Adaptec 2005 Annual Report Download - page 41

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Table of Contents
Net Revenues ($ millions)
2007 Change 2006 Change 2005
Net revenues $ 449.4 6% $ 425.0 46% $ 291.4
Net revenues for 2007 increased $24.4 million, or 6% compared to net revenues for 2006. In 2007, the products we acquired from Passave and the Storage
Semiconductor Business from Avago contributed an incremental $18.2 million to our net revenues due to full versus partial year of revenues in 2006. However,
there was a year over year decrease in revenues from the acquired Storage Semiconductor Business as certain products reached their end of life. We had growth
in our printer business and organic storage business of $8.8 million and $21.8 million, respectively, partially offset by declines in revenues from our
telecommunications products of $24.4 million.
Net revenues for 2006 increased $133.6 million, or 46% compared to net revenues for 2005. The increase was driven by $95.7 million of additional revenue from
the acquisition of the Storage Semiconductor Business from Avago and $30.7 million of additional revenue from the acquisition of Passave. Apart from revenues
from the acquisitions, in 2006 our revenues were $7.2 million higher than in 2005. Despite the overall increase for the year, in the second half of 2006 revenues
declined sequentially due to lower activity in the telecommunications market. This was caused by a slowdown in equipment orders by carriers in China, Japan,
and North America, in addition to an electronics components supply chain inventory correction primarily in Japan and North America, and US carrier and
communications OEM mergers.
Over the past three years, we have seen significant growth in net revenues generated in Asia. Net revenues from Asia were 65% of total net revenues in 2007,
57% of total net revenues in 2006, and 50% in 2005. We attribute this trend primarily to our increasing presence in the Fiber-to-the-home market, which is
concentrated in Japan, Korea, China and Taiwan, and increased manufacturing outsourcing into Asia by our OEM customers.
Gross Profit ($ millions)
2007 Change 2006 Change 2005
Gross profit $ 291.1 5% $ 278.5 32% $ 210.4
Percentage of net revenues 65% 66% 72%
Total gross profit for 2007 increased by $12.6 million over gross profit in 2006. The acquisitions we completed in 2006 and growth in sales of our
microprocessor and organic storage products had positive impacts on our gross profit, partially offset by the impact of declines in sales of our
telecommunications products on gross profit.
The most significant items impacting our gross margin as a percentage of net revenues were:
• a change in product mix away from our telecommunications products toward our storage, FTTH and SOC products, which decreased gross margin
by 2%;
35
Source: PMC SIERRA INC, 10-K, February 22, 2008