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QLogic Stock Falls Additional 17% in Wake of Ancor Deal


Investors pummeled QLogic Corp.'s stock Tuesday for the second day in a row after the Aliso Viejo chip manufacturer unveiled plans to buy a money-losing maker of equipment for data storage networks at a hefty premium price.

The stock, which tumbled 25% after the deal was announced Monday, was off an additional 17% on Tuesday as traders ignored industry analysts who asserted that the sell-off is an overreaction. The stock lost $12.81 to end the day at $61.94 on Nasdaq.

The stock of Ancor Communications Inc., the Eden Prairie, Minn., fiber-channel switch maker that QLogic will acquire, dropped 18%. Ancor shares lost $6.81 to close at $31.38 on Nasdaq.

Executives urged investors to give the companies time to explain the benefits of the purchase, but Wall Street is growing impatient with deals involving money-losing companies.

"In a tougher market, people may not be waiting around to hear the stories of the synergies" between two companies, said market analyst Todd Jadwin, managing director of Banc of America Securities.

Analysts said investors still were worried about Ancor's poor performance, the hefty premium of 69% over Ancor's stock price and the likely erosion of QLogic's relationship with a major ally.

Since announcing the stock swap Monday, QLogic and Ancor have seen the value of the deal fall from an initial $1.7 billion based on QLogic's closing price Friday of $99.94 a share to less than $1.1 billion Tuesday. The premium has dropped to 3.3% of Ancor's stock price.

The deal does not leave either company the option of bailing out because of fluctuations in the share prices. Under the agreement, QLogic would trade 0.5275 shares for each share of Ancor, which has lost $8.7 million last year and $38.3 million during the last four years.

"The market is very skittish about transactions of all sorts. They're going to distrust first and figure they can get back later," said Tom Anderson, QLogic's chief financial officer.

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