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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended March 31, 2001

OR

For the transition period from                to               .

Commission File Number 000-15071

ADAPTEC, INC.
(Exact name of Registrant as specified in its charter)

691 S. Milpitas Blvd.
Milpitas, California 95035
(Address of principal executive offices)

Registrant's telephone number, including area code: (408) 945-8600

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 Par Value

Common Share Purchase Rights
(Title of Class)

   Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes / /  No /x/

   Based on the closing sale price of the Common Stock on the Nasdaq National Market on June 15, 2001, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $866,804,314. Shares of Common Stock held by each officer and director and by each person known by the Company to own 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

   The number of shares outstanding of Registrant's Common Stock, $.001 par value, was 99,099,306 at June 15, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

   Part III incorporates information by reference from the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on August 23, 2001.

Table of Contents

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FORWARD LOOKING STATEMENTS

    This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. The statements contained in this document that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including without limitation statements regarding our expectations, beliefs, intentions or strategies regarding the future. This Annual Report on Form 10-K includes forward-looking statements regarding the level of our expenditures and savings for various expense items and our liquidity in future periods. We may identify these statements by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "will," "would" and other similar expressions. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements.

    Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the "Certain Factors Bearing Risks on Future Operating Results" section and elsewhere in this document. In evaluating our business, prospective investors should consider carefully these factors in addition to the other information set forth in this document.

PART I

Item 1. Business

    References made in this Annual Report on Form 10-K to "Adaptec," the "Company," the "Registrant," "we," "our" or "us" refer to Adaptec, Inc. and its wholly-owned subsidiaries.

Overview

    We were incorporated in 1981 in California and went public on the Nasdaq Stock Market in 1986. In March 1998, we were reincorporated in Delaware. We provide intelligent storage access solutions that reliably move, manage and protect critical data and digital content. Our storage solutions are found in high-performance networks, servers, workstations and desktops from the world's leading manufacturers, and are sold through original equipment manufacturers, or OEMs, and distribution channels to Internet service providers, large enterprises, medium and small businesses and consumers. We are an S&P SmallCap 600 Index member.

    We currently operate in three principal segments: Storage Solutions Group, or SSG, Desktop Solutions Group, or DSG, and Storage Networking Group, or SNG. As discussed further in the "Roxio Spin-Off" section below, we successfully completed the spin-off of our Software segment, Roxio, Inc., in the form of a fully independent and separate company in May 2001. Unless otherwise indicated, the discussion in this Annual Report on Form 10-K relates to our continuing operations.

    In response to the continuing economic slowdown, we implemented a restructuring plan in the fourth quarter of fiscal 2001 to reduce costs and improve operating efficiencies. Please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of Part II of this Annual Report on Form 10-K for further discussion on the restructuring plan.

Business Segments

    During fiscal 2001, we evaluated our product segments in accordance with Statement of Financial Accounting Standards, or SFAS, No. 131, "Disclosures about Segments of an Enterprise and Related Information." We concluded that our reportable segments are SSG, DSG, SNG and Other. Our SSG segment, formerly our Direct Attached Storage Group, or DAS, provides data movement and data protection solutions with a focus on redundant array of independent disks, or RAID, solutions, small

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computer system interface, or SCSI, technologies and external storage solutions that bring these technologies to networked storage applications. Our DSG segment, formerly a component of DAS, was established to create greater focus in the growing market of high-speed Input/Output, or I/O, connectivity solutions. Our SNG segment, formerly our Storage Networking Solutions Group, or SNS, focuses on bringing storage fabric solutions to the storage area network, or SAN, network interface card, or NIC, and network attached storage, or NAS, marketplaces.

    Our SSG segment develops, manufactures and markets data movement and protection solutions used by Intel and Unix-based servers. Driven by market needs for capacity and data protection, the SCSI interface supports server requirements for both high-performance hard disk drives and easy-to-use external connections generally used for tape back-up devices. We pioneered SCSI technology, which connects the central processing unit, or CPU, to internal and external peripherals, including storage devices. SCSI provides high speed data transfer rate commercially available for disk drives and is highly effective in eliminating I/O bottlenecks in high-traffic server environments.

    When combined with RAID software and hardware, SCSI is the leading method of combining multiple hard drives to collectively act as a single storage system. Disk drives tend to have a high incidence of failure in high-performance server architectures, and RAID technology reduces a server's dependence on the reliability of a single disk drive. Our SSG segment also applies our RAID technology to disk drive interfaces other than SCSI in order to offer our RAID software and hardware across server segments ranging from low- to high-end. In addition, our SSG segment introduced RAID products in the past year based on the low-cost advanced technology architecture, or ATA, interface and the higher-end fibre channel interface. While ATA has limitations in terms of scalability, we believe this will be an important segment of the market as cost pressures drive users towards lower priced solutions.

    Our DSG segment develops, manufactures and markets high-performance I/O connectivity solutions to connect personal computers, or PCs, with storage devices. The segment targets the PC installed base of desktops in homes and businesses worldwide. Our current I/O products include host bus adapters and solutions based on FireWire/1394 and SCSI technologies. FireWire/1394 technology is a fast, configurable and easy-to-use interface solution that connects desktop computers to digital video camcorders, digital cameras, external storage devices and other 1394 peripherals with the ability to handle high-bandwidth data transfers at high speed. In addition, we launched our first host bus adapters based on universal serial bus, or USB, 2.0 technology in the first quarter of fiscal 2002. USB 2.0 is the next generation desktop I/O standard, representing a large market opportunity for connectivity solutions.

    Our SNG segment develops, manufactures and markets storage fabric solutions for the SAN, NIC and NAS marketplaces. The segment focuses on bringing new levels of functionality and interoperability with solutions including fast ethernet cards, fibre channel, Internet protocol, or IP, storage and, in the future, infiniband. Customers' needs for storage are changing in response to the growth of data driven by market needs. In response to demand for lower cost data management, increased data availability, higher performance and simplified storage scalability, multiple storage fabric architectures are emerging, where storage devices are connected directly into a network-like fabric.

    Our Other segment includes unallocated corporate related revenues and expenses, such as patent settlement fee, write-off of acquired in-process technology, restructuring charges, other charges, interest and other income, interest expense and the gain on the sale of Peripheral Technology Solutions, or PTS. Additionally, our Other segment includes revenues and expenses related to business lines divested in fiscal 1999, including external storage, satellite networking and fibre channel. Although these business lines were divested, we continue to hold a minority interest in Chaparral Network Storage, Inc., or Chaparral, and BroadLogic, Inc., or BroadLogic, the companies which acquired the external storage and satellite networking business lines, respectively.

    The business lines that comprised the PTS segment were sold in November 1998 and January 1999 to Texas Instruments, Inc., or TI, and STMicroelectronics, Inc., or ST, respectively. This segment designed,

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developed, manufactured and marketed proprietary integrated circuits for use in mass storage devices and other peripherals.

    See "Note 19. Segment, Geographic and Significant Customer Information" of the Notes to Consolidated Financial Statements for further discussion on our operating segments.

Roxio Spin-Off

    On April 12, 2001, our Board of Directors formally approved a plan to spin off our Software segment, Roxio, and declared a dividend of the shares of Roxio's common stock to our stockholders of record on April 30, 2001. The dividend was distributed after the close of business on May 11, 2001, in the amount of 0.1646 shares of Roxio's common stock for each outstanding share of our common stock. We distributed all of the shares of Roxio's common stock, except for 190,936 shares that are retained by us for issuance upon the potential exercise of the outstanding warrants held by Agilent Technologies, Inc., or Agilent, to purchase shares of our common stock (see "Note 16. Agilent Agreement" of the Notes to Consolidated Financial Statements for further discussion of the warrants). The distribution of the shares of Roxio's common stock was intended to be tax-free to us and to our stockholders. Our historical consolidated financial statements have been restated to reflect Roxio as discontinued operations for all periods presented.

    Roxio is a provider of digital media software solutions that enable individuals to create, manage and move audio, music, photos, video and data onto recordable compact discs, or CDs. Roxio also provides system protection applications that allow users to protect against viruses, system crashes and data losses by allowing their computers to revert to an earlier point in time. Its principal products are the Easy CD Creator, the Toast family of CD recording software and the GoBack system recovery software. The CD recordable software offerings are available as stand-alone products, and are also shipped embedded or bundled with CD recordable drives in the desktop market.

    The primary goals of the separation were to create greater value for our stockholders and allow us and Roxio to pursue our growth and strategic objectives: we concentrate on improving access to and protection of information stored on servers, networks and desktops, while Roxio focuses on digital media. The spin-off will enable Roxio to have its own sales forces and other employees focused specifically on the software business and related opportunities. It gives Roxio greater ability to modify its business process and organization to better fit the needs of its business, customers and employees. In addition, Roxio's ability to attract and retain qualified personnel will be enhanced through its own incentive compensation programs that are tied to the market performance of its common stock and linked to the performance of its business. Finally, as a separate company, Roxio will have direct access to the capital markets to fund operations and acquire businesses, key products and technologies.

Products

    We compete largely on the basis of four competencies: time to market on technology transitions; software value-add; brand equity; and innovative application specific integrated circuits, or ASIC, technologies. Time to market refers to the need to lead industry transitions, such as Ultra320 SCSI. We strive to lead the storage market in technology transitions as a way to generate OEM design wins. Software value-add includes software drivers, BIOS integration, graphical user interfaces, RAID firmware, protocol stacks and compatibility testing that offer value to OEM customers and reduce support costs for distribution partners. Our brand equity conveys value to customers seeking pre-tested compatibility and the direct benefit of a worldwide support organization. We also decide on a product by product basis how to best invest in developing new ASICs that will create competitive advantage. We introduced the leading ASICs for the SCSI market, for example, but have also worked with ASIC partners to meet technology transitions and leverage our brand and distribution channel.

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SSG

    Our SSG products primarily include RAID and SCSI solutions that move, manage and protect critical information intelligently, providing enhanced data performance and security in the server marketplace.

