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Adaptec Says Sayonara to Systems

Struggling Adaptec Inc. (Nasdaq: ADPT) is getting out of the systems business to concentrate on pushing its SATA and serial-attached SCSI (SAS) wares.

In an abrupt about-face of strategic direction, Adaptec hired Credit Suisse First Boston Corp. to help find a buyer for the systems unit that it built through the acquisitions of NAS vendor Snap and Eurologic. Adaptec acquired Snap in July 2004 for $100 million and paid $30 million for SAN vendor Eurologic in March 2003. (See Adaptec's $100M Snap Decision and Adaptec Adopts Eurologic.) According to Adaptec, the systems business accounted for $80 million in annual revenues.

Adaptecs systems business appeared to be riding high shortly after the Snap acquisition, when it announced an OEM deal to supply IBM Corp. (NYSE: IBM)
with iSCSI and Fibre Channel low-end SAN systems last September. (See IBM Slips iSCSI Into SAN.)

Little more than a year later, Adaptec is struggling following four straight subpar quarters, the retirement of CEO Bob Stephens in May, and poor sales by IBM of its Adaptec systems. (See Adaptec Agonistes, Adaptec CEO Retires, and Storage OEMs Set to Shuffle Deck.)

Adaptec interim CEO Scott Mercer said in the company’s last earnings call in July that management was analyzing all of its businesses. In a statement released Tuesday night, Adaptec president Sundi Sundaresh said, "It was a hard decision for us, but we feel that selling our systems business is the best move for the company and its shareholders as we take the necessary steps in Adaptec's recovery. This will allow us to focus our internal resources on capturing a leadership position in the emerging Serial ATA and Serial Attached SCSI markets."

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