Adaptec 2008 Annual Report Download - page 30

We are closely aligning with leading OEM customers supplying carriers who are investing in their networks
to enable delivery of residential video services. We are well positioned for these network upgrade opportunities
with solutions that have high data throughput and require lower power for our customers.
With regard to our communications business, we continue to see the convergence of networks and build-
outs driving service provider requirements and large contracts for metro-optical transport and access equipment.
We are seeing growth in demand for our access products as service providers expand their wired and wireless
networks around the world.
We expect our SOC solutions to continue to penetrate the laser printer market as well as the network-
attached storage market for small to medium sized businesses. We will also continue to pursue ASIC design wins
with our leading OEM customers in this market.
Net Revenues ($ millions)
2008 Change 2007 Change 2006
Net revenues ........................................... $525.1 17% $449.4 6% $425.0
Net revenues for 2008 increased $75.7 million, or 17%, compared to net revenues for 2007. Revenues
generated from the Enterprise Networking market, which is served by our storage and microprocessor-based
SOC products increased 19% compared to 2007. Revenue generated from the Wide Area Network Infrastructure
(“WAN”) market remained flat. Revenues generated from the Access Networks market increased by 74%.
The growth in our Enterprise Networking market was generally attributable to an increase in storage
capacity upgrades and information management solutions expenditures in the market place in 2008 compared to
2007. The sales of our microprocessor-based SOC products increased in 2008 compared to 2007 primarily due to
increased activity in the laser printer market. The revenues from our Access Networks market grew due to the
growth driven by sales growth in Asia and the emerging markets, particularly China. In 2008, there was an
increase in shipments to our Chinese customers using Ethernet Passive Optical Network devices for field trials in
the China market. In addition, shipments of our FTTH products to Japan and Korea increased as carriers continue
to build out their networks.
An increase in net revenue of $4.2 million is also attributable to changes in 2007 in how we conduct
business with one of the international entities of a certain distributor to a sell-through basis, which is consistent
with our revenue practice for business conducted with that distributor.
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 an 8% growth in our revenues generated from the Enterprise Networking
market, which is served by our storage and microprocessor-based SOC products in 2007 when compared to 2006.
Revenue generated in 2007 from the WAN Infrastructure market decreased by 12% and the revenues generated
in 2007 from the Access Networks market decreased by 10% when compared to 2006. A decrease in net
revenues of $4.2 is also attributable to changes in 2007 in how we conduct business with one of the international
entities of a certain distributor to a sell-through basis, which is consistent with our revenue practice for business
conducted with that distributor, as mentioned above.
Over the past three years, we have seen significant growth in net revenues generated in Asia. Net revenues
from Asia were 73% of total net revenues in 2008, 65% of total net revenues in 2007 and 57% of total net
revenues in 2006. We attribute this trend primarily to our increasing presence in the FTTH market, which is
concentrated in Japan, Korea, China and Taiwan, and increased manufacturing outsourcing into Asia by our
OEM customers.
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