    Our RAID controllers provide performance and functionality, incorporate 64-bit and 32-bit peripheral component interconnect, or PCI, technology and offer software functionality to make RAID creation and manipulation fast, simple and reliable. Our portfolio of RAID products spans a broad range of disk drive interfaces, including Ultra160 SCSI, ATA and fibre channel. Our SSG segment deploys its own SCSI controllers for SCSI-based RAID controllers, providing our customers with cost-effective solutions. All of our RAID controllers are managed using Storage Manager Pro™, our unifying configuration and management tool. Storage Manager Pro™ allows integrators to learn one simple tool, thereby reducing training and support costs.

    The Ultra160 SCSI RAID controllers, which feature our Ultra160 SCSI ASICs, provide industry-standard disk data transfer rates of 160 megabytes per second per channel, offering increased data protection and availability for environments requiring high-speed throughput, scalability and reliability. The Ultra160 SCSI RAID controllers are designed for both conventional and rack-mount servers and support all major server operating systems, including Windows, WindowsNT, Linux, NetWare and Unix.

    We recently introduced ATA RAID controllers, which allow customers to take advantage of low-cost ATA hard disk drives. While ATA drives have limited scalability, they are particularly appealing to the cost-sensitive, entry-level server market where two or three drives may be sufficient for customers' needs.

    Our SCSI products, which incorporate our proprietary single-chip reduced instruction set computer, or RISC, architectures and ASIC development tools, provide customers with the latest high-speed PCI and SCSI technology that can be applied to servers. Our SCSI ASICs can be applied to server motherboard solutions, RAID on motherboard, or ROMB, solutions, zero-channel RAID solutions, SCSI host bus adapters, RAID host bus adapters and external RAID solutions to manage all I/O processing activity, thereby freeing the CPU to perform other operations. In addition, we have developed BIOS-based RAID solutions that offer low-cost mirroring RAID functionality that can be upgraded to our higher-functionality RAID products. To expand further the market for our products, we continue to develop and market I/O solutions that meet specific OEM requirements and offer turnkey kits for our distributor channels.

    We have undertaken numerous initiatives to increase the accessibility, ease of use, and versatility of the SCSI standard. Advanced SCSI programming interface, or ASPI, an industry standard developed by us, enables users to integrate high-performance SCSI peripherals with computers using popular operating systems, such as Windows (including Windows 2000 and Windows NT), NetWare, OS/2, Unix, Novell and Linux. In addition, we have strategic relationships with leading operating system vendors in joint development projects to embed our software within their operating systems.

    Our Ultra160 SCSI solutions are designed for high traffic environments that can benefit from added speed and bandwidth. They are used in entry-level to high-end servers, offering different levels of performance and scalability for most hard disk drive configurations. As databases expand, information access requires more time. Using a 64-bit PCI interface, the Ultra160 SCSI solutions support transfer rates of up to 160 megabytes per second. Their ability to negotiate transfer rates and provide a guaranteed connection can help maintain a high level of drive availability. In addition, the Ultra160 SCSI solutions fully support all legacy SCSI devices.

DSG

    Our DSG segment brings complex I/O technology solutions to the desktop market, making them simple, accessible and affordable for consumers and business professionals. We offer FireWire/1394 solutions which support desktop connectivity with next-generation peripherals such as camcorders and digital video cameras that feature FireWire. The emergence of digital video and multimedia applications

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has created the need to move large amounts of data between peripherals and PCs. FireWire/1394 technology offers a versatile, high-speed, low-cost method of interconnecting a variety of PC peripherals and consumer electronic devices. Our FireWire/1394 host bus adapters can handle high-bandwidth data transfer rates of up to 400 megabits per second and can connect up to 62 external devices. In addition, our FireWire/1394 solutions feature MGI VideoWave 4 SE consumer digital video editing software, which offers editing and special effects tools that capture, edit, produce and share video content. DVpics, our newest consumer video editing solution, is designed for editing digital camcorder home movies directly on PCs.

    In addition, our product offerings in the DSG segment include the family of SCSI host bus adapters for PCs, Macintosh and portables that brings high-speed connectivity to the desktop, enabling users to quickly move and manage high volumes of data to and from internal and external storage devices.

SNG

    Our SNG segment is focused on driving the convergence of storage and networking, delivering high performance NIC and fibre channel solutions and building pervasive SCSI over IP solutions. At the core of our storage networking portfolio are products and solutions geared to SANs, which enable users to efficiently share, access and consolidate storage resources.

    Our family of single-port and multi-port NICs maximizes the performance of PCI servers operating on fast ethernet and ethernet networks. They are designed to increase bandwidth, reliability and network availability. For applications requiring maximum throughput, such as graphics, multimedia and databases, NICs increase the performance of both 64-bit and 32-bit servers that provide critical local and wide area network solutions. Our DuraLAN technology maximizes throughput by providing a fast ethernet to PCI connection for LAN-based servers.

    In January 2000, we announced a partnership with Agilent to co-develop, market and sell fibre channel host bus adapters for worldwide OEMs and resellers. These one-gigabit and two-gigabit host bus adapters feature Agilent's Tachyon chips and allow servers to utilize fibre channel to communicate with storage devices such as tape drives, RAID arrays and storage clusters. Fibre channel technology provides the long-distance connectivity and the high-bandwidth needed to efficiently move large data files between a server and storage. It is well-suited for SANs, computer clusters and other data intensive computing configurations. Our one-gigabit fibre channel adapters, which were launched in the second quarter of fiscal 2001, are targeted for use by large enterprises, as well as mid-sized companies considering a SAN implementation for the first time. Our two-gigabit fibre channel adapters, which were launched in the third quarter of fiscal 2001, offer data transfer rates of up to 400 megabytes per second and provide high performance I/O connectivity. Subsequent to March 31, 2001, we terminated our agreement with Agilent. We paid Agilent $18.0 million of minimum royalty fees and received a fully paid, non-exclusive, worldwide perpetual license to use Agilent's fibre channel host bus adapter and software driver technology. Agilent will continue to supply us with the Tachyon chips (see "Note 16. Agilent Agreement" of the Notes to Consolidated Financial Statements for further discussion).

    During fiscal 2001, we entered into a strategic partnership with Brocade Communications Systems to deliver, market and support interoperable, multi-vendor SAN solutions. This partnership includes joint interoperability testing, solution documentation, training, promotion and support for popular SAN applications.

Emerging Technologies

    The computer industry is characterized by rapid technological changes. We are committed to maintaining our leadership position in the server, storage networking and desktop markets by providing our customers with advanced, affordable and easy-to-use products and solutions.

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IP Storage

    Our newest development in the SAN market is in the emerging technology of IP storage solutions. Storage over IP or ethernet-based networks are specifically designed to enable cost effective SANs to be deployed to a broad market, and to utilize existing networking infrastructure and protocols. This new technology enables SCSI block-based storage traffic to be efficiently and reliably transferred over existing IP and ethernet-based networks. Because IP storage operates over the existing ethernet infrastructure, it is intended to provide lower cost of ownership by retaining the existing networking, interoperability, manageability, compatibility and other cost advantages that have made ethernet successful. Customers will be able to use inexpensive, readily available ethernet switches, hubs and cables to implement IP storage-based SANs. In addition, IP storage will leverage future advances in ethernet and IP performance and features. In the first half of fiscal 2001, we demonstrated the industry's first working and interoperable iSCSI (an IP storage standard) host bus adapters in conjunction with IBM.

Ultra320 SCSI and PCI-X

    We are currently developing the next generation SCSI technology, Ultra320 SCSI, which will offer data transfer rates of up to 320 megabytes per second per channel. This is twice the speed of the current SCSI standard and will provide customers with additional bandwidth and performance. In March 2001, we announced a joint testing plan with IBM to advance Ultra320 SCSI technologies. We will also introduce the next generation in the PCI bus, called PCI-X, which will dramatically increase the speed of the traditional internal server bus.

USB

    In the first quarter of fiscal 2002, we released our first desktop connectivity solution based on the next generation USB 2.0 technology. USB 2.0 is the next standard in desktop I/O, supported by major PC leaders. The USB 2.0 host bus adapters provide the fastest USB standard, supporting data speeds up to 480 megabits per second while maintaining backward-compatibility with current USB 1.1 devices. The USB 2.0 host bus adapters are suitable solutions for connecting high-speed peripherals such as external hard disks, CD-rewriteable and digital scanners.

Infiniband

    We are currently developing infiniband I/O solutions that connect servers to external storage. Infiniband is a switched fabric interconnect SAN solution that we believe will eventually replace PCI. Connections between servers, remote storage and networking are accomplished by attaching all devices through a central, unified fabric of infiniband switches and links. Infiniband offers increased system performance, enhanced reliability, greater availability and independent scalability of fabric elements. We are committed to broadening the SAN marketplace by bringing this new storage fabric technology to market.

Sales, Marketing and Customers

    We supply a broad range of storage access solutions and maintain a strong sales, distribution, service and support infrastructure to help customers implement these solutions. We sell our solutions through a direct sales force to OEMs, as well as distributors worldwide. We work closely with our OEM customers on the design of current and next generation products to meet the specific requirements of system integrators and end-users. We provide our OEM customers with extensive applications and system design support.

    We maintain training and support for channel customers including value added resellers, or VARs, system integrators and distributors. Sales and marketing to OEMs, VARs, system integrators and distributors are primarily handled by our direct sales force, marketing and engineering teams. Senior management who is familiar with customers' markets and needs frequently participates in the marketing

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process. We also sell board-based products to end-users through major computer product retailers to whom we provide technical support worldwide.

    We emphasize solution-oriented customer support as a key element of our marketing strategy and maintain technical applications groups in the field and at our corporate headquarters. Such support includes assisting current and prospective customers in the use of our products, writing application notes and conducting seminars for system designers. The systems-level expertise and software experience of our engineering staff are also available to customers with particularly difficult design problems. A high level of customer support is also maintained through technical support hotlines, electronic bulletin boards and dial-in-fax capabilities.

