major discount to the group, a PEG of 1x is, in our view, a classically solid valuation for aggressive buying.