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Warning - I got little sleep due to the state of the moon last night and I might be a little 'frisky' in the post that follows. <ggg>

It appears that the recent talk about Brocade here at the Fool (I've seen the Rule Maker article as well as TMFFuz's post copied and placed all over the internet) and links to this board has -

http://messages.yahoo.com/bbs?.mm=FN&action=m&board=21750630&tid=brcd&sid=21750630&mid=7791

- and most likely will continue to bring out posts from the Ancor/Q-Logic investors as well as posts like this one from buffndm:

"I suggest you take a look at recent and proposed insider selling of Brocade."

Perhaps not on this message board, but this issue most likely has been addressed quite well in terms of the size of the float and the ownership percentage balance between insiders and institutions being maintained at a certain level to promote the best level of liquidity. However, I don't think it has much to do with the actual gorilla game going on and hence doesn't really deserve any attention. Brocade's underlying business fundamentals speak volumes if one takes the time to go over them. Insider sales at technology companies which use stock and options as part of employee compensation is an oft used 'theory' by certain posters to attempt to make some type of a point.

The discussion of Q-Logic (acquiring Ancor) and Brocade in terms of a gorilla game is part of the logical discussion along with some other companies as well as technologies. I'm aware that this discussion has been going on for the past year on threads like the Yahoo! Brocade/Ancor message boards as well as the Silicon Investor Ancor and Gorilla & King threads. Some of the language, tactics and 'style' of part of those posts would be the most 'appropriate' on this thread from the get go. However, warranted gorilla game discussion is highly encouraged. I tested the waters on three Yahoo! threads in the past couple of months (Siebel, i2 and Brocade) only to find out that there are some interesting ways of expressing opinions on the internet medium that I wouldn't consider to be the most beneficial to fellow Foolish investors.

Here's a typical Yahoo! message post from an investor that most likely hasn't read The Gorilla Game, but is void of any 'your grandma wears army boots' content:

=====
by: solo111_99
6/20/00 11:29 pm
Msg: 7799 of 7801

Point of clarification. Who has the superior technology - Ancor or Brocade? I'm one of those loyal Ancor stockholders you make reference to from time to time and admire so much. We're loyal because we know we have the superior technolgy. There is going to be a correction in the disparity of the stock prices of Q/Ancor and Brocade. Seems logical that it will happen. Brocade the gorilla? It doesn't seem logical.
=====

How does one arrive at logic? I think that we would agree that a study of gorilla gaming in high technology at least helps us arrive somewhere in the vicinity of logic. Posts like the one above really don't even begin to 'roll up the sleeves' and get down to see what is under the hood from a gorilla gaming point of view. For every post that does attempt to 'get under the hood' on threads like that, there are 100 posts that reflect the above - "the stock price is too high, Ancor offers better value". That's just the way it is.

The above post was after the Rule Maker analysis that TFMFuz posted here was copied on that Yahoo! thread. Brocade is the only fibre channel company that has such a healthy business if you apply the criteria. The others have yet to turn a profit. Tom Gardner writes in the second half of the book "Rule Breakers/Rule Makers" about K-Tel and Ancor (as well as others) in a very humorous scenario that begins on page 173. This is separate from the fibre channel game, but it's worth the quick read if you have the book. Ancor, as a company, had some troubles in the 1995 - 1998 time frame and management at the time would not qualify as honest. However, to be fair - that was then. Certainly, with the growth potential of FC over the next few years, Q-Logic will do everything they can do to clean up the balance sheet of Ancor Communications as soon as possible.

When one studies the fibre channel space, it is important to separate the switch business from the hub business. Part of the reason Gadzoox and Vixel are not doing so well is that their hub business is not doing so well. This is a good thing and confirms as well as validates the advantage of what switches can do from both Brocade and Ancor for the customer. Another very important value chain announcement was made yesterday by EMC with their certification of the Brocade Silkworm 2400 and 2800 products.

If the discussion was going to develop around the game going on between Sun Microsystems and other data storage vendors, I believe that we should separate that from the discussion of a possible standard developing around a fibre channel switch technology and how the IOS game is playing out for the switch market. As we know, the competition in the switch market will do everything they can to prevent a standard other than their own technology from developing, while the market (end users) wants one to develop for the practical reason of interoperability. At the core of the fibre channel switch game lies the software (IOS) for the switches and the interoperability of the hardware. When viewing the game, it is here that the focus needs to be as a company like Brocade with 90% of the market and their important announcement with Cisco and Emulex last week as well as the EMC certification this week sets the stage for something every gorilla game investor likes to follow. The book that we have all read (right?) "The Gorilla Game" has an excellent case study of Cisco's routers and how the IOS played the key role in developing a standard.

Here are some important thoughts from one of our gorilla game investing colleagues, DownSouth, to summarize:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13879262

CSCO took a wide open standard (TCP/IP) and wrapped its own proprietary software around it so that CSCO routers, when in a network, did things with TCP/IP that others did not. BRCD is taking FC and building silkworm switches that only work with other silkworm switches. Now they are working with CSCO to make FC and TCP/IP work together, but only with CSCO routers and silkworm switches.

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13876336

On the other hand, if a company such as BRCD becomes the defacto standard for FC, then the incompatibilities between manufacturers becomes a competitive advantage for BRCD.

As CSCO and BRCD work for a FC to IP interface, BRCD's value chain gets very long and strong and the use of FC versus IP becomes almost irrelevant.

I'll bet these two have a phase III plan involving FC and IP integration that will settle the matter for a while! The "FC camp" will only applaud it if BRCD doesn't dominate the switching market through proprietary products which work with the new innovations. I am sure that BRCD is going to do what is good for BRCD, regardless of the "FC camp".

Could be that BRCD is taking the lessons that CSCO taught in the IP market and applying them to the FC market, with CSCO's hands-on assistance.


Whether we talk about Brocade using Rule Maker criteria (which I guess you all know how I feel about putting the cart before the horse at this point in the technology adoption life cycle), or whether we compare fibre channel vendor revenue numbers, or we talk about valuations within the sector, or we discuss the pros and cons of SAN, NAS, Infiniband, DAFS and how to invest in the space - the focus really should be on what is going on from a gorilla game perspective. That being said, all points of view are very welcome here using the format of looking at the space from a gorilla game perspective. If the front office game, or the wireless standards game has taught us anything about what and how to handle all of the information, it is that one needs to get beyond that and get under the hood to see what is really taking place.

On a side note:

Mike Buckley would be happy to know that Larry Ellison has turned from bad mouthing Siebel and taking away their business to now focusing on one of my favorite companies - i2. He went after them in last night's conference call. However, gorilla gamers learned long ago to have the salt shaker nearby when Larry speaks. To say that the i2/Aspect's completed merger is a real threat to Oracle's B2B initiatives would be correct. Larry knows when to shoot from the hip and use all those eyes in the back of his head. Maybe Larry's chatter will have the same outcome on i2's share price and business that it did for Siebel's. <ggg>

Enough - off to work...

BB



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