    In the SSG and SNG segments, our major OEM customers include Asustek, Compaq Computer, Dell Computer, EMC, Fujitsu-Siemens, Hewlett Packard, IBM, Intel and NEC. Major distributors include Actebis, Arrow Electronics, Computer 2000, Ingram Micro, Synnex and Tech Data. We also sell direct to a number of manufacturing facilities, including Celestica, SCI Systems and Solectron, which generally act as agents for our OEM customers. In the DSG segment, our major OEM customers include Apple Computer and Fujitsu-Siemens. Major distributors include Actebis, Computer 2000, Globelle, Ingram Micro, Softbank, Synnex and Tech Data. Major retail customers in the DSG segment include Best Buy, Circuit City, CompUSA, Fry's and Micro Center.

    In fiscal 2001, Ingram Micro accounted for 13% of the total net revenues from our continuing operations. In fiscal 2000, Ingram Micro and Dell Computer each accounted for 12% of the total net revenues from our continuing operations. In fiscal 1999, no single customer accounted for more than 10% of the total net revenues from our continuing operations.

    Total net revenues for our current segments were as follows:

Competition

    The markets for all of our products within the SSG, DSG and SNG segments are highly competitive and are characterized by rapid technological advances, frequent new product introductions, evolving industry standards and competitive price pressures. Our competitive strategy is to continue to leverage our technical expertise and concentrate on technology-intensive solutions. We design advanced features into our products, with a particular emphasis on data transfer rates, software-defined features and compatibility with major operating systems and most peripherals. We believe the principal competitive factors in our markets are performance, a comprehensive array of solutions ranging from connectivity products for the personal computing market to high-performance products for the enterprise-wide computing and networked environments, product features, brand awareness, financial resources, price and technical and administrative support. We believe that we presently compete favorably with respect to each of these factors.

    In the SSG segment, we compete with American Megatrends, LSI Logic, Mylex (a subsidiary of IBM), QLogic and a number of other smaller manufacturers. In the DSG segment, we compete with Dazzle

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Multimedia, Pinnacle Systems and SIIG. In the SNG segment, our NICs compete with Intel and 3Com. Our fibre channel products compete primarily with Emulex, JNI and QLogic.

    Our competitors continue to introduce products with improved performance characteristics, and our customers continue to develop new applications. As we continue to broaden our storage solution product offerings into the server, workstation and desktop environments, we have experienced, and expect to experience in the future, significantly increased competition both from existing competitors and from additional companies that may enter our markets. In addition, our competitors could introduce new products with superior features, scalability and functionality at lower prices than our products. Some of these companies have greater technical, marketing, manufacturing and financial resources than us, as well as greater name recognition and a larger installed customer base. As the storage solution market continues to develop, competitors with greater resources could attempt to increase their presence in the market by acquiring or forming strategic alliances with our competitors or business partners. We will have to continue to develop and market appropriate products to remain competitive. We cannot assure you that we will be able to compete successfully in the future against existing or new competitors. Increased competition could result in price reductions, reduced gross margins and loss of market share, all of which could adversely impact our results of operations and financial position.

Backlog

    Our backlog was approximately $25 million and $38 million at March 31, 2001 and 2000, respectively. Backlog levels vary with product availability, delivery lead times and customer order delays, changes or cancellations. Accordingly, our backlog as of any particular date may not necessarily be an indicator of future operating results.

Manufacturing

    As a result of the restructuring plan implemented in the fourth quarter of fiscal 2001, we intend to consolidate all of our manufacturing operations to our Singapore manufacturing facility by mid-fiscal 2002. Our products make extensive use of standard logic, printed circuit boards and random access memory from several outside suppliers in addition to our custom designed integrated circuits.

    All semiconductor wafers used in manufacturing our products are processed to our specifications by outside suppliers and internally tested by us. We have secured capacity through agreements with Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, that provide for the availability of a major portion of our wafer needs for both current and future technologies. Advance payments have been made to TSMC to secure wafer production through December 31, 2004 (see "Note 7. TSMC Agreements" of the Notes to Consolidated Financial Statements for further discussion).

Patents and Licenses

    We maintain a patent award program which encourages our engineers to document patentable inventions, and we have applied for and continue to apply for patents in the United States and in foreign countries. As of March 31, 2001, we had 173 issued patents, expiring between 2005 and 2019, covering various aspects of our technologies. We believe our patents and other intellectual property rights have value, but no single patent is considered essential to our business. Additionally, any of our proprietary rights could be challenged, invalidated or circumvented, or may not provide significant competitive advantages.

    As is the case with many companies in the high technology industry, it may be desirable in the future for us to obtain technology licenses from other companies. We have occasionally received notices of claimed infringement of intellectual property rights and may receive additional such claims in the future. We evaluate all such claims and, if necessary, will seek to obtain appropriate licenses. We cannot assure you that any such licenses, if required, will be available on acceptable terms.

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    In May 2000, we entered into a patent cross-license agreement with a third party. Under the agreement, we will pay the third party a settlement fee in return for a release from past infringement claims prior to January 1, 2000. In addition, we will pay, in annual installments, a patent license fee for the use of certain of the third party's patents through June 30, 2004. Additionally, we granted the third party a license to use all of our patents for the same period. The aggregate patent fee to be paid by us over the term of the cross-license agreement is $11.0 million.

Research and Development

    We believe technical leadership is fundamental to our success and are committed to continuing a substantial level of research and development. During fiscal 2001, we made significant research and development investments in the following emerging technologies: Ultra320 SCSI, BIOS-based RAID, ROMB and zero-channel RAID for the SSG segment; FireWire/1394 and USB 2.0 for the DSG segment; IP storage, infiniband and fibre channel for the SNG segment.

    The high technology industry is characterized by rapid technological developments, changing industry standards and new product introductions. We intend to continue to leverage our technical expertise and product innovation capabilities to address storage access solutions across a broad range of users and platforms. We believe that our future performance will depend in large part on our ability to maintain and enhance our current product line, develop new products that achieve market acceptance, maintain competitiveness and meet an expanding range of customer requirements.

    Approximately 22% of our employees are engaged in research and development. In fiscal 2001, 2000 and 1999, we spent $110.6 million (19% of total net revenues from our continuing operations), $88.9 million (12% of total net revenues from our continuing operations) and $137.6 million (21% of total net revenues from our continuing operations), respectively, for research and development.

Employees

    As a result of the restructuring plan implemented in the fourth quarter of fiscal 2001, we eliminated the positions of approximately 275 employees. Of the 275 employees, 170 employees were terminated before March 31, 2001, and 105 employees have termination dates scheduled for the first and second quarters of fiscal 2002. We had 1,943 employees as of March 31, 2001. Our continued success will depend in large measure on our ability to attract and retain highly skilled employees. Competition for qualified personnel in our industry is intense, and we cannot assure you that we will be successful in attracting and retaining such personnel.

Executive Officers

    The following sets forth certain information regarding our executive officers as of June 26, 2001, except that ages are as of March 31, 2001:

    Mr. Robert N. Stephens (age 55) has served as Chief Executive Officer since April 1999 and President since October 1998. Prior to his promotion, Mr. Stephens had served as Chief Operating Officer since 1995. From 1993 to 1995, he founded and served as Chairman for Power I/O Corporation.

    Mr. Robert L. Schultz, Jr. (age 43) has served as Chief Operating Officer since July 1999. From 1991 to 1999, Mr. Schultz was with Compaq Computer as Vice President and Director of the Server Storage Business (1998 – 1999) and in various marketing roles within Compaq Computer (1991 – 1998).

    Mr. David A. Young (age 57) has served as Vice President and Chief Financial Officer since October 2000, and as Assistant Secretary since May 2001. From 1994 to 2000, Mr. Young was with Datum, Inc., where he served as Vice President and Chief Financial Officer.

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    Mr. Kenneth B. Arola (age 45) has served as Vice President since June 1998, and as Corporate Controller and Principal Accounting Officer since February 1999. From 1995 to 1998, Mr. Arola served as Director of Corporate Finance. From 1990 to 1995, he served in various financial roles within Adaptec.

    Mr. Kok Yong Lim (age 53) has served as Vice President of Manufacturing since December 1999. From 1993 to 1999, Mr. Lim served as Managing Director and Vice President of Adaptec Manufacturing Singapore.

Foreign and Domestic Operations

    See "Note 19. Segment, Geographic, and Significant Customer Information" of the Notes to Consolidated Financial Statements.

Certain Factors Bearing Risks on Future Operating Results

    Our future operating results are subject to fluctuation. Our operating results may fluctuate as a result of a wide variety of factors, including, but not limited to, the following:

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cancellations or postponements of orders;



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shifts in the mix of our products and sales channels;



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changes in pricing policies by our suppliers;



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shortages of components or wafer fabrication capacity affecting us, our customers or our suppliers;



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market acceptance of new and enhanced versions of our products;



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product obsolescence;



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shortage of skilled labor;



•

future accounting pronouncements and changes in accounting policies;



•

timing of acquisitions of other businesses and any associated charges or earnings;



•

restructuring actions or other involuntary terminations;



•

general economic trends; and



•

pending legal proceedings.

    Fiscal 2001 operating results were materially impacted by unusual charges, including the following:

•

accrued minimum royalty fees to Agilent;



•

restructuring charges; and



•

asset impairment charges.

    Fiscal 2000 operating results were materially impacted by unusual charges, including the following:

•

accrued minimum royalty fees to Agilent;



•

write-off of patent settlement fee attributable to a patent cross-license agreement; and



•

write-off of acquired in-process technology.

    Fiscal 1999 operating results were materially impacted by unusual charges, including the following:

•

write-off of acquired in-process technology;



•

restructuring charges;

12

•

asset impairment charges;



•

expenses associated with the termination of the Symbios acquisition; and



•

expenses associated with the terminations of several senior executives.

