The maker of adapter cards that connect PCs and disk drives had hoped gains in its
main product line would offset declines in the chip business. Hansen said Thursday
such a scenario ''is going to be increasingly difficult.''
Moreover, the company revealed that while its price for Fort Collins, Colo.-based
Symbios is reasonable, Hyundai paid somewhat more than $400 million for the
company three years ago. Adaptec should know; it bid for Symbios then. Hyundai
invested heavily in the semiconductor maker, whose profit margins generally are
lower than Adaptec's, but it's still offloading the unit for nearly double what it paid.
Finally, not mentioned but obvious to anyone whose memory extends one month,
Adaptec said Jan. 20 it would repurchase up to 10 million of its own shares on the
open market. That's a typical response from a company whose stock has been
hammered. Investors generally like buybacks because when companies reduce the
supply of shares, stock prices tend to rise.
Adaptec's stock dropped from more than $50 as efforts by PC makers to reduce
inventories have slowed component purchases.
The Symbios acquisition, which will soak up all of the company's $728 million in
cash and force it to borrow more, nixes the buyback program.
Says Hansen: ''When we found out we had this great opportunity to buy this
excellent company for 1.2 times sales, that took priority over all our resources.''
One analyst, Scott Randall of SoundView Financial Group Inc. in Stamford, Conn.,
cut his recommendation from ''buy'' to ''hold.'' Another, John Lazlo of Paine
Webber in New York, shaved three cents from his earnings-per-share estimates
for Adaptec's current quarter.
Incidentally, while investors with the time and energy can pore over securities
filings, they often can't listen to conference calls. An Adaptec spokesman says the
company's teleconferences are ''directed at institutional investors.''
That's understandable up to a point, considering the costs to the company. But it's
yet one more example of how deep-pocketed investors have a big advantage over
small fries. |
