Adaptec Inc.'s Ratings Affirmed;Off S&PWatch.NEW YORK--(BUSINESS WIRE)--June 25, 1998--Standard & Poor's today affirmed its double-'B'-plus corporate credit and double-'B'-minus subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". ratings on Adaptec Inc. The ratings were also removed from CreditWatch, where they were placed on Feb. 20, 1998. The action follows Adaptec's announcement of the termination of plans to acquire Symbios Logic Symbios Logic was a manufacturer of SCSI host adapter chipsets and disk array storage subsystems. It was a wholly owned subsidiary of Hyundai Electronics America. It was originally a division of NCR Corporation, before NCR's takeover by AT&T. AT&T sold off the division to Hyundai. Inc. from Hyundai Electronics America (HEA HEA Higher Education Academy (York, UK) HEA Higher Education Act of 1965 HEA Higher Education Authority HEA Health Education Authority HEA High Energy Astrophysics HEA Happily Ever After HEA Hockey East Association ). The outlook is stable. Adaptec's ratings reflect its leading position in a niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. and good cash flows, offset by its still narrow business base and the challenges of managing its growth. Milpitas, Calif.-based Adaptec holds the dominant market share for "small computer systems interface" (SCSI SCSI in full Small Computer System Interface Once common standard for connecting peripheral devices (disks, modems, printers, etc.) to small and medium-sized computers. SCSI has given way to faster standards, such as Firewire and USB. ) chips and adapter cards used to connect high performance peripherals to PC-based servers and advanced desktop computers. While the devices are not used in mass-market PCs, sales declined sequentially in the December 1997 and March 1998 quarters due to turmoil in thedisk drive market and PCprice pressures. Gross margins were less impacted due to product's significant software component, and remained strong at about 59% in the March 1998 quarter. Operating margins, in the low to mid 20% range, could experience further pressures as the company seeks to expand its markets, and due to potentially higher competition from any future acquirer of Symbios. Adaptec's good profitability and low levels of capital intensity have enabled the company to generate $200 million in cash flows from operations during the last three years. Liquidity of $700 million at March 31, 1998 should provide the company with ample flexibility to continue its practice of prefunding wafer capacity and making moderate-sized acquisitions, utilizing a mixture of cash and equity. OUTLOOK: STABLE The company's relatively narrow business base will likely preclude higher ratings, while its strong position in its core market and ample financial flexibility are expected to provide downside protection Downside Protection Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option. . -- CreditWire Contact: Bruce Hyman, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1350 Copyright 1998, Standard & Poor's Rating Services |
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