    Our sales have been negatively impacted by the current economic slowdown, and if these conditions persist or deteriorate, they would continue to adversely affect our results of operations and financial position. During the second half of fiscal 2001, our operating results were significantly impacted by the continuing slowdown in information technology investments. Many of our customers announced workforce reductions and delayed capital spending in response to the economic slowdown. If the current economic conditions continue to persist or deteriorate, our customers will likely further postpone capital spending, which would continue to adversely affect our financial results.

    We may not meet the goals and objectives of our current restructuring plan, which could adversely affect our results of operations and financial position. As a result of the economic slowdown, in the fourth quarter of fiscal 2001 we implemented a restructuring plan to reduce our operating costs to match the current business environment. The plan included primarily a reduction of our workforce and the consolidation of our manufacturing operations to Singapore. The goals of the plan are to support future growth opportunities, focus on investments that grow revenues and increase operating margins. If we do not meet our restructuring objectives or if the economic slowdown continues, we may have to implement additional plans in order to reduce our operating costs, which could have an adverse effect on our financial results.

    If demand in the server, network storage and desktop markets declines, our revenues may decline. Historically, our growth has been supported by increasing demand for systems that support:

•

client/server applications;



•

computer-aided engineering;



•

Internet/intranet applications;



•

data storage and digital content; and



•

multimedia and video.

    Our business or operating results could be adversely affected by a decline for our products. In addition, other technologies may replace our existing technologies and the acceptance of our technologies in the market may not be widespread, which could adversely affect our revenues.

    If demand for our customers' products declines or if our customers do not control their inventories effectively, our revenues may be adversely affected. The volume and timing of orders received during a quarter are difficult to forecast. Our customers generally order based on their forecasts, and they frequently encounter uncertain and changing demand for their products. If demand falls below their forecasts or if our customers do not control their inventories effectively, they may cancel or reschedule shipments previously ordered from us. We have historically operated with a relatively small backlog and have set our operating budget based on forecasts of future revenues. Because much of our operating budget is relatively fixed in the short-term, if revenues do not meet our expectations, then our financial results will be adversely affected.

    If we do not provide adequate support during our customers' design and development stage, or if we are unable to provide such support in a timely manner, revenues may be lost to our competition. Certain of our products are designed to meet our customers' specifications and, to the extent we are not able to meet these expectations in a timely manner or provide adequate support during our customers' design and development stage, our customers may choose to buy similar products from another company. As a result, our financial results could be adversely impacted.

13

    If there is a shortage of computer components used in our customers' products, our sales may decline, which could adversely impact our results of operations and financial position. If our customers are unable to purchase components which are embedded into their products, their demand for our products may decline. For example, beginning in the fourth quarter of fiscal 2000, we began to experience the impact of other companies' chip supply shortages, which reduced the demand for some of our SSG products. This negatively impacted our net revenues in the first half of fiscal 2001. Similar shortages of computer components used in our customers' products could adversely impact our sales and financial results in future periods.

    Our reliance on industry standards and technological changes in the marketplace may cause our revenues to fluctuate or decline. The computer industry is characterized by various, evolving standards and protocols. We design our products to conform to certain industry standards and protocols such as the following:

Technologies:

•

ATA;



•

Fibre channel;



•

FireWire/1394;



•

Infiniband;



•

IP storage;



•

PCI;



•

RAID;



•

SCSI;



•

Ultra-DMA; and



•

USB.

Operating Systems:

•

Linux;



•

Macintosh;



•

NetWare;



•

Novell;



•

OS/2;



•

UnixWare; and



•

Windows (including Windows 2000 and Windows NT).

    In particular, a majority of our revenues are currently derived from products based on SCSI standards. If consumer acceptance of these standards declines, or if new standards emerge, and if we do not anticipate these changes and develop new products, these changes could adversely affect our business or financial results. For example, we believe that changes in consumers' perceptions of the relative merits of SCSI-based products and products incorporating a competing standard, Ultra-DMA, adversely affected sales of our products beginning in fiscal 1998 and may continue to affect our future sales.

14

    If our products do not operate effectively with other products, it could negatively impact our revenues. We must design our products to operate effectively with a variety of hardware and software products supplied by other manufacturers, including the following:

•

microprocessors;



•

peripherals; and



•

operating system software.

    We depend on significant cooperation with these manufacturers to achieve our design objectives and develop products that interoperate successfully. We believe that generally we have good relationships with leading system, peripheral and microprocessor suppliers; however, these suppliers may, from time to time, make it more difficult for us to design our products for successful operability with their products. In addition, these suppliers may decide to compete with us. If any of these events were to occur, our revenues would be adversely affected.

    Our dependence on new products may cause our revenues to fluctuate or decline.  Our future success significantly depends upon our completing and introducing new products at competitive price and performance levels in a timely manner. The success of new product introductions depends on several factors, including the following:

•

defining products to meet customer needs;



•

product costs;



•

timely completion and introduction of new product designs;



•

the quality of new products;



•

differentiation of new products from those of our competitors; and



•

market acceptance of our products.

    As a result, we believe that continued significant expenditures for research and development will be required in the future. We may fail to identify new product opportunities and may not develop and bring new products to market in a timely manner. In addition, products or technologies developed by others may render our products or technologies obsolete or non-competitive, or our targeted customers may not select our products for design or integration into their products. The failure of any of our new product development efforts could have an adverse effect on our business or financial results.

    If we are unable to compete effectively, our revenues could be adversely impacted. The markets for all of our products are intensely competitive and are characterized by the following:

•

rapid technological advances;



•

frequent new product introductions;



•

evolving industry standards; and



•

price erosion.

    As we continue to broaden our product offerings into the server, network storage and desktop environments, we have experienced, and expect to experience in the future, significantly increased competition both from existing competitors and from additional companies that may enter our markets. Some of these companies have greater technical, marketing, manufacturing and financial resources than we do. We cannot assure you that we will have sufficient resources to accomplish any of the following:

•

meet growing product demand;



•

make timely introductions of new leading-edge solutions;

15

•

compete successfully in the future against existing or potential competitors;



•

provide OEMs with design specifications in a timely manner; and



•

prevent price competition from eroding margins.

    Costs associated with acquisitions or joint ventures may adversely affect our results of operations, which could be exacerbated if we are unable to integrate the acquired companies, products or technologies. To strengthen our position in the RAID market, we acquired Distributed Processing Technology, Corp., or DPT, in fiscal 2000. In addition, we enter into joint ventures and strategic alliances from time to time with other companies, such as our partnership with Brocade Communications Systems to deliver, market and support multi-vendor SAN solutions. As part of our overall strategy, we may continue to acquire or invest in complementary companies, products or technologies, and enter into joint ventures and strategic alliances with other companies. In order to be successful in these activities, we must:

•

assimilate the operations and personnel of the combined companies;



•

minimize the potential disruption of our ongoing business;



•

retain key technical and managerial personnel;



•

integrate the acquired company into our strategic and financial plans;



•

accurately assess the value of potential targeted businesses, products or technologies;



•

harmonize standards, controls, procedures and policies; and



•

minimize the impairment of relationships with employees and customers.

    The benefits of acquisitions or joint ventures may prove to be less than anticipated and may not outweigh the costs reported in our financial statements. Completing any potential future acquisitions or joint ventures could cause significant diversions of management time and resources. If we acquire new businesses, products or technologies in the future, we may be required to assume contingent liabilities and amortize significant amounts of goodwill and other intangible assets. If we consummate any potential future acquisitions in which the consideration consists of stock or other securities, our existing stockholders' ownership may be significantly diluted. If we proceed with any potential future acquisitions in which the consideration is cash, we may be required to use a substantial portion of our available cash. We may not be successful in overcoming these risks or any other problems encountered in connection with these or other business combinations, investments or joint ventures. These transactions may adversely affect our business, financial position or operating results.

    We depend on wafer suppliers whose failure to meet our manufacturing needs could negatively affect our operations. Independent foundries manufacture to our specifications all of the finished silicon wafers used for our products. We currently purchase most of the wafers through our agreements with TSMC. The manufacture of semiconductor devices is sensitive to a wide variety of factors, including the following:

•

the availability of raw materials;



•

the availability of manufacturing capacity;



•

the level of contaminants in the manufacturing environment;



•

impurities in the materials used; and



•

the performance of personnel and equipment.

    While we have been satisfied with the quality, yield and timeliness of wafer deliveries to date, we cannot assure you that manufacturing problems may not occur in the future. In addition, although we have various supply agreements with our suppliers, a shortage of raw materials or production capacity could lead our wafer suppliers to allocate available capacity to other customers. Any prolonged inability to obtain

16

wafers with competitive performance and cost attributes, adequate yields or timely deliveries from our foundries would delay our production and our product shipments, and could have an adverse impact on our business or financial results. We expect that our current suppliers will continually seek to convert their fabrication process arrangements to smaller wafer geometries and to more advanced process technologies. Such conversions entail inherent technological risks that can affect yields and delivery times. If for any reason our current suppliers are unable or unwilling to satisfy our wafer needs, we will be required to identify and qualify additional foundries. Additional wafer foundries may be unavailable, may take significant amounts of time to qualify or may be unable to satisfy our requirements on a timely basis.

    If our manufacturing demand of silicon wafers falls below our projections, we may not be able to fully utilize our prepayments to TSMC, which could adversely affect our results of operations and financial position. From time to time, we have entered into "take or pay" contracts that have committed us to purchase specified wafer quantities over extended periods based on our projected needs. In addition, we have made prepayments to TSMC in order to secure a guaranteed wafer capacity. If our demand for wafer units falls below our projections, we may not be able to fully utilize our prepayments. The unused portion of the prepayments may be impaired and written off as an asset impairment charge, which would adversely affect our financial results.

    We depend on subcontractors whose failure to meet our manufacturing needs could negatively affect our results of operations. We rely on subcontractors for the assembly and packaging of the integrated circuits included in our products. We have no long-term agreements with our assembly and packaging subcontractors. We have, from time to time, used board subcontractors to better balance production runs and capacity. We cannot assure that such subcontractors will continue to be able and willing to meet our requirements for such components or services. Any significant disruption in supplies from, or degradation in the quality of components or services supplied by, such subcontractors could delay shipments and result in the loss of customers or revenues, which could have an adverse impact on our financial results.

