Adaptec 2009 Annual Report Download - page 42

As of December 27, 2009, the original underlying securities held by the Reserve Funds had matured, and
with the exception of Lehman Brothers’ securities, the balances were held by the Reserve Funds in the form of
overnight agency notes. Changes in market conditions and the method and timing of the liquidation process of
the Reserve Funds could result in further adjustments to the fair value and classification of these investments, and
these changes could be material.
Business Outlook
We expect our revenues for the first quarter of 2010 to be approximately $148 million to $152 million based
on typical order patterns. As in the past, and consistent with business practice in the semiconductor industry, a
portion of our revenues are likely to be derived from orders placed and shipped during the same quarter, which
we call our “turns business.” Our turns business varies from quarter to quarter. In the fourth quarter of 2009, net
orders booked and shipped within the quarter were approximately 23% of quarterly sales, and we expect the turns
percentage to be lower in the first quarter of 2010 compared with the fourth quarter of 2009.
We anticipate our first quarter 2010 gross margin percentage to be in the range of 66% plus or minus 100
basis points including approximately $0.2 million stock-based compensation expense. As in past quarters this
could vary depending on the volumes of products sold, since many of our costs are fixed. Margins will also vary
depending on the mix of products sold.
We expect our first quarter 2010 research and development and selling, general and administrative expenses
to be approximately $63.0 million to $64.1 million respectively including stock-based compensation expense of
approximately $4.6 million to $5.6 million. Therefore, we expect our first quarter core operating research and
development and selling, general and administrative expenses to be approximately $58.5 million.
We expect that we will continue to incur significant amortization of purchased intangible assets related to
our 2006 acquisitions in the first quarter of 2010.
We anticipate that net interest income will be approximately $0.5 million in the first quarter of 2010 as
interest income earned from our cash position will be offset by interest expense incurred on our outstanding
senior convertible notes.
Liquidity and Capital Resources
Our principal sources of liquidity are cash from operations, our short-term investments and long-term
investment securities. We employ these sources of liquidity to support ongoing business activities, acquire or
invest in critical or complementary technologies, purchase capital equipment, repurchase and repay our senior
convertible notes and finance working capital. The combination of cash, cash equivalents, short-term investments
and long-term investment securities at December 27, 2009 and December 28, 2008 totaled $453.4 million and
$307.5 million, respectively. As of both December 27, 2009 and December 28, 2008, we had $68.3 million of
senior convertible notes outstanding. In the future, we expect our cash on hand, from operations, our short-term
investments, and long-term investment securities to be our primary source of liquidity.
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