Adaptec 2002 Annual Report Download - page 18

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion of the financial condition and results of our operations should be read in
conjunction with the Consolidated Financial Statements and notes thereto included elsewhere in this Annual
Report.
Net Revenues ($000,000)
2002 Change 2001 Change 2000
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Networking products $ 212.7 (29%) $ 300.2 (55%) $ 665.7
Non−networking products $ 5.4 (76%) $ 22.5 (22%) $ 29.0
Total net revenues $ 218.1 (32%) $ 322.7 (54%) $ 694.7
Net revenues for 2002 decreased by $104.6 million, or 32%, from net revenues in
2001, which decreased by $372.0 million, or 54%, from net revenues in 2000.
Networking
In 2001 and 2002, our net revenues were impacted by several factors:
o weakness in the US and global economies
o depressed spending levels by telecommunications companies and
enterprises that incorporate our products into their networking
equipment
o excess inventory levels at OEM's
Prior to the onset of these adverse market conditions, our customers had accumulated significant inventories
of our products in anticipation of rapid networking equipment sales growth. In 2001, rather than grow, the
market for our customers' products contracted, causing a sharp decline in the demand for our products.
Consequently, our networking revenues declined $87.5 million, or 29% in 2002 from 2001 and declined $365.5
million, or 55%, in 2001 from 2000. The lower demand of our products in 2002 was not as severe as the
decline in 2001 from 2000, as our customers consumed a portion of the excess inventories of our products
they held.
The majority of the revenue decline resulted from reduced volume shipments of our parts, however price
reductions for high volume products also reduced revenues by 4% and 5% in 2002 and 2001 respectively.
Non−networking
Non−networking revenues declined $17.1 million, or 76%, in 2002 and $6.5 million, or 22%, in 2001 due to
decreased unit sales to our principal customer in this segment. This product reached the end of its life
after the first quarter of 2002, with only insignificant revenues thereafter.
17