    We depend on the efforts of our distributors, which if reduced, would negatively affect our business and our results of operations. Our distributors generally offer a diverse array of products from many different manufacturers. Accordingly, we are at risk that these distributors may give higher priority to selling products from other suppliers. A reduction in sales efforts by our current distributors could adversely impact our business or financial results. Our distributors may on occasion build inventories in anticipation of substantial growth in sales, and when such growth does not occur as rapidly as they anticipate, our distributors may subsequently decrease the size of their product orders. If we decrease our price protection or distributor-incentive programs, our distributors may also decrease their orders from us. In addition, we may from time to time take actions to reduce levels of products at distributors. These actions could reduce our revenues and negatively impact our financial results.

    Our operations depend on key personnel, the loss of whom could affect our business and reduce our future revenues. Our future success depends in large part on the continued service of our key technical, marketing and management personnel, and on our ability to continue to attract and retain qualified employees, particularly those highly skilled engineers who are involved in the design enhancement, manufacture of existing products and the development of new ones. The competition for such personnel is intense, and the loss of key employees could adversely affect our business. We have experienced, and may continue to experience, difficulty in hiring and retaining qualified personnel in light of the recent significant decline in our stock price. Our continued growth and future operating results will depend upon our ability to attract, hire and retain qualified employees.

    Our international operations involve risks, and may negatively affect our revenues and results of operations. As a result of our fiscal 2001 restructuring plan, we intend to consolidate our manufacturing facilities in Singapore. In addition, various of our subcontractors are primarily located in Asia. Additionally, we have sales offices and customers throughout Europe, Japan and other foreign countries. Our international operations and sales are subject to political and economic risks, including political instability, currency

17

controls, exchange rate fluctuations, and changes in import/export regulations, tariffs and freight rates. We may use forward exchange contracts to manage any exposure associated with certain foreign currency-denominated commitments. In addition, because our primary wafer supplier, TSMC, is located in Taiwan, we may be subject to certain risks resulting from the political instability in Taiwan, including conflicts between Taiwan and the People's Republic of China. These and other international risks could negatively impact our business and financial results.

    We may encounter natural disasters, which may negatively affect our results of operations and financial position. Our corporate headquarters in California are located near major earthquake faults. Any damage to our facilities as a result of an earthquake, fire or any other natural disasters could have an adverse impact on our business and financial results. Additionally, our primary wafer supplier, TSMC, is located in Taiwan, which has experienced significant earthquakes in the past. A severe earthquake could interrupt its manufacturing process, which could affect its ability to supply wafers to us, which would negatively impact our business and financial results.

    We rely on a continuous power supply to conduct our operations, and California's current energy shortage could disrupt our operations and increase our expenses. California is experiencing an energy shortage that could disrupt our operations and increase our expenses. In the event of an acute power shortage, California has implemented rolling blackouts throughout the state. We currently do not have back-up generators or alternate sources of power in the event of a blackout, and our current insurance does not provide coverage for any damages we or our customers may suffer as a result of any interruption in our power supply. If blackouts interrupt our power supply, we would be temporarily unable to continue operations at our California facilities. Additionally, California regulators have approved a substantial rate increase for electricity in the state. Any interruptions in our ability to continue operations at our facilities, as well as higher energy costs incurred as a result of the energy shortage, could adversely affect our business and financial results.

    We may experience volatile fluctuations in our stock price.  The stock market in general, and the market for shares of technology companies in particular, has from time to time experienced extreme price fluctuations. Often, these changes have been unrelated to the operating performance of the affected companies. In addition, factors such as technological innovations or new product introductions by us, our competitors or our customers may have a significant impact on the market price of our common stock. Furthermore, quarter-to-quarter fluctuations in our results of operations caused by changes in customer demand, changes in the microcomputer and peripherals markets or other factors may have a significant impact on the market price of our common stock. In addition, general market conditions and international economic factors unrelated to our performance may affect our stock price. These and other conditions and factors that generally affect the market for shares of technology companies could cause the price of our common stock to fluctuate substantially over short periods.

    If the carrying value of our long-lived assets is not recoverable, an impairment loss must be recognized which could adversely impact our results of operations and financial position. Certain events or changes in circumstances would mandate us to assess the recoverability of the carrying amount of our long-lived assets. For example, in the third quarter of fiscal 2001, we evaluated the warrant costs associated with the warrants issued to Agilent and determined that the future undiscounted cash flows would be insufficient to recover any of the carrying value of the warrant costs. As such, we wrote off the carrying balance of the warrant costs. We will continue to evaluate the recoverability of the carrying amount of our long-lived assets, and we may incur additional impairment charges which could adversely impact our financial results.

    We hold a minority interest in certain nonpublic companies, and if these companies face financial difficulties in their operations, our investments could be impaired. We continue to hold a minority interest in certain privately held companies that acquired our divested business lines in fiscal 1999. Our investments are inherently risky because these companies are still in the development stage and depend on third parties for financing to support their ongoing operations. In addition, the markets for their technologies or products

18

are typically in the early stages and may never develop. If these companies do not have adequate cash funding to support their operations, or if they encounter difficulties developing their technologies or products, especially in the recent economic downtown, our investments in these companies may be impaired, which could adversely affect our financial results.

    If we are unable to protect and enforce our intellectual property rights, we may be unable to compete effectively. Although we actively maintain and defend our intellectual property rights, we may be unable to adequately protect our proprietary rights. In addition, the laws of certain territories in which our products are or may be developed, manufactured or sold, including Asia and Europe, may not protect our products and intellectual property rights to the same extent as the laws of the United States.

    Despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property, which could harm our business and ability to compete effectively. We have from time to time discovered counterfeit copies of our products being manufactured or sold by others. Although we have maintained an active program to detect and deter the counterfeiting of our products, significant availability of counterfeit products could reduce our revenues and damage our reputation and goodwill with customers.

    Third parties may assert infringement claims against us, which may be expensive to defend and could adversely impact our business and results of operations. From time to time, third parties may assert exclusive patent, copyright and other intellectual property rights to our key technologies. For example, we entered into a patent cross-license agreement with a third party in May 2000. Under the agreement, we will pay the third party a patent settlement fee in return for a release from past infringement claims prior to January 1, 2000. In addition, we will pay a patent license fee for the use of certain of the third party's patents through June 30, 2004. Additionally, we granted the third party a license to use all of our patents for the same period. The aggregate patent fee to be paid by us under the patent cross-license agreement is $11.0 million.

    We cannot assure you that third parties will not assert other infringement claims against us in the future, that assertions by third parties will not result in costly litigation or that we would prevail in such litigation or be able to license any valid and infringed patents from third parties on commercially reasonable terms. Litigation, regardless of the outcome, could result in substantial costs to us and diversion of our resources. Any infringement claims or other litigation against or by us could adversely impact our business or financial results.

    We may be engaged in legal proceedings that could negatively affect our business operations or financial position. From time to time, we are subject to litigation or claims that could negatively affect our business operations or financial position. For instance, a class action lawsuit is pending in the United States District Court for the Northern District of California against us and certain of our officers and directors. This lawsuit alleges that we made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. Our motion to dismiss the complaint was granted in April 2000. The plaintiffs filed an amended complaint in July 2000. In October 2000, we filed a motion to dismiss the amended complaint. We believe this lawsuit is without merit and we intend to defend ourselves vigorously. However, any disputes, including this lawsuit, could cause us to incur unforeseen expenses, could occupy a significant amount of our management's time and attention, and could negatively affect our business or financial results.

    If we repatriate cash from our foreign subsidiaries, we may incur additional income taxes which could negatively impact our results of operations and financial position. Our cash and cash equivalent positions are held principally in both the United States and in our subsidiary in Singapore. From time to time we may need additional cash flow to support our operations, which may require us to repatriate our cash from Singapore to the United States. We will incur additional income taxes from the repatriation, which could negatively affect our financial results.

19

    We may be subject to a higher effective tax rate that could negatively impact our results of operations and financial position. Our effective tax rate is benefited by a Singapore tax holiday relating to certain of our products. The terms of the tax holiday provide that profits derived from certain products will be exempt from tax through fiscal 2005, subject to certain conditions. If we do not continue to meet the conditions and requirements of the tax holiday in Singapore, our effective tax rate will increase, which could adversely impact our financial results.

    We may be required to pay additional federal income taxes which could negatively impact our results of operations and financial position. On June 27, 2000, we received a statutory notice of deficiency from the Internal Revenue Service, or IRS, with respect to our federal income tax returns for fiscal 1994 through 1996. We filed a Petition with the United States Tax Court on September 25, 2000, contesting the asserted deficiencies. On December 15, 2000, we received a statutory notice of deficiency from the IRS with respect to our federal income tax return for fiscal 1997. We filed a Petition with the United States Tax Court on March 14, 2001, contesting the asserted deficiencies. In addition, the IRS is currently auditing our federal income tax returns for fiscal 1998 and 1999, for which no proposed adjustments have been received. While we believe we have meritorious defenses against the asserted deficiencies and any proposed adjustments and that sufficient taxes have been provided, the final outcome of these matters could adversely impact our results of operations and financial position.

    Our spin-off of Roxio requires us to perform certain obligations under the transitional service agreement, which, if not satisfactorily performed, could cause us to be held liable for resulting losses suffered by Roxio. In May 2001, we completed the spin-off of Roxio, our Software segment. As part of the separation, we entered into a transitional service agreement with Roxio to support ongoing Roxio operations relating to information technology systems, supply chain management, product order administration, buildings and facilities, and legal, finance and accounting. These services generally have a term of one year following the separation. If we do not satisfactorily perform our obligations under the agreement, we may be held liable for any resulting losses suffered by Roxio.

