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

To: George Dawson who wrote (18978)	10/30/1998 2:04:00 AM
From: Kerry Lee	Respond to of 29386

George : <<There is another scenario - wait and just buy the product. That way you don't have M&A costs. This might be a preferred strategy if you see a limited window of opportunity for FC switches - either time to another technology or the commoditization of switches. In that case you might have to write off relocation or other costs associated with closing a division.>> Unless Networking company "C" already has their own FC switch technology developed in-house, I see your scenerio as unlikely. For example, IF I am Networking Company "CM" and I have FC switch company "B" supplying me with their FC switch via an OEM deal, what happens IF Networking Company "CO" buys FC switch company "B", therefore making "B" a "CO"-captive company? Is "CO" going to continue shipping me? Unlikely. If I was a "big 4" networking company and I saw FC/SANS as the next huge/emerging trend/technology and I saw a small FC company with leading-edge technology, why would I want to share that technology with my competitors or risk having my competitor own it to themselves? Competitive market forces causes the stock of hot technology companies to rise.This is why the Mets are willing to overpay ( $91 million) for Mike Piazza and the Wolves were forced to overpay ( $120+ million )Kevin Garnett... Regarding "commoditization of switches", why would switches be any more/less prone to commoditization versus adapters, hubs and routers or any other technology product for that matter? As long as you can keep improving the product from a lower cost/more bandwidth/functionality standpoint( eg. keep adding network mgmt features) and keep realizing economies of scale, the higher margins of switches ( 45-75% gross )should justify "value-added" stature. I do believe that at some point within the next 12-18 months, Ancor is going to have to decide whether to expand its product range in order to grow substantially/remain independent OR if it stays focussed soley on FC switches, it will be likely be bought out. Personally, I don't think the current Ancor mgmt team has the strategic/marketing vision/expertise to expand the Company beyond FC switches which is why I believe that a buy-out is the most likely scenerio in the next 12-24 months. I hope I am proven wrong.Once Ancor gets a couple of OEMs under their belt, they really need to hire a VP Business Development. Regarding "costs of closing a division"...I don't think that is necessarily an automatic. For example, Alcatel is leaving Packet Engines alone as a stand alone division way up in the boondocks of Spokane, WA.