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Filed by QLogic Corporation
pursuant to Rule 425 under the
Securities Act of 1933 and
deemed filed pursuant to Rule
14a-12 of the Securities
Exchange Act of 1934
Subject Company: Ancor
Communications, Incorporated
Commission File No.: 001-12982
THE FOLLOWING IS A TRANSCRIPT OF A CONFERENCE CALL HELD ON MAY 8, 2000 BY QLOGIC
CORPORATION.
SPECIAL INVESTOR TELECONFERENCE
MONDAY, May 8, 2000
[QLOGIC/ANCOR CONFERENCE CALL MAY 8, 2000]
OPERATOR: Ladies and Gentlemen thank you for standing by. Welcome to
the QLogic and Ancor conference call. At this time, all
participants turn listen only mode. Later, we will conduct
the question and answer session. At that time, if you have a
question, you will need to press the one and the four on
your push button phone. As a reminder, this conference is
being recorded Monday, May the 8th year 2000. I will now
like to turn the conference over to Mr. H. K. Desai,
President, Chairman and Chief Executive Officer of QLogic.
Please go ahead sir.
H. K DESAI: Thank you, operator. Good morning, and welcome to
this special teleconference regarding QLogic's acquisition
of Ancor Communications. I'm H.K. Desai, Chairman, CEO and
President of QLogic and with me is Tom Anderson, QLogic's
Chief Financial Officer. Also joining us today is Ken
Hendrickson, Chairman and Chief Executive Officer of Ancor
Communications, and Ancor's Chief Financial Officer, Steve
Snyder. I will outline some of the major points of our
announcement earlier today regarding the pending acquisition
of Ancor Communications by QLogic, and Ken will add some
commentary regarding the transaction. At the conclusion of
these comments we will then open up the line for a general
question and answer session. During the course of this
conference call, we may make forward-looking statements
regarding future events or the financial performance of the
company. We wish to caution that actual events or results
may differ materially. We refer you to the documents that
QLogic and Ancor Communications files with the SEC,
specifically the most recent 10-K and 10-Qs. These documents
identify important factors that could cause our actual
results to differ materially from expectations.
This conference call report is protected by copyright law
and international treaties. Unauthorized reproduction or
distribution of this report or any portion of it may result
in civil and criminal penalties. Any recording or other use
or transmission of the text or audio for today's call is not
allowed without the express permission of QLogic and Ancor
Communications. With that being said, I will continue our
discussion of this acquisition. Earlier today we announced
that we entered into an agreement to acquire Ancor
Communications, Incorporated, in which QLogic will exchange
0.5275 shares of common stock for each share of Ancor common
stock. Based on the closing market price for QLogic of
$99.94 as of Friday, May 5, 2000, the transaction value is
approximately $1.7 billion. The proposed transaction is
intended to qualify as a pooling-of-interests and as a
tax-free exchange of shares under IRS regulations.
Completion of the proposed transaction is subject to
approval of the shareholders of both companies and
appropriate regulatory clearances. We expect to close this
transaction in the third calendar quarter. We expect the
transaction to be neutral to slightly accretive to calendar
year 2001 earnings, as well as, obviously QLogic's fiscal
year
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ended March 2002. These forecasts to not include any
operational or strategic benefits. QLogic is the leading
supplier of Fibre Channel end-node connectivity solutions
for servers, workstations, storage subsystems, peripheral
devices and management controllers. Combined with Ancor's
performance oriented scaleable switch products, QLogic will
be uniquely positioned to deliver total SAN solutions to the
marketplace. Customers will benefit from end-to-end tested
SAN solutions, as well as faster time-to-market deployments
of Fibre Channel products. The combination of our two
companies will be able to provide higher value-added
solutions to a broader base of customers and channels. I
would now like to have Ken briefly address Ancor's business
and give you his perspective on this transaction, Ken?
KEN HENDRICKSON: Thanks H.K.. As H.K. mentioned, Ancor Communications
provides high-performance Fibre Channel switches for storage
area networks. The company's customers include Sun
Microsystems, MTI Technology Corporation, EMC, Hitachi Data
Systems, INRANGE, and SAN resellers, including Bell
Microproducts. The company was the first to deliver a Fibre
Channel switch, and the first to top the one-gigabit
performance level. Through this unique merger, we will be
able to get access to an expanded customer base with
complete high-performance, interoperable SAN solutions. The
combined company's financial and technical resources and
comprehensive product scope make it second to none in the
Fibre Channel arena. It is especially noteworthy that the
combination will allow Ancor and QLogic to accelerate its
competitive advantages in the SAN marketplace. Importantly,
we have found strong similarities in company cultures that
will aid us in making this a very successful partnership.
With that being said, I will now turn over this
teleconference to Tom Anderson, QLogic's Chief Financial
Officer, Tom?
TOM ANDERSON: Thanks Ken. When they become available, we urge investors
and security holders to read QLogic's Registration Statement
on Form S-4 and the Prospectus/Proxy Statement on QLogic and
Ancor relating to the merger transaction described below,
because they will contain important information. When these
and other documents relating to the transaction are filed
with the Securities and Exchange Commission, they may be
obtained free at the SEC's Web Site at www.sec.gov. You may
also obtain each of these documents (when they become
available) for free from QLogic or from Ancor by directing
your request to the investor relations contacts in the press
release issued earlier today. This concludes our brief
formal comments and now we would like to open up the meeting
for questions and answers. Operator, please poll for any
questions.