    There may be potential subsequent tax liabilities that could negatively affect our results of operations. Pursuant to our distribution of the shares of Roxio's common stock, we have received an opinion from PricewaterhouseCoopers LLP, or PwC, that the transaction would qualify as tax-free to us and to our stockholders under Section 355 of the Internal Revenue Code. IRS regulations provide that if another entity acquires a controlling interest in Roxio's or our common stock within two years of the distribution, a presumption will arise that the acquisition was made in connection with the distribution, causing the distribution to become taxable. The validity of the PwC opinion relating to the qualification of the distribution as a tax-free transaction is subject to factual representations and assumptions. We are not aware of any facts or circumstances that would cause such representations and assumptions to be untrue. In addition, the opinion of PwC is not binding on the IRS. If we or Roxio fails to conform to the requirements set forth in the IRS regulations, it could cause the distribution to be taxable to us and to our stockholders, and our financial results could be adversely affected.

    We may have potential business conflicts of interest with Roxio with respect to our past and ongoing relationships, and we may not resolve these conflicts on terms favorable to us. Conflicts of interest may arise between Roxio and us in a number of areas relating to our past and ongoing relationship, including:

•

labor, tax, employee benefits, indemnification and other matters arising from the separation;



•

intellectual property matters;



•

employee retention and recruiting;



•

the nature, quality and pricing of transitional services we have agreed to provide to Roxio; and



•

business opportunities that may be attractive to both Roxio and us.

20

    These and other business conflicts could adversely affect the growth of our business in the future.

Item 2. Properties

    We own seven buildings (approximately 479,000 square feet) in Milpitas, California, of which five are primarily used by us for corporate offices, research, manufacturing, technical support, marketing, sales and administration and two are leased to third parties. We also own land and one building (approximately 16,000 square feet) in Florida primarily used for engineering. Internationally, Adaptec Manufacturing Singapore is located in one owned facility (approximately 172,000 square feet) that is used by us for manufacturing, research and development, sales and warehousing. We have entered into a contract to sell the Florida land and building and expect to consummate the sale in fiscal 2002. Accordingly, the Florida land and building were classified as assets held for sale in "Other current assets" in the Consolidated Balance Sheet as of March 31, 2001.

    During fiscal 2001, we sold land in California with a net book value of $13.1 million, and land and one building (approximately 200,000 square feet) in Colorado with a net book value of $21.5 million. These transactions resulted in a total gain of $9.1 million, which was included in "Interest and other income" in the Consolidated Statement of Operations for the year ended March 31, 2001.

    We currently lease five buildings (approximately 92,000 square feet) in California, of which two buildings are used as warehouses, one building is occupied by us and two buildings are subleased to third parties or available for sublease. In addition, we currently lease one building in Florida (approximately 100,000 square feet) which is used for manufacturing, technical support, marketing, sales and administration. We also lease three other buildings in Florida (approximately 28,000 square feet) which are available for sublease. Other leased facilities are located in Nashua, New Hampshire (73,000 square feet); Longmont, Colorado (48,000 square feet); Hudson, Wisconsin (11,000 square feet); and Redmond, Washington (5,000 square feet). These leased facilities are primarily used for research and development and technical support.

    We lease four sales offices in the United States, as well as sales offices in the following international locations: Lindfield, Australia; Waterloo, Belgium; Beijing and Hong Kong, China; Camberley Surrey, England; Bretonneux, France; Haar, Germany; and Tokyo, Japan. The Lindfield, Waterloo, Hong Kong, Haar and Tokyo offices also provide technical design efforts and technical support.

    We believe our existing facilities and equipment are well maintained and in good operating condition, and we believe our facilities are sufficient to meet our needs through fiscal 2002. Our future facilities requirements will depend upon our business, and we believe additional space, if required, may be obtained on reasonable terms.

Item 3. Legal Proceedings

    A class action lawsuit is pending in the United States District Court for the Northern District of California against us and certain of our officers and directors. The class action lawsuit alleges that we made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. Our motion to dismiss the complaint was granted in April 2000. The plaintiffs filed an amended complaint in July 2000. In October 2000, we filed a motion to dismiss the amended complaint. We believe the class action lawsuit is without merit and intend to defend ourselves vigorously.

    In December 1999, we purchased DPT and as part of the purchase agreement, $18.5 million of the purchase price was held back, or the Holdback Amount, from former DPT stockholders, or the DPT Stockholders, for unknown liabilities that may have existed as of the acquisition date. For accounting purposes, the Holdback Amount was included as part of the acquisition purchase price. Subsequent to the date of purchase, we determined that certain representations and warranties made by the DPT

21

Stockholders were incomplete or inaccurate, which resulted in a loss of revenues and additional expenses to us. In addition, certain DPT products were found to be defective and we expect to incur additional product liability expenses. In December 2000, we filed a claim against the DPT Stockholders for the entire Holdback Amount of $18.5 million. In January 2001, the DPT Stockholders notified us as to their objection to our claim. Under the terms of the purchase agreement, our claim will be submitted to arbitration.

    On June 27, 2000, we received a statutory notice of deficiency from the IRS with respect to our federal income tax returns for fiscal 1994 through 1996. We filed a Petition with the United States Tax Court on September 25, 2000, contesting the asserted deficiencies. On December 15, 2000, we received a statutory notice of deficiency from the IRS with respect to our federal income tax return for fiscal 1997. We filed a Petition with the United States Tax Court on March 14, 2001, contesting the asserted deficiencies. We believe we have meritorious defenses against all deficiencies asserted in these statutory notices. In addition, the IRS is currently auditing our federal income tax returns for fiscal 1998 and 1999, for which no proposed adjustments have been received. We believe sufficient taxes have been provided in all prior years and the ultimate outcome of the IRS audits will not have a material adverse impact on our financial position or results of operations. However, we cannot predict with certainty how these matters will be resolved and whether we will be required to make additional tax payments.

    We are a party to other litigation matters and claims which are normal in the course of our operations, and while the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

    Not applicable.

PART II

Item 5. Market for Registrant's Common Stock and Related Shareholder Matters

    Our common stock is traded on the Nasdaq Stock Market under the symbol "ADPT." The following table sets forth the range of the high and low sales prices by quarters as reported by Nasdaq National Market.

    As of March 31, 2001, there were 767 record holders of our common stock. We have not paid cash dividends on our common stock and do not currently plan to pay cash dividends to our stockholders in the near future.

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Item 6. Selected Financial Data

    The following selected financial information has been derived from the audited consolidated financial statements. The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The information below has been restated to account for Roxio as discontinued operations.

23

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

    As discussed further in the "Roxio Spin-Off" section below, we successfully completed the spin-off of our Software segment, Roxio, Inc., into a fully independent and separate company in May 2001. Unless otherwise indicated, the Management's Discussion and Analysis of Financial Condition and Results of Operations relate to our continuing operations.

Results of Operations

    The following table sets forth the items in the Consolidated Statements of Operations as a percentage of net revenues:

    Business Segments.  During fiscal 2001, we evaluated our product segments in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." We concluded that our reportable segments are SSG, DSG, SNG and Other. Our SSG segment, formerly our DAS segment, provides data movement and data protection solutions with a focus on RAID solutions, SCSI technologies and external storage solutions that bring these technologies to networked storage applications. Our DSG segment, formerly a component of our DAS segment, was established to create greater focus in the growing market of high-speed I/O connectivity solutions. Our SNG segment, formerly our SNS segment, focuses on bringing storage fabric solutions to the SAN, NIC and NAS marketplaces. Please see "Item 1. Business" of Part I of this Annual Report on Form 10-K for a detailed discussion of our segments.

    Net Revenues.  Our fiscal 2001 net revenues decreased 21% from the prior year to $582.0 million. Net revenues for the year consisted of $461.4 million from the SSG segment, a decrease of 16% from the prior

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year, $89.4 million from the DSG segment, a decrease of 43% from the prior year, and $31.2 million from the SNG segment, an increase of 23% from the prior year.

    In the SSG segment, we saw strong demand for our Ultra160 SCSI RAID solutions for the entry- and mid-range server market, and we received design wins with certain OEMs. However, fiscal 2001 net revenues decreased from the prior year, primarily due to a lack of Intel microprocessors and motherboards in the distribution channel which adversely impacted some server production in the first half of fiscal 2001. Intel underestimated microprocessor demand as it transitioned its production from 0.25 micron technology to 0.18 micron technology, and it experienced problems with its 840 memory controller hub, a critical component to motherboards. The constraint in the supply of server motherboards began to ease in the third quarter of fiscal 2001. Because demand for our board level products in the SSG segment depends on server production, our net revenues were adversely affected in the first nine months of fiscal 2001. In addition, net revenues from the SSG segment were adversely impacted by the industry-wide slowdown in information technology investments which resulted in sales slower than we anticipated. The economic slowdown caused both OEMs and channel distributors to focus on reducing their inventories on hand. As a result of these inventory pressures, we reduced shipments of our RAID and SCSI products into channel distributors in the fourth quarter of fiscal 2001. We expect that our revenues from the SSG segment will continue to be affected by the economic slowdown in fiscal 2002.

    Fiscal 2001 net revenues from the DSG segment decreased from the prior year, primarily due to the continued decline in the demand for SCSI-based desktop solutions caused by the continued penetration of products incorporating less-expensive Ultra-DMA technology. However, the decline in net revenues was partially offset by sales of our FireWire/1394-based products, which include the FireConnect 4300 Kit launched in the third quarter of fiscal 2001, and the DVpics Digital Video Editing Kit launched in the fourth quarter of fiscal 2001.

    Fiscal 2001 net revenues from the SNG segment were derived from sales of networking products and solutions. Net revenues increased from the prior year, primarily as a result of the increase in sales of our single-port and multi-port NICs, as well as design wins with certain OEMs. However, we expect to see a slowdown in the demand for our NICs in fiscal 2002.

