Adaptec Axes Headcount, Again

Lays off 165 employees, after letting 200 go in September. Can it stop the bleeding?

March 1, 2003

2 Min Read
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Adaptec Inc. (Nasdaq: ADPT) today announced it has slashed another 11 percent of its workforce, or 165 people. This is the second headcount reduction undertaken by Adaptec in a matter of months to try to lower its costs (see Adaptec Lays Off 11% of Workforce and Adaptec Cuts Back).

The storage component maker, which will have 1,385 employees after the layoffs, said it expects to take a one-time charge of approximately $7 million related to the actions.

The restructuring targets annualized savings of approximately $17 million. Adaptec says its revenue and earnings levels for its fiscal fourth quarter 2002, which ends in March, will remain generally comparable to its third-quarter results, as previously forecast. Adaptec reported net income in its third quarter of $3.0 million on sales of $109.0 million, up 27 percent from the previous quarter (see Adaptec Boosts Q3 Revenues).

"This restructuring will enable us to maintain our investment in new products and technologies while continuing to improve bottom-line results for stockholders," said David A. Young, Adaptec's chief financial officer, in a prepared statement.

Adaptec is one of the major suppliers of SCSI controllers and also sells a range of external RAID storage systems, but it's been banking on the iSCSI market for new revenue growth -- and that has failed to materialize as soon as it hoped (see Adaptec Sees iSCSI Delayed and iSCSI in Exile).Still, the company says it remains committed to this technology. "We continue to pursue iSCSI vigorously," says Andrew McCarthy, director of public relations at Adaptec, who says the company has initiated a beta program and its iSCSI adapters should be in the channel shortly. He adds that Adaptec is developing a complete line of iSCSI products.

Regarding potential OEM deals, McCarthy says Adaptec is working with all the major players. "This is the part of the equation we have a lot of control over -- to make sure we deliver the best technology to our customers," he says. "Outside of that, the macroeconomic issues we cant do anything about... There are so many dials with this thing, the economy, the long standardization process -- it’s been difficult."

The iSCSI specification was finally ratified by the Internet Engineering Task Force (IETF) earlier this month, three years after it was initially drawn up (see iSCSI Gets Go-Ahead).

Could Adaptec be up for sale at this point? The stock was hovering at around $6 a share in midday trading today -- not the lowest it's ever been, but way off its 52-week high of $15.34. The company has a market capitalization of around $645 million.

"It's not preposterous" that Adaptec could be acquired, says John Roy, technology strategist at Merrill Lynch & Co. Inc.

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