Feeds

Adaptec - the eternal wannabe

Serial acquisition FAIL

Maximizing your infrastructure through virtualization

Enter Steel Partners

There were more new Snap servers in 2007, and the new capabilities were delivered. The improvements didn't work and the Snap server business was obviously dragging Adaptec down. Steel Partners, an activist investor in distressed companies took a holding in Adaptec, gained board representation and pushed for a company sale to return cash to the investors. The Adaptec board withstood this pressure but their and Sundaresh's minds were focussed on getting Adaptec profitable and growing once again.

They hoped that Adaptec's future was in front of it rather than behind it. Once again Sundaresh decided the Snap business had to go. Adaptec should focus on its core adapter technology once amore. You got the feeling that it was not because the company wanted to do this but that there was nowhere else for it to go. Its acquisitions off the adapter base had turned into dead-ends, one after the other.

The company brought out new unified SAS and SATA interface Series 3 RAID cards and recorded 2007 revenues of $255.2m with a profit of $30.8m the profit looked good and it made the revenue decline more acceptable. Next year saw a hammer blow. It started well enough with Sundaresh fashioning a new data conditioning RAID card strategy and managing to offload the Snap Server business to distressed Overland Storage who thought it saw a way to buy an $18m annual run-rate business for just $3.6m.

Adaptec brought out new Series 5 RAID cards and Series 2 RAID-on-chip (ROC) entry-level cards. It added a drive spin-down capability to the cards, playing to the green gallery, and bought Aristos and its RAID ASIC technology for $40m. The sheer cost of staying in the RAID business was proving too much to bear but then competitors like LSI were strengthening their products all the time. The 2008 headline financial numbers were $167.4m revenue and a $9.6m loss.

Baying for board room blood

Steel Partners board members began snapping at the heels of Adaptec's old guard board. The RAID controllers had NAND flash added to them to speed I/O but it was fruitless in terms of relieving the pressure on the company. Steel Partners pushed harder and harder for a proposal at the AGM that Adaptec should be sold. It wanted control of the board and Sundaresh off the board too. There was a battle of proposal and counter-proposal, with letters to shareholders and proxy vote casting. Steel Partners gained more than half these votes and won control of the company. It cemented control of a smaller board, forced Sundaresh off the board, and then came clean this week and had Sundaresh agree to resign and assist in a company sale.

Adaptec never recovered from the dot com boom and bust; neither its revenues nor its share price ever returned to those heady heights. Its failure to heed both lessons of the 1994 crisis, its failure to adapt, returned to haunt it as it fumbled the parallel to serial transition in controllers/adapters and embarked once again on the we-can-sell-storage-boxes-too road to ruin.

In a period when LeftHand Networks and EqualLogic made iSCSI SAN array fortunes for their venture capitalist backers, Adaptec flunked the IP SAN business and then flunked the NAS business too, very messily. The Snap Server acquisition, initial divestment failure, renewed investment, and then distress sale cost the company very much more than $100m in total. Arguably, this diversion of resources led to weaker and delayed adapter and RAID controller product too.

If you want to go there, don't start from here

Adaptec always wanted to be more than an adapter/RAID controller company, but found out the hard way that if you want to become a storage array producer the best way to get there is not from an adapter starting place. Other adapter companies, such as Emulex and QLogic, didn't make the mistakes that Adaptec did and fared better, overall, through the dot com bust and the recession. There wasn't as much competition in the Fibre Channel HBA space as there was in NAS where software TCP/IP and cheap Ethernet NICS made NAS product entry cheaper.

The NAS market is a cruel one. Boucher's Auspex was knocked off its perch by NetApp and, once EMC entered the market with Celerra and BlueArc introduced its hardware-accelerated high-end NAS products, there were only low-end scraps left to fight over, with nobody making serious money.

So, farewell Adaptec. You fought a good fight but not good enough, being out-classed every-which-way you turned as you tried and tried to build something sustainable and profitable on your adapter base instead of focussing on it alone.

Who will buy you? LSI might like some of your technology. Broadcom possibly too. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Sysadmin Day 2014: Quick, there's still time to get the beers in
He walked over the broken glass, killed the thugs... and er... reconnected the cables*
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
SHOCK and AWS: The fall of Amazon's deflationary cloud
Just as Jeff Bezos did to books and CDs, Amazon's rivals are now doing to it
VVOL update: Are any vendors NOT leaping into bed with VMware?
It's not yet been released but everyone thinks it's the dog's danglies
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
The triumph of VVOL: Everyone's jumping into bed with VMware
'Bandwagon'? Yes, we're on it and so what, say big dogs
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.