Yikes. I didn't know about the cult following of
last week's item on the company, which sent this column's Hostile React-O-Meter spinning outta control.
Why didn't I go after
Brocade Communications Systems
, which has a $4.7 billion market cap vs. $700 million for Ancor? (Four-point-seven bil! Hard to justify that, but at least Brocade can lay claim to 80% of the fibre-channel switch market. And the Ancor story is simply more compelling because of its hype-or-hope ties to
. And get this: Without the Sun deal, Ancor's growth next year, according to one short-seller, would be flat.)
And why didn't I point out that Ancor, which I mentioned was "cash-starved," had just raised $65 mil in a public offering? (It'll be a Band-Aid if the Sun deal doesn't go through.)
Speaking of which, get a load of my assistant
chat with Brocade CEO Greg Reyes:
Mark: Are you going to let Ancor basically walk away with the Sun biz, or are you interested in pursuing it?
We were notified that we had won the business. Then a week before our IPO
Brocade's IPO last May, Sun said there were a new set of terms. Sun wanted warrants, full access to our source code and intellectual property.
No healthy company with competitive products would agree to a set of terms like those .... We didn't lose the Sun business, we just chose to pass on the terms.
Mark: Does that mean that you may eventually go back to Sun and try to work something out?
We would welcome the opportunity to work with Sun.
He then referred Mark to what happened with
earlier this week. SGI announced that it was going to use Brocade switches, much to the chagrin of Ancor, which several months ago announced it would work with another partner to supply fibre-channel products to SGI.
Reyes said, "I am hopeful that what happened with SGI will happen with Sun," adding, "at the end of the day, we are the supplier to every first-tier player other than Sun."
Mark then caught up with Ancor CFO Steve Snyder, who says he believes Ancor has a "very firm" position with Sun.
Mark: What about the comment by Reyes that no healthy company with competitive products would enter into the kind of agreement that Ancor did with Sun?
I believe that we won the business because we had product in Sun's lab that was working and doing what had to be done.
(As part of the deal, if Sun generates about $100 million in business for Ancor, it will get warrants to purchase 1.5 million shares of Ancor stock at $7.30 per share. Sun also gets free access to Ancor's source coding.)
Recap: Brocade says it won the Sun biz but backed out, and Ancor says it won the Sun biz because it had the better product.
Sun told Mark that Brocade never won any biz, and flat out said that Greg Reyes is "incorrect. They were never notified that they ever won the business. They were notified that they were a competitor for the business and that's all," says Kathleen Holmgren, vice president of storage operations for Sun Microsystems.
Holmgren also says the Brocade folks "were very disappointed to not get the business."
What about those warrants, source code and intellectual property issues that Reyes brought up? Says Holmgren: "We would rather not get into the terms of the deal, but it was not a deal breaker."
In the end Ancor got the biz, says Holmgren, because Ancor had more of what Sun was looking for. "The deal is based on their products, nothing more than that. We looked at
Ancor's technology and their roadmap and we made our decision based on that."
So what does Brocade's CEO say about Sun's comments? We can't use his exact words, but let's just say he stands by his comments.
One thing's for sure: They all can't be right.
Yesterday's item on
questioned whether the graphics chip company's financials indicate that it stuffed the channel last quarter. Nvidia officials hadn't been able to be reached prior to publication, but yesterday I spoke with Nvidia CFO Christine Hoberg.
She says she could understand "superficially," based on falling inventories and rising receivables, why someone would think Nvidia stuffed the channel. "I've been in finance long enough to know those two numbers work," she says. But she insists falling inventories and rising receivables really were the result of a back-end loaded quarter that was caused by high demand outstripping supply of several hot new products.
She also says the company's accounting policies preclude channel stuffing because, unlike many tech companies, they don't allow revenue recognition until a product has been sold out of the channel by distributors.
Speaking of chips: An item
here last October pointed out why
believed it would beat the odds of blowing up like all other graphics chipmakers. "It's this big inevitability: You have it for a while, and then you lose it," said one money manager at the time. "And when you lose it, Wall Street trades you to low valuations."
Well, 3Dfx, about 10 at the time, went on to rise as high as 21 7/8 last April before a slow descent this summer. Then, on Monday, it disclosed disappointing earnings. Stock, off 27% yesterday, is back around 10. (Did it ever deserve to go any higher?)
Now Nvidia thinks
will beat the odds.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
email@example.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.