OPERATOR: Ladies and Gentleman, if you have a question, please press
the one or above the four on your push button phone. You
will hear a three tone prompt acknowledging your requesting.
If your question has been answered, and you would like to
withdraw your request, you may do so, by pressing the one
followed by the three. If you're using a speaker phone
today, please pick up
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your handset before entering your request. One moment please
for the first question. Robert Monigue of Morgan Keegan,
please proceed with your question or comment.
ROBERT MONIGUE: Hi guys, way to go, I wanted to see if you would delineate a
little more. Both of you have strategic relationships with
Sun. How do you see this impacting on the added features you
can offer to Sun as part of this transaction? And also,
generally, how you will be able to combine the technologies
to offer synergies in the marketplace, in terms of future
benefits to customers? Thanks.
H. K. DESAI: We both have a great relationship with Sun and we already
talked to Sun Micro Systems last night and their response
was very positive from their management. What synergy we are
going to provide is that we are going to provide the total
SAN solutions of products we supplied versus switch product
supplying by Ancor. So, there is going to be a benefit for
the customers.
ROBERT MONIGUE: Okay. I assume there is some opportunities at the software
layer to integrate these together under one management
umbrella? Any rough feel on the timing of that type of
integration? And also, has there been any determination made
yet on the Sun warrant situation that Ancor has had there?
H. K. DESAI: Bob, let me answer the first question and Tom can answer the
second one. The software synergy, I mean this is too early
to determine really the schedule or timeframe, but
definitely we'll look at the synergies and then see what we
can provide, but, right now, it's too early to determine
that.
TOM ANDERSON: Yes. And far as the warrant situation, it's a much similar
answer. It's much too early to determine anything different.
We did review obviously those agreements in the due
diligence process.
ROBERT MONIGUE: Okay. Alright. I'll come back in a minute.
OPERATOR: Jim Pointer, please proceed with your questions or comments.
JIM POINTER: Yes. Is there a collar on this exchange or are you going
with a fixed percentage exchange regardless of stock prices
of either entity going forward here?
TOM ANDERSON: The exchange ratio is fixed and there is no price collar
effecting the closing of the transaction. The definitive
merger agreement will be filed later this week with the SEC
and you will have a chance to look at it at that point.
JIM POINTER: And you're expecting a close in the calendar in the third
quarter?
TOM ANDERSON: Yes. It's purely speculative at this point. It depends on
just how long the regulatory process ends up taking. We
obviously will require shareholder
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approval both from our shareholders and Ancor from their
shareholders. And, uh, we have to obviously file, uh, an S-4
with the SEC and that is subject to review. So, the process
we think will likely, uh, put us out in late summer, early
fall.
JIM POINTER: One last question. Does your alliance now with Ancor at the
switch level, do you think it has any impact on the
marketing of your HBA's with other switches out there, on
the part of OEM's or systems integrators?
H. K. DESAI: Well, that is not our strategy. What we want to do really is
we want to continue working with all of our suppliers and
for interoperability. Because we have common customers with
a lot of switch suppliers. So, we will continue working
that. We're not going to change any strategy on that regard.
JIM POINTER: Okay. Great. Thank you.
OPERATOR: Glen Hynans, with Needham & Company. Please proceed with
your questions.
GLEN HYNANS: Can you comment whether there were any other discussions
that took place before this was agreed to? Whether there
were any other bidders and then maybe comment on any changes
to the combined, what the combined companies management team
looks like?
H. K. DESAI: We can't. We don't want to comment on any of these two
questions. We really can't comment on the first two and we
don't know what's going on on the second one. It think it's
too early for us to really talk about the management
structure.
GLEN HYNANS: And the warrants with Sun and Ancor, is that spelled out in
the merger agreement? I mean, any reason SUN that you
wouldn't just, you know, take, Sun wouldn't just be taking
QLogic, you know, you just do the exchange ratio and have
Sun take the QLogic share. Has that been worked out?
H.K. DESAI: Basically, yes it has, but again, that is something that's
in the merger, definitive merger agreement, which will be
filed later this week.
GLEN HYNANS: Thank you.
OPERATOR: Chau Wu with Insurance. Please proceed with your question or
comment.
CHAU WU: Okay. Thanks. First congratulations. I just have kind of the
same question that the previous guy asked. In terms, like,
integration, do you plan to have this, you know, integrate
their sales forces? Integrate their engineering teams? And
also, what about the brand name? Will it be QLogic? Or will
Ancor run as a separate entity?
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H. K. DESAI: QLogic is the one, let me answer your second question first.
QLogic is the one which is going to surviving entity. So it
will be a QLogic brand name. About the integrations, we'll
start working on that as soon as this transaction is
complete. So, really, it's very difficult for us to comment
on our integration plans right now. But, there are a lot of
synergies between us in the operations areas because we
have a lot of chip expertise. There are synergies in the
marketing and sales. There is no overlap on the research and
develop side for the both companies.
