Adaptec casts off systems business

By Dave Simpson

October 7, 2005—With the familiar refrain of "Concentrate on core competencies" in the background, Adaptec this week announced that it will divest its systems-level businesses and concentrate on its RAID controller and adapter product lines, most notably those based on Serial ATA (SATA) and Serial Attached SCSI (SAS) components and related software.

The systems-level products came primarily from Adaptec's acquisition of Snap Appliance and its line of low-end NAS filers last year (for about $100 million), and its acquisition of Ireland-based Eurologic in 2003 (for about $30 million). Eurologic made disk arrays, with a focus on iSCSI.

Adaptec's systems business accounted for approximately $80 million in annual revenues, according to company officials. The business also included management software from Eurologic and NAS-related software from Snap, including the Linux-based GuardianOS operating system.

In prepared statements, interim CEO Scott Mercer said that Adaptec "...needed to simplify our business model," while company president S. "Sundi" Sundaresh said the divestiture will enable the company to "focus our internal resources on...Serial ATA and Serial Attached SCSI."

"It was clear that the commodity [systems] business was not helping Adaptec from a financial standpoint," notes Steve Berg, an analyst with the Punk, Ziegel & Co. investment and research firm, in New York. "[The divestiture] will help to start clean up the company."

The news set off speculation about which vendors might be interested in buying Adaptec's systems business (which is being handled by Credit Suisse First Boston Corp.), with competitors Dot Hill, Engenio, and Xyratex being mentioned most frequently as potential buyers. This speculation is based on the theory that the playing field for independent vendors of midrange storage systems for OEMs is due for further consolidation.

Adaptec officials declined to further discuss the move, although more details are expected at the company's fiscal Q2 2006 earning report on November 3.

This article was originally published on October 06, 2005