Adaptec 2007 Annual Report Download - page 10

Table of Contents
INDUSTRY OVERVIEW
Growth in Internet usage and digital consumer devices is continuing to drive demand for bandwidth and efficient networks that can manage these higher levels of
data traffic. At the same time, communication service providers are seeking ways to increase their revenues by bundling and delivering a range of services to
their customers in a cost-effective manner. Newer applications such as Voice Over Internet Protocol (VoIP), video-on-demand, Internet Protocol Television
(IPTV), third generation wireless services, and network-attached storage are being deployed globally. This is resulting in increasing requirements for service
providers and enterprises to upgrade and improve their network infrastructure and storage management capabilities. Enterprises, corporations, small offices and
home offices are expanding their networks to better capture, store, and access large quantities of data efficiently and securely.
Different types of data transmitted at various speeds over the Internet require service providers and enterprises to invest in multi-service equipment that can
aggregate and transport these varied types of network traffic. In simplified terms, Internet traffic moves over a series of distinct networks, with each network built
using copper wires, coaxial cables or fiber optic cables. These networks carry high-speed traffic in the form of electrical and optical signals that are transmitted
and received by complex networking equipment. To ensure this equipment and varied networks can communicate with each other, communications equipment
manufacturers and makers of communications semiconductors have developed numerous communications standards and protocols for the industry. These
communications and storage protocols make it easier for complex high-speed data traffic to be sent, received and stored reliably and efficiently — whether
intra-office, across the country, or internationally. The products we sell, and the protocols used in development of our devices, are described below.
MARKETS THAT WE SERVE
We sell our semiconductor solutions primarily into five general areas of the worldwide network infrastructure, which we refer to as the Access, Metro, Enterprise
Storage, Enterprise Networking, and Customer Premise markets. The products and solutions that we sell into the Metro and Access areas of the market are
largely driven by the capital spending of service providers in the telecommunications industry. Our products and solutions that are sold into the Enterprise
Storage, Enterprise Networking and Customer Premise areas are driven primarily by the capital spending of corporations, enterprises, and smaller businesses. In
2007 the mix of our revenues were derived approximately 50% from the telecommunications market and 50% from the enterprise and storage markets.
We acquired the Storage Semiconductor Business from Avago Technologies Inc. (“Avago”) in 2006. We purchased the Storage Semiconductor Business due to
the market position it had in the Fibre Channel Controller market and the growth opportunities for standard semiconductor solutions in the enterprise storage
market. Since the acquisition we have experienced the benefits from product synergies between the acquired business and PMC-Sierra’s storage disk interconnect
integrated circuit (IC) business.
In 2006 we also purchased Passave, Inc., a company that develops system-on-chip semiconductor solutions for the Fiber-To-The-Home (FTTH) access
market. We purchased Passave due to its market leadership in Passive Optical Networking (PON) solutions for central office and customer premise FTTH
applications.
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Source: PMC SIERRA INC, 10-K, February 22, 2008