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Storage Suppliers Mix Messages
Adaptec blames drive shortages for shortfall, while a key competitor raises estimates
March 25, 2005
3 Min Read
Several vendors of storage subsystems are sending mixed messages about the impact of drive shortages on their financial reports. In at least one case, it's tough to tell reason from excuse.
Here's the rundown:
Adaptec Inc. (Nasdaq: ADPT) today announced quarterly revenues will fall 9 to 13 percent below the low-end range of $127 million to $131 million the company gave in January. Adaptec blames "recent enterprise drive shortages [that] have negatively effected demand for its SCSI-related products from its OEM and channel customers."
Early last week, LSI Logic Corp. (NYSE: LSI), which competes with Adaptec in storage subsystems, raised its quarterly guidance from $420 million to $435 million in revenues from $400 million to $415 originally cited (see Drive Shortage Lowers Adaptec's Hopes). About one-third of LSI Logic's total revenues come from storage systems versus semiconductors. The company says its guidance adjustment was prompted by "[s]trength in both Consumer and Storage Components, driven by new products and an early end of the supply chain inventory correction."
Xyratex Ltd. (Nasdaq: XRTX) last night announced $142.5 million in quarterly earnings, showing growth of slightly more than 22 percent sequentially. Xyratex, which also makes storage subsystems and competes with Adaptec in midrange disk arrays, predicts next quarter's revenue to run between $155 million and $165 million (see Xyratex Announces Earnings). In a prepared statement, CEO Steve Barber comments, "We continue to see strong demand for our products and technologies... and believe this reflects the strong trends we have seen across the whole storage industry."
All three vendors noted above depend on the storage drive market for business. Yet only Adaptec is complaining about shortages of SCSI I/O drives required for host adapters and arrays. Shortages of these and of Fibre Channel drives have drawn vendor complaints in recent months (see Storage Drives Are Low on Fibre) .
At least one analyst thinks Adaptec's stated reason for lowering its guidance doesn't go quite far enough. According to Thomas Curlin of RBC Capital Markets, tightening competition is squeezing Adaptec more than a shortage of drives.
"The relative strength of LSI's SCSI I/O ... business suggests that Adaptec's current issues reflect share loss as Ultra 320 products ramp in the marketplace," writes Curlin in a note about Adaptec today.Ultra 320 is the highest-capacity parallel SCSI interface available and is generally thought to be the "last stop" for OEMs before adoption of serial-attached SCSI (SAS) in storage gear.
Citing SEC guidelines, an Adaptec spokesperson declined to comment on whether the company is losing market share in enterprise drives.
Meanwhile, Adaptec isn't putting its eggs into one SCSI basket. Recent announcements include a "RAID-on-a-chip" adapter announced yesterday (see Drive Shortage Lowers Adaptec's Hopes) and an alliance with IC maker Server Engines LLC to augment Adaptec's iSCSI product line (see Adaptec Joins With ServerEngines ).
Adaptec's fourth quarter ends March 31, and its conference call earnings announcement is planned after market close in April 28.
Mary Jander, Site Editor, Byte and Switch0
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