Adaptec: Fiscal 2Q10 Financial Results

Adaptec, Inc. reported its results for the second quarter of fiscal 2010, which ended on October 2, 2009.

Financial Highlights for Second Quarter of Fiscal 2010

• Total net revenues of $18.4 million
• GAAP gross margins of 44%; non-GAAP gross margins of 50%
• GAAP net loss per share of $(0.03); non-GAAP net loss per share of $(0.01)
• Positive operating cash flows from continuing operations of $4.9 million
• Ended the quarter with $385.6 million in combined cash, cash equivalents and marketable securities

Business Highlights for Second Quarter of Fiscal 2010

• Unveiled strategic vision for the Company’s Data Conditioning Platform, which enables next-generation enterprise and cloud data centers to utilize our technologies to improve server and storage utilization, lower costs and address green initiatives.
• Launched the Company’s Max IQ SSD Cache Performance Solution, an industry first for building and managing High-Performance Hybrid Arrays in commodity servers to maximize performance while minimizing capital and operating costs, without disrupting existing operations.
• Received Editor’s Choice Award for one of Adaptec’s Series 5 Unified Serial controller from PC Magazine Belgium.

Financial Results
Net revenues for the Company’s second quarter of fiscal 2010 were $18.4 million, compared with $31.7 million for the second quarter of fiscal 2009. Gross margins, computed on a generally accepted accounting principles (GAAP) basis, were 44% for the second quarter of fiscal 2010, compared with 42% for the second quarter of fiscal 2009. Non-GAAP gross margins for the second quarter of fiscal 2010 were 50%, compared with 44% for the second quarter of fiscal 2009.

The Company’s GAAP loss from continuing operations, net of taxes, for the second quarter of fiscal 2010 was $(4.1) million, or $(0.03) per share, compared with GAAP income from continuing operations, net of taxes, of $3.3 million, or $0.02 per share, for the second quarter of fiscal 2009. GAAP net loss for the second quarter of fiscal 2010 was $(3.8) million, or $(0.03) per share, compared with GAAP net income of $3.3 million, or $0.02 per share, for the second quarter of fiscal 2009.

Non-GAAP loss from continuing operations, net of taxes, for the second quarter of fiscal 2010 was $(1.8) million, or $(0.01) per share, compared with non-GAAP income from continuing operations, net of taxes, of $4.0 million, or $0.03 per share, for the second quarter of fiscal 2009. Non-GAAP net loss for the second quarter of fiscal 2010 was $(1.8) million, or $(0.01) per share, compared with non-GAAP net income of $4.0 million, or $0.03 per share, for the second quarter of fiscal 2009.

“Although customer engagements with our new products continue to grow, our new product revenue is not enough to offset the decline in revenues from our legacy products,” said S. ‘Sundi’ Sundaresh, President and Chief Executive Officer of Adaptec. “Our recent product introductions, such as our MaxIQ Cache Performance Solution that was successfully launched in September as part of our Data Conditioning Platform, allow us to deliver new server, storage and application optimization technologies with the ability to reduce financial costs and address green initiatives for the next generation enterprise and cloud data centers. We continue to focus on attracting new customers for our new products while maintaining tight controls on our operating expense levels.”

Business Outlook
For the third quarter of fiscal 2010, net revenues are projected to be between $15 million and $17 million. GAAP net loss per share is projected to be in the range of $(0.06) and $(0.04). Non-GAAP net loss per share is projected to be in a range of $(0.04) and $(0.02). Actual results may vary depending on a number of factors including challenging economic conditions in IT spending for servers and timing of the Company’s revenue transitions.