Adaptec's Revenues Abate

Adaptec Inc.'s (Nasdaq: ADPT) stock took a dive this morning, as the company cut its first-quarter top-line revenue forecast by 9 percent (see Adaptec Lowers Q1 Target).

Blaming an uncertain economy and slipping demand, the company now anticipates $107 million in revenues for the quarter that ended in June. The new forecast is flat, compared to the companys year-ago revenues of $107.8 million and would represent a slight sequential increase over last quarter's $105.6 million (see Adaptec Settles DPT Lawsuit). But the new figure is well below Adaptec's previous forecast of $115 million to $120 million.

The Milpitas, Calif.-based company expects first-quarter earnings to fall in the middle of the range it forecast in April of 2 cents to 4 cents per share -- lagging EPS of 5 cents last quarter. First Call analyst consensus has predicted 3 cents a share.

Adaptec also plans to post a gain of $49.3 million for the quarter related to its settlement in May with Stephan Goldman, the principal shareholder and former president of Distributed Processing Technology Corp., a company Adaptec acquired in 1999.

Adaptec’s stock slipped nearly 11 percent in morning trading today, dropping 90 cents to $7.54 a share.Beyond explaining that its expectations for a business spike in June hadn’t been met, Adaptec’s release yesterday didn’t specify why revenues are slumping. The company won't comment beyond its press release.

Merrill Lynch & Co. Inc. analyst John Roy, however, speculates that a slight market shift from SCSI to Fibre Channel controllers could explain the drop. “This could mean that their SCSI business is going away faster than they thought,” he says, pointing out that the company has been losing market share to LSI Logic Corp. (NYSE: LSI). “With less demand, pricing is harder to hold.”

Increasing its focus on iSCSI, which allows companies to skirt Fibre Channel and encapsulate the SCSI command set directly to an IP transport, could help Adaptec turn that trend around, he says (see Adaptec Shipping iSCSI and IP SANs: Coming of Age).

— Eugénie Larson, Reporter, Byte and Switch