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

To: Craig Stevenson who wrote (18225)	9/25/1998 11:38:00 AM
From: Kerry Lee	Read Replies (1) \| Respond to of 29386

Craig, I don't think total shares outstanding will be as bad as 25 million despite what the S-3 says, because the 25 million number assumes a conversion price around $1. Also, the Boeing AWACS will not be 100% gross margin since I think they still need to buy a few parts (eg. optics) and they will probably make some kind of accounting adjustments to avoid distorting their margins..I have heard that Boeing AWACS should be in excess of 50% gross margin. FWIW, IF Ancor decides to spread the $9 million licensing/royalty over 3 quarters, then Q3 revenues will be $3 million worst case and Q4 will be $5 million worst case( $3 million INRANGE + $2 million AWACS )..The flipside is if they decide to recognize $7-9 million all in the current quarter...then they would have to actually report Q3 eps on a fully diluted basis <g>. Regarding the INRANGE deal, my understanding is that Ancor already received their first installment of the INRANGE payment with the second installment payment due in mid-December and the third in mid-March.

To: Craig Stevenson who wrote (18225)	9/25/1998 12:00:00 PM
From: Kerry Lee	Read Replies (2) \| Respond to of 29386

<< Here is where my assumptions may break down. I am calculating about 25 Million shares outstanding. $1.9 Million divided by 25 Million is 7.6 cents per share. Multiplying that by 4 (assuming that this can be maintained) yields 30.4 cents per share on an annualized basis. 20 times that is $6.08.>> Craig, I respectfully disagree with your valuation technique of using the PE ratio for a development stage/start-up company in a new/high growth sector like FC. I believe that analysts are more likely to: 1) value a company like ANCR by looking at valuations of companies in high growth sectors, eg.Gigabit Ethernet, Internet and Biotech companies. 2) Forecast 12-24 month forward revenues and then use Price-to-Sales ratio and PEG ratios 3) Look at takeover value based on what other companies have been sold for,eg. in 1996, Granite Systems sold for $220 million and had zero revenues, Netstar had $5 million revenues and sold for $300 million to ASND...more recent small company data communications deals ( proprietary technology, minimal sales ) seem to be going for $50-150 million. The reality is that IF Fibre Channel takes off in a big way,Industry consolidation is INEVITABLE ( look at TELCO )and companies like Brocade and Ancor will be hard pressed to stay independent 1-2 years from now.