CHAU WU: Okay. Thanks.
OPERATOR: John Dean with Solomon Smith Barney. Please proceed with
your questions or comments.
CLINT VAUGHN: Thank you. Actually, it's Clint Vaughn and firstly,
congratulations on the transaction. Ken, I would like to
direct my question to you if possible. Could you talk about
your relationship you recently had with EMC? Also, your
ongoing relationship with Inrange and Intel and how this
agreement may effect those? And then maybe, I don't know who
wants to speak about this, but, if somebody could address
potential synergies with clients and maybe you said end
solution, but point to point, rather in the end-to-end will
be probably be better. But if you could talk about some
examples of how you see that really folding in. That would
be helpful. Thank you very much.
H. K. DESAI: Ken do you want to take the first one?
KEN HENDRICKSON: Yes. I will. Alright. We've talked to each of those
customers and the response we've gotten has been very
positive. I think we can be a better supplier and certainly
our commitment to those customers is every bit as good as,
has increased because we have increased resources, increased
critical mass to be a good supplier. The products are so
complimentary and the engineering work is so complimentary
and then we put together the sales and marketing and get it
well coordinated, I think the customer is going to be a real
winner here. We're really thinking that the employee, the
stockholders, the customers, the companies are all going to
win. Because it's such a good strategic fit.
H. K. DESAI: Let me try to answer your second question. Like I said, the
benefits we have is the common customer base like Sun Micro
Systems, for example, EMC, I mean they are going to be
benefiting from the total SAN solutions. The second benefit
for the customers is that Ancor will have an expanded
customer base because the relationship we have is from the
customer. So, it's really providing a total SAN solution and
that is going to be the big benefit for the customers.
CLINT VAUGHN: Excellent. Thank you and just one other quick one. Are you
planning on merging on facilities or locations at all.
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H. K. DESAI: No.
CLINT VAUGHN: Thank you very much.
OPERATOR: Rick Billy with SG Cowen. Please proceed with your questions
or comments.
RICK BILLY: Gentlemen, couple of, uh, clarifications if you would. The
extent and duration of potential dilution until you reach
break-even and when might that be?
H.K. DESAI: Okay. The statement that's in the press release is obviously
that we expect that the transaction to be neutral to
slightly accretive to calendar 2001 earnings, we're not
really specifying, you know, a specific targeted quarter
within the year. In the meantime, this deal won't close
until late in the third calendar quarter this year or
perhaps even into the fourth calendar quarter. We don't
expect that the dilution in this calendar year will be that
significant. Perhaps in the $.03 to $.05 range is probably a
maximum exposure there.
R. BILLY: Thank you.
OPERATOR: ______ Chad with Chad Partners. Please proceed with your
questions or comments.
CHAD: Yes. QLogic is sailing along and doing great, why exactly
are we doing this deal and why are we doing it right now?
That's question one. And question two for Ancor is, why were
your receivables up so much in this recent quarter?
H. K. DESAI: Let me answer. If you look at the IDC data, what we really
do is we supply end-to-end solutions for the SAN market. If
you look at IDC's numbers in 1999, there was about a
500,000,000 market. HBA which is what we addressed at about
49%, which are $250,000,000 TAM and switches about
$150,000,000 TAM which is about 30% of the market. If you
look at going forward in 2003, the data says that it's going
to be 4.5 billion dollar market, which will have about 38%
HBA, which is about a $1.7 billion dollar market and about
56% will be the switch market, which is about a $2.5 billion
dollar market. So what QLogic is doing is really expanding
its market by $2.5 billion dollars going forward in 2003.
And the compound annual growth rate for that market is about
73% for the SANs. So this is a great opportunity for us and
we need to, uh, looking for a place where we can expand and
grow with the synergistic technology and culture and we feel
that Ancor is the right company for that.
CHAD: But their record is horrible and your record is awesome. And
this dilution and the way the stock is getting hit, just,
you know, it seems inopportune right now.
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H. K. DESAI: Well, you can't really look at the short-term benefits. What
we look at it is what's our strategies and where we going
forward. Where the market is going and the opportunity and I
disagree with you that they have a horrible record. I think,
what I'm hearing from customers is that they have a great
technology and that's what we're looking for.
CHAD: They preleased their, uh, their two quarters ago and their
receivables are up this quarter. And obviously your holders
are none too happy with your stock down 20 points today.
H.K. DESAI: Okay. I think we've answered the question. Is there anything
Steve or Ken you want to address on his question on the
receivables.
STEVE SNYDER: Sure. I can address that. This is Steve. The fourth quarter,
the calendar fourth quarter, the linearity within that
quarter was weighted much more toward the middle of the
quarter and hence we had an unusually low DSO in Q4 and I
pointed that out in our call at the time. And Q1 March
quarter, our quarter was more weighed toward the end of the
quarter, hence, the receivables were higher. So, it's really
a function of timing within the quarter and the increase is
the difference between the two quarters and not a reflection
of any creditors or collection issues.
CHAD: Okay. Thank you. Best of luck.
UNKNOWN: Alright. Thank you.
OPERATOR: James Thayer for Prudential Security. Please proceed with
your question.
