Adaptec 2001 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2001 Adaptec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 93

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93

38
We have announced a large number of new products and design wins for existing and new
products. While some industry analysts may use design wins as a metric for future revenues,
many design wins will not generate any revenues as customer projects are cancelled or rejected
by their end market. In the event a design win generates revenue, the amount of revenue will
vary greatly from one design win to another. In addition, most revenue-generating design
wins do not translate into near term revenues. Most revenue-generating design wins take
greater than 2 years to generate meaningful revenue.
Our revenue expectations may include growing sales of newer semiconductors based on early
adoption of those products by customers. These expectations would not be achieved if early
sales of new system level products by our customers do not increase over time. We may
experience this more with design wins from early stage companies, w ho tend to focus on
leading-edge technologies which may be adopted less rapidly in the current environment by
telecommunications service providers.
Our restructurings have curtail ed our resources and may have insuf fici ently addressed market
conditi ons.
On March 26 and October 18, 2001, w e announced plans to restructure our operations in
response to the decline in demand for our netw orking products. The restructuring plans
included a workforce reduction of 564 employees, consolidation of excess facilities, and contract
settlement activities. A s a result of our restructuring plans, we recorded a charge of $195.2
million in 2001, w hich represents management’s best estimate, and which may require
adjustment in the future.
We implemented this restructuring in an effort to bring our expenses into line with our reduced
revenue expectations. H owever, for at least 2002, we do not expect that these measures will be
sufficient to offset lower revenues, and as such, w e expect to continue to incur net losses.
Restructuring plans require significant management resources to execute and we may fail to
achieve our targeted goals. We may have incorrectly anticipated the demand for our products,
we may be forced to restructure further or may incur further operating charges due to poor
business conditions and some of our product development initiatives may be delayed due to
the reduction in our development resources.
Our revenues may decl ine if our customers use our competi tors’ products instead of ours,
suf f er further reducti ons in demand for their products or are acqui red or sol d.
We are experiencing significantly greater competition from many different market participants
as the market in w hich we participate matures. In addition, we are expanding into markets,
such as the wireless infrastructure and generic microprocessor markets, which have established
incumbents with substantial financial and technological resources. We expect fiercer
competition than that which we have traditionally faced as some of these incumbents derive a
majority of their earnings from these markets.
All of our competitors pose the follow ing threats to us: