… And Adaptec Responds

Adaptec, Inc. responded to a news release issued Oct. 29 by Steel Partners II LP.

“In claiming the Board’s independent financial advisor has
called for ‘selling the business operations,’ Steel has once again
attempted to shade the truth. The advisor made no such recommendation,
and in fact has yet to present an analysis of the best ways to create
value for stockholders,” said Joseph S. Kennedy, Adaptec’s Board Chairman. “This
misrepresentation typifies Steel’s campaign, which has offered up
creative distortions in press releases at the expense of presenting a
clear vision of prudent strategies to create value for stockholders."

“Steel’s distortion relates to the Board’s strategic review process.
The Board asked its advisor to evaluate a number of alternatives, a
subset of which were alternatives for separating the Company’s assets,
ranging from a spin-off to a split of the corporation into multiple
entities. The advisor found that, within that subset of alternatives, a
sale was the best – but the advisor did not compare the separation of
assets against other alternatives, nor did the advisor determine that a
sale of the business was the best way to create value for stockholders.
The advisor is also considering other scenarios outside of that
subset,” added Mr. Kennedy.

“While the Board majority is open to all options to maximize
value, and has tried on several occasions over the years to find buyers
for the business, the Board recognizes that the success of such
strategic actions depends on timing to get the best value,” he noted. “In
the meantime, the Board majority is committed to a significant cash
dividend to stockholders after taking into account Adaptec’s needs for
working capital and for other strategic opportunities. A cash dividend
is an alternative Steel has consistently resisted."

“Steel’s vague plan suggests value-destroying approaches
similar to those followed by CoSine Communications, of which Steel has
been an investor at least since 2005. The Company ceased its technology
customer service operations in 2006 and has been pursing an
‘opportunistic, value-focused investment strategy and is not targeting
any specific industries.’ To date, CoSine has made no acquisition nor
has it returned cash to stockholders, as would be the case in a
properly structured SPAC (Special Purpose Acquisition Company). CoSine
now trades on the Pink Sheets at a current market value that is
slightly less than the value of its cash and cash equivalents,” he added.

In response to Steel’s comments on Adaptec’s quarterly results, Mary Dotz, Chief Financial Officer, said: “Our
results, excluding one-time costs relating to Steel’s consent
solicitation, were in line with the operating plan that was approved by
the Board – including by Steel’s representatives. The results we
believe underscore our strong financial foundation and demonstrate the
rising acceptance of Adaptec’s new products, which have now grown to
account for 48% of our revenues and are close to outrunning the decline
of our legacy revenues."

“While Steel confuses the issue by citing projections of our
cash burn that are based on GAAP numbers, which include non-cash and
one-time charges, we generated close to $5 million in cash from our
operations last quarter. Our plan projects a positive cash flow from
operations this year and a modest operating cash burn in the next
fiscal year, excluding the impact of the Board’s decision to declare a
cash dividend,” she added.