JAMES THAYER: Thank you very much and congratulations on the merger. Most
of my questions have been answered. Tom, as far as that
notion is concerned, you seem to be saying that there is
going to be a $.03 to $.05 dilution in QLogic's fiscal third
quarter for the March 2001 year. Do I understand that
correctly? And, what is going to be the overall effect in
the March 2001 year?
TOM ANDERSON: Jim, you understood my--my general comments I think pretty
well. I said, the one thing that I'm going to clarify here a
little bit is we don't know exactly when this transaction
will close. We don't know if it will close within the third
quarter or within fourth quarter. So that obviously affects
when they'll be consolidated with our financial results. And
basically in those quarters, I'm just giving you a range of
what could be expected in those quarters, given the trend
that we see with the numbers right now. And again, we're
focused on the longer haul on this issue next year, overall
its accretive earnings.
JAMES THAYER: Yes. I understand. Okay. And, second, you both have
mentioned several times that there would be products
synergies, but would you describe these in a little bit more
detail briefly. Thank you.
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H. K. DESAI: It's really what I said. There are solution synergies, like,
I said before, we supply the end node products which is HBA
and the silicon and they have the switch which is in there,
in the fabric for the customer it's a total end-to-end
solution and that's the synergy we really talk about. It's
more at the customer side synergy more than the product
synergy. And then the technology synergy is the one which we
both are in the fibre technology. We are also both investing
in InfiniBand technology. So there is technology synergy
which probably we will use in future products.
JAMES THAYER: Thank you.
OPERATOR: Michael Power with Steel Capital. Please proceed with your
questions or comments.
MICHAEL POWER: Hi. Good morning. Quick question about the competitive
landscape with this acquisition, could you talk about who
might benefit from this acquisition and also maybe also your
competitors who are really going to see more difficult
challenges in the market. Thank you.
H. K. DESAI: I think the biggest benefit is going to be the customers in
this, the customers will have the most benefit because they
can get the total solution. In a competitive market, I don't
know, I mean I think it's going to be beneficial to us
because we both will have our product for the SAN market.
MICHAEL POWER: Okay. Thank you.
OPERATOR: John McClone with McClone & Company. Please proceed with
your question.
MCCLONE: Yeah. I have two questions. The first is if you could help
me understand your position versus Brocade's 2010 and the
Vixel 7000 and Zoot's Capelli and how to you play down
there? And secondly, concerning the combo HBA you just
introduced, which I guess, Sun is OEM-ing, is that unique to
Sun or will that be going out on all their servers and is
that somehow play into all the Sun business that Ancor does
with them in the switch area?
H. K. DESAI: Let me answer the second question and then Ken can answer
the first one. The second question is the combo, what we
announced about Sun, which is that Sun is using our chip to
and they have designed a combo card for Fibre Channel and
this is for that product so they are buying silicon from us
and this is for Sun. There is no impact on this for--for the
switch, for the Ancor acquisition. And Sun has designed us
in for a lot of different products as to its on the
motherboard or in the server or the HBA any way. And this is
one of the one designs with Sun. Ken, you want to take the
first one?
KEN HENDRICKSON: Yes. I would. Thank you. We produce the broadest line of
Fibre Channel switches in the marketplace. We actually cover
the whole marketplace. We have 8 and 16 port switches
shipping today. They provide full fabric. They can also run
in arbitrated loop mode and they can translate between the
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arbitrated loop or the old private loop. Let me clarify that
a little bit because you can have a fabric arbitrated loop
or a private loop arbitrated loop. So let me talk about
whole fabric private loop and translate in between. So we
cover the whole switch landscape 8 to 16 ports with the
whole range of features. We have the lowest latency in the
business. We are the only switch that can take a private
loop initiator and translate it up to a full fabric and have
a performance system that has more than a 126 nodes. So we
have several technical advantages across that product line.
In addition, we are sampling as I speak, a 64 port storage
director product. The only company that does that in the
industry, well, nobody does a 64 port in the industry and we
will have a 128 port version of that this Fall. So Ancor has
the broadest product line. I think it overlaps all the
competitor's product lines.
MICHAEL POWER: When you say translate, are you talking about dynamic
interactions? Or are you talking about a gradability to the
fabric?
KEN HENDRICKSON: No. I'm talking about dynamic interactions. In the private
loop, you've got 8 bit addressing and if you want a simple
minded model, the switch adds the other 16 bits to give you
the 24 port address and keep tracks and so it treats that
private loop device just as though it were full pledged
member of the fabric by building into translation.
MICHAEL POWER: And price wise?
KEN HENDRICKSON: Price wise, I think we're very competitive.
MICHAEL POWER: Okay. And one follow-up on that combo quick. How much does
Sun represent in your business now? And do you expect to
accelerate where you will be experiencing a larger
percentage of business from Sun?
TOM ANDERSON: The percentage of Sun business to our total busines is only
announced once a year. That's after a year-end. We have not
announced our year-end results yet. Last fiscal year, they
were about 18% of our total revenue. That's in the ballpark
probably.
H. K. DESAI: And we'll announce this Wednesday about the last fiscal
year.
KEN HENDRICKSON: Last fiscal year. Yes.