    Our fiscal 2000 net revenues increased 13% from the prior year to $733.4 million. Net revenues for the year consisted of $546.8 million from the SSG segment, an increase of 32% from the prior year, $157.3 million from the DSG segment, an increase of 31% from the prior year, $25.3 million from the SNG segment, an increase of 27% from the prior year, and $4.0 million from the Other segment, an increase of 78% from the prior year.

    Fiscal 2000 net revenues from the SSG segment increased from the prior year, primarily as a result of sales of our high-end RAID products, which we began shipping in the third quarter of fiscal 1999. Additionally, the SSG segment net revenues increased from sales of SCSI adapter cards and chips in the server markets, as a result of increased demand for high performance I/O and SCSI-based RAID products sold to distributors. The increased demand for high performance I/O was driven by the growth in online applications such as electronic commerce, online publishing and the proliferation of the Internet and corporate intranets.

    Fiscal 2000 net revenues from the DSG segment increased from the prior year, primarily as a result of the strong demand for our PCI connectors for both Macintosh and PC desktops. However, the growth in this segment was affected by the continued penetration of desktop products incorporating less-expensive Ultra-DMA technology.

    Fiscal 2000 net revenues from the SNG segment increased from the prior year, primarily as a result of additional design wins with certain OEMs. Beginning in the fourth quarter of fiscal 1999, we also restructured certain areas of our business and increased our focus on sales and marketing activities. These activities helped us increase sales to our existing OEM customers.

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    Gross Margin.  Our fiscal 2001 gross margin was 53% as a percentage of net revenues, compared to 63% in fiscal 2000 and 57% in fiscal 1999. Gross margin in fiscal 2001 was adversely impacted by excess manufacturing capacity due to lower production volumes. The lower production volumes were primarily related to reduced demand for our SCSI premium board level products in the SSG segment stemming from the lack of Intel microprocessors and motherboards in the distribution channel. Our gross margin was also negatively impacted by proportionately higher sales of our RAID products which generally have lower margins than other products in the SSG segment, and also by proportionately higher sales to OEMs which generally have lower margins. In addition, our gross margin was adversely impacted by excess inventory charges, primarily due to customers delaying shipments or cancelling orders as a result of the economic slowdown. However, our fiscal 2001 gross margin was favorably impacted by improved pricing from our major suppliers and by an adjustment to the patent settlement fee that was written off in fiscal 2000, as discussed further below.

    Our fiscal 2000 gross margin was favorably impacted by manufacturing efficiencies obtained through greater production volumes, as well as improved pricing from our major suppliers. However, our fiscal 2000 gross margin was also adversely impacted by the patent settlement fee included as a component of cost of revenues.

    In May 2000, we entered into a patent cross-license agreement with a third party. Under the agreement, we agreed to pay the third party a patent settlement fee in return for a release from past infringement claims prior to January 1, 2000, and a patent license fee for the use of certain of the third party's patents from January 1, 2000 through June 30, 2004. Additionally, we granted the third party a license to use all of our patents for the same period. The final aggregate patent fee was to be determined by an evaluation of certain patents by an independent party and would range from $11.0 million to $25.0 million. As of March 31, 2000, our best estimate of the aggregate patent fee that would be payable under the proposed cross-license agreement was $18.0 million. Based on the March 31, 2000 estimate, the portion of the estimated patent settlement fee allocated to revenues from periods prior to January 1, 2000 of $9.3 million (net of $0.3 million included in discontinued operations) was written off and reflected as a component of cost of revenues under the caption "Patent settlement fee" in the Consolidated Statement of Operations for the year ended March 31, 2000. In March 2001, the final aggregate patent fee was determined to be $11.0 million. Based on this final aggregate patent fee, we recorded a credit adjustment of $3.6 million (net of $0.1 million included in discontinued operations) to cost of revenues under the caption of "Patent settlement fee" in the Consolidated Statement of Operations for the year ended March 31, 2001. The patent license fee pertaining to future periods was allocated to an intangible asset and is being amortized over the period from January 1, 2000 through June 30, 2004.

    Research and Development Expenses.  Our fiscal 2001 spending for research and development increased 24% from the prior year to $110.6 million. As a percentage of net revenues, fiscal 2001 spending was 19% compared to 12% in fiscal 2000. The increase in research and development expenses was primarily attributable to additional resources obtained through our fiscal 2000 acquisition of DPT, as well as investments in developing new products targeted at the server, network storage and desktop markets. Despite the current economic slowdown, we are committed to a significant level of research and development in order to maintain our technological leadership in storage access solutions. During fiscal 2001, we have made significant research and development investments in our portfolio of RAID, SCSI, SAN and desktop connectivity solutions: Ultra320 SCSI, BIOS-based RAID, ROMB and zero-channel RAID in the SSG segment; FireWire/1394 and USB 2.0 in the DSG segment; and IP storage, infiniband and fibre channel in the SNG segment. We expect our research and development expenses to remain consistent with the current levels in fiscal 2002.

    Our fiscal 2000 spending for research and development decreased 35% from the prior year to $88.9 million. As a percentage of net revenues, fiscal 2000 spending was 12% compared to 21% in fiscal 1999. The decrease was primarily attributable to $30.4 million of research and development expenses related to the divested PTS segment included in fiscal 1999. The decrease was also attributable to the

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company-wide cost reduction programs effected during fiscal 1999 which included reductions in workforce and the curtailment of costs related to the divesting of certain unprofitable business activities. We initiated these cost reduction programs in order to bring operating expenses in line with net revenues. The business divestitures were completed to further our objective to refocus the business along our core competencies. The cost benefits of these reductions were not fully realized until fiscal 2000.

    Selling, Marketing and Administrative Expenses.  Our fiscal 2001 spending for selling, marketing and administrative activities decreased 4% from the prior year to $129.0 million. However, as a percentage of net revenues, fiscal 2001 spending was 22% compared to 19% in fiscal 2000. Although additional sales and marketing expenses were incurred in launching new products during the year, we continued our efforts to cut discretionary spending as a result of the decline in our revenues. In the fourth quarter of fiscal 2001, we implemented a restructuring plan which included company-wide cost reduction programs, specifically reductions in workforce. We expect the cost benefits of these programs will reduce our selling, marketing and administrative expenses to approximately 20% of net revenues in fiscal 2002.

    Our fiscal 2000 spending for selling, marketing and administrative activities decreased 12% from the prior year to $134.4 million. As a percentage of net revenues, fiscal 2000 spending was 19% compared to 24% in fiscal 1999. The decrease was primarily attributable to the company-wide cost reduction programs effected during fiscal 1999, specifically reductions in workforce. The cost benefits of these reductions were not fully realized until fiscal 2000. In addition, the decrease was attributable to $5.9 million of selling, marketing and administrative expenses related to the divested PTS segment included in fiscal 1999.

    Amortization of Goodwill and Other Intangibles.  Our fiscal 2001 amortization of goodwill and other intangibles included in operating expenses was $61.3 million, compared to $17.5 million and $10.3 million in fiscal 2000 and fiscal 1999, respectively. The increase was due to a full year of amortization of goodwill and other intangibles from our fiscal 2000 acquisition of DPT, as well as three quarters of amortization of warrant costs associated with the license agreement with Agilent (see "Agilent Agreement" section below).

    Our fiscal 2000 amortization of goodwill and other intangibles included goodwill and other intangibles from the acquisition of DPT beginning in the third quarter of fiscal 2000, as well as the amortization of warrant costs associated with the license agreement with Agilent beginning in the fourth quarter of fiscal 2000. In addition, fiscal 2000 amortization expense included goodwill amortization associated with our fiscal 1997 acquisition of Data Kinesis, Inc., or DKI. The DKI goodwill was fully amortized in fiscal 2000.

    Write-Off of Acquired In-Process Technology.  During fiscal 2000 and fiscal 1999, we purchased complementary businesses recorded under the purchase method of accounting, resulting in aggregate write-offs of acquired in-process technology of $16.7 million and $45.5 million, respectively.

    DPT:  In December 1999, we purchased DPT, a supplier of high-performance storage solutions, including RAID controllers and storage subsystems, for $185.2 million in cash and assumed stock options valued at $51.8 million using the Black-Scholes valuation model. As part of the purchase agreement, $18.5 million of the purchase price was held back for unknown liabilities that may have existed as of the acquisition date. The holdback amount was intended to be paid for such unknown liabilities or to the seller within twelve months from the acquisition date and was included as part of the purchase price. The holdback amount remained outstanding as of March 31, 2001 (see "Note 18. Commitments and Contingencies" of the Notes to Consolidated Financial Statements). Additionally, we incurred $1.1 million in professional fees, including legal, valuation and accounting fees, related to the acquisition, which were included as part of the purchase price of the transaction.

    We identified research projects in areas for which technological feasibility had not been established and no alternative future uses existed. Approximately $16.7 million of the purchase price was allocated to acquired in-process technology, which consisted of next generation RAID controllers, and was written off in the third quarter of fiscal 2000.

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    We expect to complete the in-process technology project by the end of fiscal 2002. The completion of the in-process technology project has been delayed by approximately twelve months due to the lack of availability of compatible industry components and the complexity brought on by additional uses of this technology in our board level products. However, we still expect the costs to complete the in-process technology project will be in line with original estimates. Development of this project remains a significant risk to us due to the remaining effort to achieve technical feasibility, rapidly changing customer markets and significant competition. Failure to bring these products to market in a timely manner could adversely impact our sales and profitability in the future. Additionally, the value of the intangible assets acquired may become impaired.

    If we had acquired DPT at the beginning of the periods presented, our unaudited pro forma net revenues, net income (loss) and net income (loss) per share from our continuing operations would have been as follows:

    Ridge:  In May 1998, we purchased Ridge Technologies, Inc., or Ridge, for 1,241,538 shares of our common stock valued at $21.2 million and assumed stock options valued at $13.1 million. The options assumed were valued using the Black-Scholes valuation model. Additionally, we incurred $0.8 million in professional fees, including finance, accounting, legal and appraisal fees, related to the acquisition, which were included as part of the purchase price of the transaction. In-process technology was valued at $39.4 million and was written off in the first quarter of fiscal 1999. In August 1998, we exited the storage subsystems business line, abandoned the in-process technology projects (these projects remained incomplete from the date of acquisition through abandonment) and wrote off the remaining unamortized goodwill of $0.6 million and an intangible asset (workforce in place) of $1.2 million associated with Ridge.

