Adaptec exits Fibre Channel market
In a continuing effort to reduce operating costs, Adaptec Corp. last quarter announced several cost-cutting measures, including the discontinuation and sale of its Fibre Channel assets.
The Milpitas-based company has eliminated some 850 jobs since last April, but company officials view it as a necessary evil to reduce operating expenses by 35% by Q3 1999. According to interim CEO Larry Boucher, Adaptec did not cut back in areas of weakness, but in areas where they saw dim market potential. For example, company officials believe the future of Fibre Channel is contingent on too many slow-developing technologies, such as clustering, storage area networks, and the release of Windows NT 5.0.
"There are an awful lot of people who believe Fibre Channel is one of the future pillars of our industry, but there are serious problems standing in the way of its success," Boucher contends. "It`s not a replacement for internal disk storage. Its use will require major additions to the interconnect infrastructure, and its complexity means that interoperability is in doubt."
As Adaptec turns its attention to more immediate revenue-generating areas, its focus will center on RAID and SCSI connectivity. Officials believe the company is properly leveraged by backing the new Ultra160/m SCSI standard (see lead News story) because it plays well into their server-related business, which they see growing faster than industry estimates of more than 15% per year over the next three years.
"RAID is a key area, and we will invest whatever is necessary to be a leader. If you look at the server business, RAID is a significant growth opportunity and one we must absolutely focus on for the future," Boucher says.
In an effort to hedge its bets should Fibre Channel one day flourish, Adaptec sold its Fibre Channel assets to Longmont, CO-based Chaparral Technologies and San Diego-based Jaycor Networks Inc. (JNI).
According to CEO Gary Allison, Chaparral agreed to acquire Adaptec`s external storage systems division, while Adaptec gets a 19.9% equity stake in Chaparral. Chaparral will inherit a division that developed an external controller that includes SCSI-to-SCSI and Fibre Channel-to-SCSI options. While the controllers were initially for RAID devices, Chaparral officials plan to also convert the same controller board to pro- vide high-speed, long-distance data transfer for tape and tape library systems.
JNI entered into a strategic alliance with Adaptec in which they receive technology and expertise in the low-end SCSI-to-Fibre Channel bridge and adapter markets, in exchange for Adaptec acquiring an undisclosed stake in the company.
Officials with both companies lauded the agreement. "Jaycor is profitable in the Fibre Channel component business, and we believe this is the best chance to get a return from our investment in Fibre Channel," says Boucher.
"This is a very positive move for us because it brings together complimentary products and services," says JNI CEO Terry Flanagan.