MICHAEL POWER: I guess, what I'm getting at is, the competitors that are
working with Sun now. Primarily, in the, Unix environment,
such as Emulex. Do you think this is a competitive advantage
over them, within the Sun environment?
H. K. DESAI: What we are supplying, like I said before, we supplying
products to Sun just the combo card is not the only thing. I
mean, we're doing the HBA for the SCSI, we have HBA for the
Fibre Channel. We have silicon on their motherboard for
their server, low-end server anyways. So we supply, we will
be supplying the products on the lot of different fronts
anyway for Sun. So
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we really have a very dominant position at the Sun as far as
Fibre Channel products are concerned.
MICHAEL POWER: So you don't expect any market share shifts then? Between
you and Emulex at Sun?
H. K. DESAI: Not at Sun.
MICHAEL POWER: Okay. Good luck.
H. K. DESAI: Thank you.
MICHAEL POWER: Thanks.
OPERATOR: ______ _______ Franklin Street Partners. Please proceed with
your question.
UNKNOWN: I have two questions. One is do you have any kind of cost
synergies on acquiring Ancor and secondly, could Ancor talk
about their competitive positioning along in terms of a
Broadcom and others in the area.
H. K. DESAI: Like I said before, a lot of synergies exist between us and
Ancor. Long-term I don't expect to see anything be changed
in the short term. But the long-term, because we are still
looking at the expertise of the purchasing we'll probably
have for the silicon, it is going to help us in the long
term. So there will be some synergies in the long-term on
the cost side. Ken you want to talk about the second
question.
KEN HENDRICKSON: Today we make InfiniBand and Fibre Channel switches that's
our product line. I don't believe that Broadcom is in that
product line.
UNKNOWN: O.k. sorry I meant to say Brocade not Broadcom. I'm sorry
about that.
KEN HENDRICKSON: We are the only ones in InfiniBand we're not shipping those
yet but we are in a development mode there. As far as the
Brocade switches our product line is virtually parallel with
theirs. We have some features that they don't have but 8
port switches, we both sell 16 port switches we have private
loop features we have public loop features. Ours is a little
faster, ours does translate from a private loop initiator
into a full fabric and probably most importantly we have 64
and 128 port switches in our product line. So I would say
that we include all of Brocade's product line within our
product line and then some.
UNKNOWN: Do you have any kind of lead over Brocade and how much time
Brocade needs to catch up with you.
KEN HENDRICKSON: I think that's a horse race. You take a point in time with
any pair of competitors in a development company and
somebody will come out with features ahead of one another.
We feel that we are ahead of them right now. If you ask
Greg, I suspect he'd claim that he was ahead of us and it is
a horse
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race and that's one of the advantages of this acquisition is
it gives us the critical mass and the resources to be able
to really run a good race, so that's why we're so
enthusiastic about it.
UNKNOWN: O.k. Thanks.
OPERATOR: Chesapeake Partners, please proceed with your questions.
UNKNOWN: Congratulations and a couple of questions. One, could you
tell us a little bit more, give us a little bit more color
on the background to the transaction and two, you mentioned
perhaps a September or October closing, I was wondering why
this should take that long it sounds like a clean deal and
then also I'm wondering you know, given the track records if
there is some protection for QLogic that's explicit. In
other words are there financial tests or product milestone
tests or development tests that Ancor has to meet?
TOM ANDERSON: O.k. First of all let's address the issue of the length of
time to do the transaction. Uh, that is - you have to
remember this also our year-end. We're going to be
announcing our year-end results in two-days. We have a
number of SEC filings to undertake as a result of year-end
and as a result of this transaction and we're just
anticipating that at worse case we'll probably have some
commentary from the SEC. There is really nothing we feel out
of the ordinary in this type of transaction but the SEC is
obviously very diligent about matters these days. So in that
regard we think that it could draw out that long. There is
always the chance that it could go much faster too. The
second part in terms of the milestones, etc. we're not going
to get into addressing that today as I say there is some SEC
documentation that's going to be filed with regard to the
merger later this week, but we feel that we've done
certainly a good job in the due diligence process and we
feel very comfortable with where this company is heading and
we think that we can obviously assist Ancor in moving along
to identify the area even faster perhaps than they would
have been able to do alone.
UNKNOWN: So there are no earnings test or product development tests?
TOM ANDERSON: Again, that's something that we are not commenting on here
today.
UNKNOWN: O.k. Thank you.
OPERATOR: _______________ of Morgan Stanley Dean Whiter please proceed
with your questions or comments.
UNKNOWN: Yes, I was wondering when a deal's announced there is a
period of uncertainty where at times customers defer
decisions on purchasing products and I was wondering if
there is any plans that the companies have for preventing
that sort of thing. Anything you can do ahead of the deal
that would allow the company to continue selling during the
course of completing this deal.
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H. K. DESAI: You know - I kind of -- in our business it takes a lot of
time to get the design win. It's not like the business is
made in a very short period so whatever design means they
have or what we have in our product I think that's not going
to change at all. We will continue without any problems or
issues because its a long way inside the design and the
qualification cycles. Um, for the future one I don't
think people is going to wait for making the decisions
because what this is really providing to the customer is
that they have better resources available with a combined
company so there is a benefit to them.
UNKNOWN: O.k. Thank you.
