Adaptec's largest shareholder voices concerns over Adaptec's direction, prepared to replace, remove board

By Lisa Kerner

Charlotte, N.C., May 30 - Steel Partners II, LP expressed concerns over Adaptec, Inc.'s performance and acquisition strategy in a letter to the company's board.

The letter cites Adaptec's recent history of operating losses - over $300 million during the past five years and roughly $188 million of which was amassed under the leadership of Sundi Sundaresh, the company's current chief executive officer and president. In addition, Steel Partners points to "ill-conceived acquisitions" over the past five years that have resulted in "acquired technology intangibles and goodwill write-offs in excess of $175 million."

Steel Partners is Adaptec's largest shareholder, owning 15,006,197 shares, or about 12.7%, of the Milpitas, Calif., data storage company's outstanding shares, according to a company news release.

"Steel Partners with a significant stake in the company, is in a unique position to help assist the company in its next steps towards profitability and believe that our minority representation on the board and on the transaction committee would place the company in the best position possible to effect a successful turnaround. As a signal of your commitment to such success, we request that the board agree not to conduct any further acquisitions until our representatives are members of the board," Steel Partners' Warren G. Lichtenstein wrote.

The investor is prepared to nominate a full slate of directors for election to the board at the 2007 annual meeting and reserves the right to commence a consent solicitation to remove the board.

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