Issue 6th October 2005By CBR Staff Writer Advertisement Adaptec bought Snap only last summer, for $90 million cash and $10 million in stock options, as part of a plan to replace its shrinking storage business with array-making and software activities. The plan had already been put into action in 2003 when Adaptec bought Irish low-end array maker Eurologic. Now Eurologic is also up for sale, alongside the other parts of the company's systems or array-building businesses that have been acquired over the last few years.

Now the company plans to capture a "leadership position" in the SATA and emerging SAS markets, or, in other words, the tough components business it had hoped to reduce its reliance upon.

For the past five quarters Adaptec has missed its financial guidance, and for the last two quarters its revenue has been down significantly year-on-year. In July the company said it was conducting a "very thorough analysis" of its business.

Adaptec's problems began when it missed the Fibre Channel boat around five years ago, and saw its revenue plunge from $587 million in its fiscal year 2001, to $408 million in fiscal year 2003. It has blamed that revenue collapse on commoditization in its core business selling SCSI and RAID chips, boards and software. Volumes grew, but prices shrank.

When Adaptec bought Snap, the NAS maker's Linux-powered boxes were already facing fierce competition from Windows-powered NAS devices made by the likes of Dell and Hewlett-Packard. Adaptec hoped that its channel and brand-name would shore up and boost Snap's sales, but clearly that has not happened.

In addition, the wafer thin margins in the low-end NAS market require large volumes to make a profit. This is also demonstrated by EMC's recent admission that it is pulling out of the sector.

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