OPERATOR: Mike Ridgelay with Regan MacKenzie please proceed with your
questions.
MIKE RIDGELAY: Yes, I have three real quick questions. First you mentioned
the operational impact going forward and long-term regarding
purchasing silicon and what not you have a pretty
competitive gross margin in the industry in general, what
long-term impact do you see to the gross margin with the
addition of these new products. Secondly, you mentioned
there are some new customer opportunities. You mentioned
some of the overlaps could you identify maybe a little bit
of detail from the new opportunities that you see with
QLogic products given the Ancor customer list and finally,
just a little bit of discussion perhaps on how you're
positioning the Anchor switch vs. Brocade in the NT
environment and how you see that environment progressing.
Thank you.
H. K. DESAI: Like I said, there are benefits long term because of the
synergy we'll have on the marketing and sales side. The
gross margin is - we really don't know right now. We cannot
comment on that when I don't think there is going to be an
impact on the gross margin of what we doing our self. But
gross margin for Ancor long term, we don't have a date right
now we'll let you know as the time goes. The customer
opportunity is we have a lot of common customers between us
and what this deal is really providing is expanded
opportunity for both of us and the relationships we have.
Ken you want to answer the last question about the NT market
for the switch?
KEN HENDRICKSON: Why certainly, H.K. you have a lot of credibility in a good
partnership with several customers in that space. I think
that by being part of QLogic the Ancor switch can benefit
from those relationships and that credibility with the NT
customers.
MIKE RIDGELAY: Great thanks a lot and we'll listen to you again on
Wednesday.
TOM ANDERSON: I would just like to add one further. . . a little bit of
commentary on the general financial question that was asked
and maybe I wasn't real clear on this a little earlier. We
do expect to achieve accretion in the first half of calendar
year 2001 on this transaction, but obviously we're not going
to get into the details today of how we're going to affect
things like gross margins
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<PAGE> 13
and operating expenses and other details but we feel pretty
confident about the overall outcome of the financial success
of the two companies.
KEN HENDRICKSON: I'd like to make one addition too if I could to my last
comment. I think its important to consider that there will
be second sourcing opportunities as this industry matures
and I think that by being part of QLogic and having their
relationships and their credibility with the NT customers
that will aid us in the second sourcing and even in some
cases first sourcing opportunities of those customers. Thank
you.
OPERATOR: Glen Hynans with Needham & Company please proceed with your
follow-up question.
GLEN HYNANS: Couple things. One of the callers asked about the background
of the transaction can you give us any color on how long
you've been talking to one another. Two, I guess there was
an announcement - a press release about interoperability
between certain switch vendors being demonstrated this
morning. Can you comment on more specifically just what
interoperability is being demonstrated and whether this
represents a major milestone in the process towards a switch
to switch interoperability or not and lastly are there break
up fees in this deal and can you tell us anything there.
UNKNOWN: In terms of the - how the transaction - the color of how it
came together, all the details of that will be in the
jointly filed S-4. Those were recent discussions that
obviously were held between the CEO's and I think that's as
far as it went to answer that question. Go ahead H.K.
H.K DESAI: Ken do you want to take the interoperability questions?
KEN HENDRICKSON: Yes I will. There was a OSFI press release this morning
which talked about the demonstrations that are going to be
demonstrated at N plus I which is a conference that's going
on in Las Vegas this week. The announcement was that Ancor,
Gadzoox, Vixel and MacData along with Inrange will be
demonstrating switches in a fabric working together
heterogenous fabric. There was one switch supplier that is
part of OSFI which is not taking part in the demonstration
and that's Brocade.
UNKNOWN: I think we have time maybe for one additional question we do
need to cut this teleconference at 45 minutes and its just
about at that time limit.
OPERATOR: Robert Monigue with Morgan Keegan please proceed with your
question.
ROBERT MONIGUE: Just a few follow-ups. First of all building on that interop
question. Ken or H.K. could maybe either of you comment on
the macro recent trends at the OEM's on desirability or how
strong they are pushing the industry to achieve
interoperability. Second of all on the director type
products maybe you could just refresh your view of how much
of the market you see moving from 8-16 port switch
categories over to higher port count or high availability
type products like the director and are typically are you
seeing customers create
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<PAGE> 14
these as separate procurement categories or are these gonna
be viewed with established design situations in the eight
and sixteen port and then finally - get my little shopping
list in here - Ancor's got a relationship with Intel on the
InfiniBand and H.K. I know your very active in both VI and
InfiniBand any direct impact or synergy that you see in the
Intel relationship with those technologies. Thank you.
H.K DESAI: Uh, Ken I think you can take most of the questions there.
KEN HENDRICKSON: O.k. I will. Thank you for the question Robert and I'll
point you to the recent EMC announcement where both Brocade,
Ancor and McData are in the announcement in the form of the
NC switch. A lot of our customers are now demanding
interoperability and I think its a strong trend. Speaking
from my experience in the past I will tell you that people
want dual sourcing, they want interoperability without it
the industry is severely handicapped. So there will be a lot
of pressure for interoperability. With regards to the
director we are seeing that in the same category. We are
seeing people wanting a switch family. A lot of our Unix
people want to build fabrics that not only have a 8 and 16
port switches but they have a fabric topology that has 64
port switches and 8 and 16 and its interesting because you
might assume in the center actually it depends so much on
the fabric. The larger switch may be on the edge and you
might have a small switch in the core it might be reversed.
