Financial: Adaptec Q3 Earnings; Revenue up 28% sequentially - Company Financial Information

Edge: Work-Group Computing Report, Feb 1, 1999

Adaptec, Inc. (NASDAQ:ADPT) released its fiscal year 1999 third quarter results for the period ending December 31, 1998. Strong demand for its host bus adapter products, a significant RAID design win, and overall expense reductions paved the way for a healthy quarter. Revenue for the third fiscal 1999 quarter was $183.9 million.

Net income and diluted earnings per share were $26.7 million and $0.24, respectively. Excluding the results from the Peripheral Technology Solutions group (PTS), which was recently sold in parts to STMicroelectronics and Texas Instruments, net revenues were $159.6 million in the third quarter, down 17.9% from $194.4 million in the third quarter of fiscal 1998, and up 34.9% sequentially from $118.3 million in the second quarter of fiscal 1999. Net income was $29.2 million, down 13% from $33.6 million excluding unusual charges and a change in accounting principle a year ago, and up from $3.8 million excluding unusual charges last quarter. Diluted earnings per share were $0.26, down from $0.28 for the third quarter of fiscal 1998 excluding unusual charges and a change in accounting principle, and up from $0.03 for the second quarter of fiscal 1999 excluding the effect of unusual charges in that quarter. "We are pleased with the achievements the entire Adaptec team has accomplished to deliver these results," said Larry Boucher, interim CEO of Adaptec. "We believe we are positioned for long-term profitable growth, especially on the server side of our business." "Our expense reduction program also proceeded more rapidly than we originally expected," added Andy Brown, vice president and CFO of Adaptec. "The keys to our future success are continued execution on works in progress, strong customer relationships, software expertise, and brand equity." Trends of the Quarter Continued demand for host bus adapters was fueled by server growth, driven largely by the demands of Internet computing. E-business, online publishing, and online trading/brokerage, for example, all require powerful I/O to move data quickly, reliably, and on demand "24x7" where it is needed. On the technology front, Adaptec was the first to demonstrate a working Ultra160/m host bus adapter (Comdex, November 1998), and is working closely with hard disk manufacturers, who will debut Ultra160/m drives concurrently with Adaptec shipments, providing a ready market for the Adaptec product. The company's AAC-364 64-bit RAID adapter (formally announced January 6, 1999) is the industry's first true 64-bit RAID controller. Embraced by Dell and incorporated into its new PowerEdge servers and PowerVault storage products during the quarter, the AAC-364 is the industry's flagship performer, and heralds a new era of RAID development and focus at Adaptec. Sophisticated RAID and SCSI products are being differentiated more by software features and functionality than by hardware, and server performance is heavily influenced by the value Adaptec software adds. At the desktop, Adaptec's CD-RW software is the de facto industry standard, and Adaptec expects to leverage its CD-RW expertise into future DVD products. Over the last five months Adaptec divested itself of non-core businesses with the sale of peripheral technology solutions to STMicroelectronics; sale of high-end peripheral technology solutions to Texas Instruments Incorporated; the formation of BroadLogic Inc. as an independent satellite networking technologies company; the transfer of certain Fibre Channel technologies and assets to Jaycor Networks, Inc. (JNI) in return for an equity stake in JNI; and the transfer of certain external storage technologies and products to Chaparral Technologies, Inc. (CTI) in exchange for an equity stake in CTI. Adaptec moves the world's information with host bus adapter, RAID, and software products that speed information to and from computers, peripherals, and networks. Founded in 1981 and with headquarters in Milpitas, Calif., Adaptec is a global design, manufacturing, sales, service and distribution company. More information on Adaptec and its products is available at http://www.adaptec.com.