Adaptec 2003 Annual Report Download - page 24

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We generated networking revenues of $247.9 million in 2003, an increase of 17% over 2002.
In 2002 and 2001, our net revenues were impacted by weakness in US and global economies, depressed spending levels by
telecommunications companies and enterprises that incorporate our products into their networking equipment and excess inventory
levels at customers. Many of our customers experienced significant declines in demand for their products, and accumulated
significant inventories of our products that exceeded the amounts required to meet current production levels during this downturn.
This, in turn, negatively impacted our networking revenues, causing them to decline $87.5 million, or 29% in 2002 compared to 2001.
Over the past three years, we have seen significant growth in net revenues generated in Asia, on a customer billing location. Net
revenues from Asia have grown to 38% of total net revenues in 2003, from 27% in 2002 and 21% in 2001. We attribute this trend
primarily to increased manufacturing outsourcing directed into Asia by our OEM customers as well as increased levels of activity at
Asian customers.
Non−networking
Non−networking revenues are comprised of sales of a single medical application−related chip, which declined $3.9 million, or 72%,
in 2003 and $17.1 million, or 76%, in 2002 due to decreased unit sales to our principal customer in this segment. While we had
wound down this product at the end of 2002, we did ship a small quantity of this product in 2003. We do not expect further significant
revenue from this product in 2004.
Gross Profit ($000,000)
2003 Change 2002 Change 2001
Networking products $ 161.0 28% $ 126.2 (28)% $ 176.1
Percentage of networking revenues 65% 59% 59%
Non−networking products $ 0.7 (71)% $ 2.3 (76)% $ 9.4
Percentage of non−networking revenues 43% 43% 42%
Total gross profit $ 161.6 26% $ 128.5 (31)% $ 185.5
Percentage of net revenues 65% 59% 57%
Total gross profit for 2003 increased by $33.1 million, or 26%, over gross profit in 2002, which decreased by $57.1 million, or 31%,
from gross profit in 2001.
Networking
Our networking gross profit for 2003 increased by $34.8 million in 2003. This increase in networking gross profit related primarily to
higher sales volumes in 2003 compared to 2002. Also contributing to the increase in gross profit was the decrease in write−downs for
excess inventory from $4.0 million in 2002 to nil in 2003.
Networking gross profit as a percentage of networking revenues increased to 65% in 2003 from
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