It's that flexibility. What our customers want is to be able
to provide a growth scenario for their end-users so they
want to be able to build a fabric that can expand over time
and keep that customer and by having a full family of
switches they have a better chance of providing that growing
fabric for their customers. As far as Intel is concerned
we're very active, we're very proud of the fact that we're
writing a lot of the standards documents and very active.
One of the comments I got this morning when we did the all
hands meetings and I will take this opportunity to make this
statement that our employees are very enthusiastic about
this and feel that teaming with QLogic is going to be
extremely beneficial but one of the advantages is that they
knew a lot of QLogic people from the Intel sponsored and
InfiniBand meetings.
H.K DESAI: I like to add a couple of things what Ken said is that the
QLogic management team is and the employees are very
enthusiastic about this deal. We are getting a tremendous
positive response inside QLogic. I also have known Ken for
many many years. I use to really work for him one time at WB
so we have great relationship we also have secured
employment contracts with the team at Ancor. So we are
looking forward that this is going to be very very exciting
fortunately for both companies and we are looking forward
for the challenges on these things. With that Tom, do you
have closing remarks?
TOM ANDERSON: We want to thank everybody for joining us for this special
teleconference. As a reminder those of us at QLogic will
look forward to discussing our fourth quarter and year-end
results with you on Wednesday, May 10th at 2:30 p.m. PST.
Thanks to everybody for joining us.
H.K DESAI: Thank you.
OPERATOR: Ladies and Gentlemen that does conclude our conference call
for today you may all disconnect and thank you for
participating.
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<PAGE> 15
* * * *
ABOUT ANCOR COMMUNICATIONS
Ancor Communications Inc. (Nasdaq: ANCR) provides high-performance SANbox(TM)
Fibre Channel switches for storage area networks (SANs). The company's customers
include EMC, Hitachi Data Systems, INRANGE Corporation, MTI Technology Corp.,
Sun Microsystems, and premier SAN resellers, including Bell Microproducts and
Datalink. The company was the first to deliver a Fibre Channel switch, and the
first to hit the one-gigabit performance level. Ancor, an ISO 9001 quality
certified company, is a member of the Fibre Channel Industry Association, the
Storage Networking Industry Alliance, the InfiniBank Trade Association, the ANSI
Standards Committee, and the University of New Hampshire Fibre Channel
Consortium to promote the advancement of Fibre Channel standards and
interoperability. Information on Ancor is available on the Web at
http://www.ancor.com.
ABOUT QLOGIC
A member of the Nasdaq-100 Index, QLogic Corporation sold more Fibre Channel
host bus adapters in 1999 than any other manufacturer in the world according to
IDC. The company is also a leading designer and supplier of semiconductor and
board-level I/O and enclosure management products targeted at the computer
system, storage device and storage subsystem marketplaces. QLogic
high-performance controllers are implemented in products from technology leaders
such as AMI, Compaq, Dell, Fujitsu, Hitachi, IBM, Iwill, Quantum, Raidtec,
Siemens, Sun Microsystems and Unisys. The company's high-performance Fibre
Channel and SCSI solutions play a key role in enabling enterprise-level storage
area networks (SANs) and the company's enclosure management products monitor
and communicate component information that is critical to computer system and
storage subsystem reliability and availability. For more information about
QLogic and its products, contact QLogic Corp., 26600 Laguna Hills Drive, Aliso
Viejo, CA 92656; telephone: 800/662-4471 (sales); 949/389-6000 (corporate); fax:
949/389-6126; home page http://www.qlogic.com.
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<PAGE> 16
ADDITIONAL INFORMATION AND WHERE TO FIND IT
QLogic Corporation ("QLogic") and Ancor Communications, Incorporated, ("Ancor ")
plan to file a Registration Statement on Form S-4 and other relevant documents
with the Securities and Exchange Commission (the "SEC") in connection with the
merger, and QLogic and Ancor expect to mail a Joint Proxy Statement/Prospectus
to stockholders of QLogic and Ancor containing information about the merger.
Investors and security holders are urged to read the Registration Statement, the
Joint Proxy Statement/Prospectus, and other documents filed with the SEC
carefully when they are available. The Registration Statement, Joint Proxy
Statement/Prospectus, and other filings will contain important information about
QLogic, Ancor, the merger, the persons soliciting proxies relating to the
merger, their interests in the merger, and related matters. Investors and
security holders will be able to obtain free copies of these documents through
the website maintained by the SEC at http://www.sec.gov. Investors will be able
to obtain copies of the documents free of charge from QLogic by directing a
request through the Investor Information portion of QLogic's website at
http://www.qlogic.com or by mail to QLogic Corporation, 26650 Laguna Hills
Drive, Aliso Viejo, CA 92656, attention: Investor Relations, telephone: (949)
389-6000. Documents filed by Ancor will be available free of charge from Ancor
by directing a request through the Investor Information portion of Ancor's
website at http://www.ancor.com or by directing a request by mail to Ancor
Communications, Incorporated, 6321 Bury Drive, Eden Prairie, MN 55346,
attention: Investor Relations, telephone: (612) 932-4000. In addition to the
Registration Statement and the Joint Proxy Statement/Prospectus, QLogic and
Ancor file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information filed by QLogic or Ancor at the SEC public reference rooms at 450
Fifth Street, N.W., Washington, D.C. 20549 or at any of the SEC's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
QLogic's and Ancor's filings with the SEC are also available to the public from
commercial document-retrieval services and at the Web site maintained by the SEC
at http://www.sec.gov.
