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Technology Stocks : Adaptec (ADPT) -- Ignore unavailable to you. Want to Upgrade?

To: Spartex who wrote (3811)	10/3/1998 12:39:00 PM
From: Adam Weiner	Read Replies (2) \| Respond to of 5944

ADPT is still in shell-shock after a few bad quarters that followed many years of outstandingly consistent revenue and profit growth. Investors grew complacent in thinking there would be no hiccups, and were punished accordingly. As far as ADPT's host adapters, they never really had a technology edge per-se, since there are other chipsets and HBA's (Host Bus Adapters) that essentially do and perform nearly the same as ADPT's, many at prices substantially below ADPT's offerings (Qlogic, Buslogic/Mylex, Diamond, AdvanSys). In spite of this, and much to the industry's surprise, ADPT has been able to sustain its strong market share and above-average margins. I attribute this success to their brilliant leveraging of their first-to-market position (way back when they first started) in creating a nearly unassailable brand. For most of ADPT's history, they've been able to maintain a stable market price for their HBA's while their costs continued to decline. However, leveling demand and margin compression for the HBA's and PTS (Peripheral Technology Solutions; the IDE/SCSI interface and servo controllers that go into disk drives) products have essentially cut off their major source of revenue and profit growth. For me, the major issues weighing against ADPT today (as reflected in the spectacular decline of the stock price) is developing new markets/products to replace declining revenue/ASPs for the HBA's and PTS products. The development of Ultra DMA for IDE drives (and ATAPI for CD-ROM/tape support) basically wiped out the value proposition for SCSI on the desktop/workstation, while SCSI remains the interface of choice for servers. And herein lies the big uncertainty; if ADPT cannot find ways to increase demand for their SCSI solutions (either HBA's or PTS), they must grow the topline with new products. Trouble is, as a Billion $+ company, its not easy coming up with products with 100 million+ revenue contribution. RAID products are a natural fit for them, but to date their offerings haven't been competitive (from a technology perspective) with established players in the market, such as Mylex, CMD, and AMI. Also, its not helping that Qlogic its eating their lunch in fiber channel. << More to say about these subjects, but this message is already too long! >> In summary, ADPT is in the toilet due to low earnings visibility resulting from uncertain demand for their HBAs/PTS and future product offerings. Also, several missteps and cash burning from the recently ousted top management did little to help sustain the street's confidence in the company. However, members of the company's original management (including its founder) are back at the helm and, if history repeats itself, should be able to get the company back on track.

To: Spartex who wrote (3811)	10/8/1998 6:49:00 AM
From: Capt. Dennis Shepherd	Read Replies (2) \| Respond to of 5944

My thoughts are that SCSI is no longer viable for the mass market. ADPT may survive as a niche player, but its hopes of a mass SCSI market are long down the tube. The current price is reflecting that transition. USB is not directly competitive in terms of performance, but is sure does threaten to be the primary way for average consumers to alleviate IRQ problems. SCSI will continue where needed, but I doubt if we will see mass sales of SCSI equipped pcs coming direct from the factory. This was once ADPT's hope. Dennis Shepherd wallstreettalk.com