Conference Call, 02/04/97: Ancor Communications

FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (MF Raleigh)

Ancor Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANCR)") else Response.Write("(Nasdaq: ANCR)") end if %>
6130 Blue Circle Dr.
Minnetonka, MN 55343
612-932-4000
http://www.ancor.com/

ALEXANDRIA, Va, February 4, 1997 /FOOLWIRE/ -- Ancor Communications held on January 28, 1997 a conference call to discuss the cancellation of an OEM contract with SEQUENT COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNT)") else Response.Write("(Nasdaq: SNT)") end if %>. Steve O'Hara, CEO, and Lee Lewis, CFO, were on the conference call.

COMMENTS FROM STEVE O'HARA. The company was told of the cancellation on January 27. "As you can imagine, we are very disappointed by this news. We've worked very hard for months to solve Sequent's Numa-Q switched version systems integration problems and we were successful in solving the first round. However, Sequent informed us that they had decided to delay the switched version of their Numa product and concentrate their engineers on solving the integration issues of the arbitrated loop version. They remain committed to fibre channel and they remain committed to a switched version. It is important to note than Ancor's switch was not the problem and we met our product specifications. The issues we're proved to our satisfaction, and IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> verifies, involved other parties' equipment failing to interoperate. We continue to work with this company to solve this problem so that we can work together on Numa opportunities and indeed, we expect to work with Sequent in the future."

QUESTION AND ANSWER SESSION. The company was in a systems integration mode with Sequent, which can present numerous delays or unforeseen events. As such, the company did not model significant Sequent revenues into "base-case" financial assumptions for the year. When the company did sign the contract in early 1996, it did expect to be shipping product in 1997. However, the company budgeted conservatively going into an unknown situation.

Fibre channel is in its infancy and is starting to come to market now. "Interoperability is the issue, the question. We have the University of Minnesota and University of New Hampshire, who are setting up interoperability labs for every fibre channel company. EDS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EDS)") else Response.Write("(NYSE: EDS)") end if %> has just joined the fibre channel association and they are setting up an interoperability test lab, where they will take products. There are other companies that have announced yet, who are doing the same thing as far as interoperability test labs."

"We've never had interoperability problems because we've been shipping our product. Now that other people are starting to come to market, we need to get everybody's product out there and tested so that it interoperates. Fibre channel is making a statement here that we are going to have interoperability between our products" as opposed to ethernet products. "As other switches come to market, as other adaptor companies are now bringing their product to market and adding Class 1 to their product, then they will be a great deal of interoperability testing that's taking place to make sure we move forward. I expect that as we work with other companies on OEM opportunities, that there will be a lot more interoperability testing up-front before we make any announcements."

There will be no one-time charges on the income statement to reflect the cancellation.

Sequent decided to pull its engineers off the switched version to work on an arbitrated loop versions of the Numa products. Ancor hopes that Sequent will return to the switched version when it has taken care of arbitrate loop version issues. In the meantime, Sequent decided that it didn't want to be bound to a contract that was not active.

SUMMARY. "We're obviously disappointed by this cancellation at this point, however, we're going to press forward here -- there's other activity that we will discuss at our quarterly conference call at the end of February that we do expect Ancor to be on its numbers for the year."

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