Steel Partners increases stake in Adaptec after chastising board for performance, losses

By Lisa Kerner

Charlotte, N.C., June 1 – Adaptec, Inc. investors led by Steel Partners II, LP purchased 2,663,465 shares of Adaptec stock between May 22 and May 30, priced from $3.71 to $4.03 per share

The reporting persons beneficially own 15,381,052 shares, or 13%, of the Milpitas, Calif., data storage company’s outstanding stock. Steel Partners reported a 10.7% stake in Adaptec on March 9, according to a schedule 13D filing with the Securities and Exchange Commission.

Steel Partners, the company’s largest shareholder, expressed concerns on May 30 over Adaptec’s performance and acquisition strategy in a letter to the company’s board.

The letter cited 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 pointed 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.”

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, according to the filing.

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