Adaptec 2006 Annual Report Download - page 44

Table of Contents
Net Revenues ($ millions)
2006 Change 2005 Change 2004
Net revenues $ 425.0 46% $ 291.4 (2%) $ 297.4
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 communications 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.
Net revenues for 2005 decreased $6.0 million, or 2% compared to net revenues in 2004. Revenues were lower than in 2004 due to a lower volume of units sold in
the first half of 2005 compared to the first half of 2004 due to an inventory rebalancing by our customers that began in the third quarter of 2004 and continued
into 2005. Quarterly revenues increased sequentially since the fourth quarter of 2004 but in 2005 were still below levels recorded in early 2004. In the first half of
2005, revenues increased sequentially for several reasons. First, reduced levels of inventories at end customers led to stronger orders; second, telecom-related
capital spending in our end markets continued to increase, especially in the Metro Transport area; and third, product cycles in the Enterprise Storage markets
favored the Company’s product offering. Increases in revenues in the second half of 2005 were due in large part to improved activity levels in Edge Routing &
Multi-Service Switching, Enterprise Storage, and our Laser Printer business.
Over the past three years, we have seen significant growth in net revenues generated in Asia. Net revenues from Asia were 57% of total net revenues in 2006,
50% of total net revenues in 2005, and 46% in 2004. We attribute this trend primarily to increased manufacturing outsourcing into Asia by our OEM customers
as well as increased levels of activity at Asian customers.
Gross Profit ($ millions)
2006 Change 2005 Change 2004
Gross profit $ 278.5 32% $ 210.4 0% $ 209.8
Percentage of net revenues 66% 72% 71%
Total gross profit for 2006 increased by $68.1 million over gross profit in 2005, which was relatively consistent with gross profit in 2004. Gross profits increased
in 2006 due to higher sales volumes, primarily resulting from the acquisitions. In 2005, despite overall lower sales volumes compared to 2004, gross profit
improved due in part to the centralizing of our manufacturing logistics teams into a single location through our restructuring activities, as well as tightly
managing our manufacturing costs.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