Steel
Partners Comments on Adaptec's Second Quarter Financial Results
Revenue
Declines 41%, Operating Losses Increase Substantially, R&D and SG&A
Increase as
Percentage of Revenue and Third Quarter Projections Look Even
Worse
Urges
Stockholders to Sign, Date and Return the WHITE Consent Card Today to Protect
Their Investment
NEW
YORK--(BUSINESS WIRE)--Steel Partners II, L.P. (“Steel Partners”) today
commented on the second quarter 2010 financial results released earlier today by
Adaptec, Inc. (“Adaptec” or the “Company”) (NASDAQ:ADPT - News), which
highlights the Company’s rapidly deteriorating performance. With the consent
deadline just a few days away, Steel Partners also again urged stockholders to
vote the WHITE consent card to remove Adaptec CEO Sundaresh and Legacy
Director Loarie.
“After
reviewing Adaptec’s second quarter results, it is clear that the operating
performance continues to rapidly deteriorate under Mr. Sundaresh and his
so-called turnaround plan,” stated Warren Lichtenstein of Steel Partners. “How
can the Legacy Directors tell you with a straight face that Mr. Sundaresh’s
efforts are gaining traction? Is revenue declining 40% from $31.6 million to
$18.4 million, operating losses going from $1.8 million to $7.2 million, and
projected third quarter revenue dropping even further with a larger operating
loss their idea of traction?”
Mr.
Lichtenstein continued, “It is amazing that anyone can find it acceptable for
Mr. Sundaresh to continue to run Adaptec. It’s even more amazing that CEO
Sundaresh and the Legacy Directors continue to throw money into a rapidly
deteriorating business instead of selling the business operations as the
independent financial advisor recommended. It is time to end the reign of the
Legacy Directors once and for all before our respective investments in Adaptec
fall further.”
Adaptec Inc.
ADPT
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Net
Revenues
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$ |
18,442 |
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$ |
31,655 |
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$ |
40,180 |
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$ |
63,158 |
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Research
& Development
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7,195 |
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4,863 |
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14,749 |
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10,766 |
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%
of Revenue
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39.01 |
% |
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15.36 |
% |
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36.71 |
% |
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17.05 |
% |
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Selling,
Marketing & Administrative
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7,926 |
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8,753 |
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14,561 |
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18,250 |
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%
of Revenue
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42.98 |
% |
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27.65 |
% |
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36.24 |
% |
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28.90 |
% |
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Loss
from Continuing Operations
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$ |
(7,191 |
) |
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$ |
(1,797 |
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$ |
(11,751 |
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$ |
(4,352 |
) |
From Company press release
10/29/2009
Steel
Partners urged Adaptec stockholders to consider the following:
Comparing
second quarter of fiscal 2010 to second quarter of fiscal 2009, the Company’s
net revenues declined more than 40% from $31.6 million for the Company’s 2009
second quarter to $18.4 million for the 2010 second quarter.
Does this sound like the sales of the
Company’s products are gaining traction?
The
Company’s loss from
continuing operations for the second quarter of fiscal 2010 was $7.1 million
compared with $1.7 million for the second quarter of fiscal 2010.
Net
income declined to negative $3.7 million for the quarter compared to net income
of 3.3 million for the second quarter of fiscal 2009, and negative $3.2 million
for the six months ended October 2, 2009 compared with $8.3 million for the same
period in fiscal 2009.
With the sales of the Company’s
products in a state of decline, operating and net losses accelerating, do you
really think Adaptec will be able to generate positive operating cash flows
moving forward under Mr. Sundaresh?
Research
and development expense increased more than 35% from the first half of fiscal
2009 to the first half of fiscal 2010. Additionally, over the same period
selling, marketing and administrative expenses plus R&D expenses have
increased significantly to about 73% of revenues. If the run rate operating loss
continues for the rest of the fiscal year, it appears the Company could lose
over $25 million dollars on $76 million run rate revenues.
Mr. Sundaresh’s plan appears to
involve nothing more than the Company spending more and more of our money with
no returns, which we believe will lead to our cash balances decreasing as the
year progresses.
If our
solicitation is not successful, Mr. Sundaresh will be permitted to continue his
value-destroying plans -- DON’T
LET THIS HAPPEN!
Despite
all of his failures, which are crystallized by these abysmal financial results,
Mr. Sundaresh has now proposed a Board that would be controlled by himself,
Messrs. Kennedy and Van Houweling and three directors hand-picked by Mr.
Sundaresh. We cannot afford to continue with zero accountability and oversight
at the Company.
Voting to
remove Messrs. Sundaresh and Loarie on the WHITE consent card is the only
way to ensure a more balanced Board that is fully committed to maximizing
stockholder value.
FORTUNATELY,
IT’S NOT TOO LATE TO SAVE ADAPTEC AND YOUR INVESTMENT!
YOU
CANNOT AFFORD TO LEAVE YOUR INVESTMENT IN MR. SUNDARESH’S HANDS.
Steel
Partners recommends that all Adaptec stockholders sign, date and return the
WHITE consent card
today! We urge you not to revoke your consent by signing any gold consent
revocation card sent to you by Adaptec or otherwise, and to revoke any consent
revocation you may have already submitted to Adaptec. Follow the simple voting
instructions contained on the WHITE consent card or contact
MacKenzie Partners, Inc. at 800-322-2885 or 212-929-5500.
About
Steel Partners
Steel
Partners Holdings L.P. (“SPH”) is a global diversified holding company that owns
majority-owned subsidiaries, controlled companies and other interests in a
variety of operating assets and businesses. SPH seeks to work with the
management of these companies to increase corporate value over the long term for
all stakeholders and shareholders through growth initiatives, Steel Partners
Operational Excellence programs, the Steel Partners Purchasing Council, balance
sheet improvements and capital allocation policies.
Steel
Partners II LP is a wholly-owned subsidiary of SPH.
Contact:
Steel
Partners
Jason
Booth, 310-941-3616
jason@steelpartners.com