INVESTORS SHOULD READ THE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY WHEN IT
BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS. NOTHING
HEREIN SHALL CONSTITUTE AN OFFER OF ANY SECURITIES FOR SALE.
SOLICITATION OF PROXIES; INTERESTS OF CERTAIN PERSONS IN THE MERGER.
QLogic, Ancor and their respective directors and executive officers, who may be
considered participants in this transaction, and certain other members of
management and employees may be soliciting proxies from QLogic's stockholders
and Ancor's shareholders in favor of approval and adoption of the merger
agreement.
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<PAGE> 17
The following are the directors and executive officers of QLogic:
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
H.K. Desai Director, Chairman of the Board, Chief Executive Officer and President
Thomas R. Anderson Vice President and Chief Financial Officer
Michael R. Manning Secretary and Treasurer
David Tovey Vice President and General Manager, Peripheral Products Group
Lawrence F. Fortmuller, Jr. Vice President and General Manager, Computer Systems Group
David M. Race Vice President and General Manger, Enclosure Management Products Group
Mark A. Edwards Vice President, Sales and Corporate Marketing
Carol L. Miltner Director
George D. Wells Director
Larry R. Carter Director
</TABLE>
The following are the directors and executive officers of Ancor:
Name Position
- ---- --------
Kenneth E. Hendrickson Director and Chief Executive Officer
Calvin G. Nelson President
Steven E. Snyder Chief Financial Officer and Secretary
John F. Carlson Director
Gerald M. Bestler Director
Paul F. Lidsky Director
Michael L. Huntley Director
Amyl Ahola Director
Thomas F. Hunt, Jr. Director
The directors and executive officers of Ancor have interests in the merger, some
of which may differ from, or may be in addition to, those of Ancor shareholders
generally. Those interests include:
* in connection with the merger, Steve Snyder and Calvin Nelson have entered
into employment agreements with Ancor and noncompetition agreements with
QLogic which will be effective as of the closing date of the merger;
* in connection with the merger, Ken Hendrickson has entered a consulting
agreement and a noncompetition agreement with QLogic which will be effective
as of the closing date of the merger;
* in connection with the merger certain key engineers will enter into
employment agreements with Ancor and noncompetition agreements with QLogic;
* certain of the directors and executive officers of Ancor may own options to
purchase shares of Ancor common stock which will become vested and
exercisable in connection with the merger;
* Ken Hendrickson will become a member of the board of directors of QLogic in
connection with the merger; and
* certain of the executive officers of Ancor will receive payments pursuant to
the merger that are considered to be "parachute payments" under the Internal
Revenue Code of 1986, and Ancor will pay excise taxes on behalf of the
executive officers in connection with such parachute payments.
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<PAGE> 18
Additional information about the officers and directors of QLogic can be found
in QLogic's Proxy Statement for its 1999 Annual Meeting of Stockholders. More
information about the officers and directors of Ancor, including information
about their option benefits and holdings of Ancor common stock can be found in
Ancor's Proxy Statement for its 2000 Annual Meeting of Shareholders in the
section titled "Executive Compensation." QLogic's and Ancor's filings with the
SEC are available to the public from commercial document-retrieval services and
at the Web site maintained by the SEC at http://www.sec.gov.
The report contains forward-looking statements within the meaning of the Safe
Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
References made in this report, and in particular, statements regarding the
proposed QLogic/Ancor merger are based on management's current expectations or
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. In particular, the following factors, among others,
could cause actual results to differ materially from those described in the
forward-looking statements: inability to obtain, or meet conditions imposed for,
governmental approvals for the merger; failure of the QLogic stockholders or
Ancor shareholders to approve the merger; costs related to the merger the risk
that the QLogic and Ancor businesses will not be integrated successfully; and
other economic, business, competitive and/or regulatory factors affecting the
businesses of QLogic and Ancor generally.
For a detailed discussion of these and other cautionary statements concerning
QLogic and Ancor and their respective operations, please refer to QLogic's and
Ancor's filings with the Securities and Exchange Commission, including their
most recent filings on Form 10-K and 10-Q, QLogic's and Ancor's Proxy Statements
for their respective Annual Meetings of Stockholders and the "Forward-Looking
Statements" section of the Management's Discussion and Analysis section of
QLogic's Form 10-K for the fiscal year ended March 28, 1999 and Form 10-Q for
the quarterly period ended December 26, 1999. QLogic's and Ancor's filings with
the SEC are available to the public from commercial document-retrieval services
and at the Web site maintained by the SEC at http://www.sec.gov.
Trademarks and registered trademarks are the property of the companies with
which they are associated.
###
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