    ADI:  In April 1998, we purchased ASIC technologies from Analog Devices, Inc., or ADI, for $34.4 million in cash. The ASIC technologies purchased from ADI were to be incorporated into the mainstream removable PTS business line upon completion. Grant Saviers, our former Chairman and CEO, was a director of ADI at the time of the acquisition. We incurred $0.4 million in professional fees, including finance, accounting, legal and appraisal fees, related to the acquisition, which were included as part of the purchase price of the transaction. The in-process technology was valued at $6.1 million and was written off in the first quarter of fiscal 1999. In January 1999, we sold the mainstream removable PTS business line, including the in-process technology projects purchased from ADI (these projects remained incomplete from the date of acquisition through their disposition) and relieved the remaining unamortized goodwill of $18.3 million and an intangible asset (covenant not to compete) of $1.7 million associated with the ASIC technologies purchased from ADI.

Restructuring Charges.

    Fiscal 2001 Restructuring Plan:  In response to the continuing economic slowdown, our management implemented a plan in the fourth quarter of fiscal 2001 to reduce costs and improve operating efficiencies, and we recorded a restructuring charge of $9.9 million. The restructuring charge consisted primarily of severance and benefits of $6.1 million related to the involuntary termination of approximately 275 employees. The positions were primarily in manufacturing and engineering functions, of which

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approximately 78% were based in the U.S., 19% were based in Singapore and 3% were based in Belgium. We also eliminated approximately 175 open positions as a result of the restructuring. Additionally, we accrued for lease costs of $1.4 million pertaining to the estimated future obligations for non-cancelable lease payments for excess facilities in California, New Hampshire, Florida and Belgium that were vacated due to the reductions in workforce. We wrote off leasehold improvements, furniture and fixtures, and production related machinery and equipment with net book values of $1.2 million, $0.4 million and $0.3 million, respectively. The assets were taken out of service as they were deemed unnecessary due to the reductions in workforce. In addition, we wrote down certain manufacturing equipment by $0.3 million to its estimated realizable value of $0.5 million. The manufacturing equipment was taken out of service and is expected to be sold in fiscal 2002. We accrued for legal, accounting and consulting costs of $0.2 million related to the restructuring. As a result of our fiscal 2001 restructuring plan, we estimate that we will reduce our infrastructure spending by approximately $30 to $40 million per year.

    Fiscal 1999 Restructuring Plans:  During fiscal 1999, we recorded $39.9 million in restructuring charges, including $21.6 million of severance and benefits ($3.9 million in non-cash stock-based compensation charges), $13.5 million of asset write-offs and $4.8 million in other charges.

    First Quarter of Fiscal 1999 Restructuring Plan:  In the first quarter of fiscal 1999, in connection with management's plan to reduce costs, improve operating efficiencies and divest the satellite networking business line, we recorded a restructuring charge of $8.8 million. We continue to hold a minority interest in BroadLogic, the company that acquired our satellite networking business line. The restructuring charge was comprised primarily of severance and benefits of $6.8 million related to the involuntary termination of approximately 550 employees, primarily in manufacturing and engineering functions, of which approximately 36% were based in the U.S. and the remainder were based in Singapore. Additionally, we wrote off machinery and equipment, primarily consisting of production and test equipment, with a net book value of $1.0 million that was deemed unnecessary due to the reductions in workforce. The machinery and equipment was taken out of service and disposed during the second quarter of fiscal 1999. We incurred $1.0 million in legal, consulting and accounting charges related to this restructuring.

    We recorded a net reduction to the fiscal 1999 first quarter restructuring provision of $1.4 million in the second quarter of fiscal 1999 and a net increase of $0.2 million in the fourth quarter of fiscal 1999. The adjustments reflected changes to the anticipated expenses as actual costs became known. As a result, severance and benefits costs were reduced by $0.6 million, and legal, accounting and consulting costs were reduced by $0.9 million. Additionally, we identified an additional $0.3 million of assets deemed unnecessary due to the first quarter restructuring activities.

    Second Quarter of Fiscal 1999 Restructuring Plan:  In the second quarter of fiscal 1999, we recorded a restructuring charge of $26.0 million. This charge was a direct result of management's decision to refocus the business and divest certain unprofitable business activities including storage subsystems (primarily those business activities purchased in connection with the Ridge transaction), fibre channel, external storage and high-end peripheral technology solutions. We continue to hold a minority interest in Chaparral, the company that acquired our external storage business line.

    The second quarter restructuring charge consisted primarily of severance and benefits of $9.2 million related to the involuntary termination of approximately 300 U.S. employees, primarily in engineering functions. We wrote off machinery and equipment (primarily design and development equipment), furniture and fixtures, and leasehold improvements with net book values of $4.4 million, $1.7 million and $1.5 million, respectively. The assets were taken out of service and disposed during the second quarter of fiscal 1999. These assets were deemed unnecessary due to business divestitures and related reductions in workforce. Additionally, we wrote down test equipment by $0.9 million to its estimated realizable value of $2.1 million, based on its estimated sale value, and subsequently sold it in the third quarter of fiscal 1999. In addition, we wrote off and scrapped inventory and other assets, including goodwill associated with the storage subsystems business line, with net book values of $1.0 million and $2.0 million, respectively. We

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accrued for contractual obligations of $3.7 million, lease costs of $0.9 million and legal, consulting and accounting costs of $0.6 million related to the restructuring. The contractual obligations primarily related to non-cancelable purchase commitments including approximately $1.6 million of equipment (e.g., development equipment and computer equipment) and $2.1 million of prototype products. The lease costs included lease termination costs and estimated future obligations for non-cancelable lease payments for excess facilities in Northern and Southern California that were vacated due to the reductions in workforce.

    We recorded adjustments to the fiscal 1999 second quarter restructuring provision of $1.4 million in the fourth quarter of fiscal 1999. The adjustments related primarily to favorable negotiations with vendors surrounding contractual obligations where we successfully cancelled outstanding purchase orders and reduced cancellation fees for a total of $1.8 million, offset in part by additional legal, consulting and accounting charges of $0.2 million and additional lease costs of $0.4 million. Additionally, the adjustments included an increase in severance and benefits of $0.2 million, as actual costs were higher per person than anticipated, and a $0.4 million decrease related to proceeds from the sale of previously written-off furniture and fixtures and leasehold improvements.

    Fourth Quarter of Fiscal 1999 Restructuring Plan:  In the fourth quarter of fiscal 1999, we recorded a restructuring charge of $7.8 million. This charge resulted from a reduction in the infrastructure that supported business lines divested during fiscal 1999. The restructuring charge consisted primarily of severance and benefits of $6.0 million related to the involuntary termination of approximately 125 employees in various functions, including manufacturing, sales and administration. Most of these positions were based in the U.S. We wrote off and disposed of equipment, primarily consisting of office equipment, with a net book value of $1.2 million deemed unnecessary due to the reductions in workforce during the fourth quarter of fiscal 1999. Additionally, we accrued for lease costs of $0.2 million and legal, consulting and accounting charges of $0.4 million related to the restructuring. The lease costs pertained to lease termination costs for excess facilities in Washington that were vacated due to the reductions in workforce.

    Other Charges.  Our other charges consisted of acquisition-related charges, asset impairment charges and other charges.

    Acquisition-Related Charges:  In fiscal 1998, we entered into an agreement to purchase all of the outstanding stock of Symbios, Inc., a wholly-owned subsidiary of Hyundai Electronics America, or HEA. In fiscal 1999, we agreed to terminate the agreement with HEA. We paid a $7.0 million termination fee and approximately $6.7 million in non-consummation fees to HEA. Additionally, we incurred approximately $7.8 million in other acquisition-related charges, including legal, consulting and other costs. We expensed the entire $21.5 million in fees associated with this terminated acquisition in fiscal 1999.

    Asset Impairment Charges:  We regularly evaluate the recoverability of long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. Based on these evaluations, we recorded asset impairment charges of $28.2 million (see "Agilent Agreement" section below) and $4.0 million in fiscal 2001 and fiscal 1999, respectively.

    The asset impairment charge in fiscal 1999 related to approximately $1.4 million in manufacturing equipment, specifically testing equipment located in Singapore, deemed unnecessary due to non-temporary declines in production volume, and the write-off of approximately $2.6 million of non-trade related receivables. As of the second quarter of fiscal 1999, net revenues had been declining over the previous four quarters. Further, we were divesting business lines and did not believe that production volumes would return to levels necessary to fully utilize the manufacturing equipment. Accordingly, the testing equipment was taken out of service, written down to zero and disposed in the second quarter of fiscal 1999.

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    Other Charges:  In fiscal 1999, we recorded executive termination costs of $3.4 million related to three executives whose employment was terminated during the fiscal year. The costs consisted of $1.9 million in severance and benefits and $1.5 million in non-cash stock compensation charges resulting from an amendment to one of the executives' option agreements. The severance and benefits were paid to two of the executives upon their termination and the third executive's severance and benefits were paid over a two-year term which commenced in the second quarter of fiscal 1999. The option agreements for one of the terminated executives were amended to allow the vesting of the options to continue for two years subsequent to the date of termination of employment.

    Interest and Other Income.  Our fiscal 2001 interest and other income was $155.5 million, compared to $47.1 million and $35.1 million in fiscal 2000 and 1999, respectively. The increase in interest and other income was primarily related to the components of other income. Fiscal 2001 other income included primarily a $9.1 million gain on the sale of properties and a $112.7 million gain on the sale of JNI Corporation, or JNI, common stock. We did not hold any shares of JNI common stock as of March 31, 2001. Fiscal 2000 other income included a $3.5 million gain on the sale of land and an $11.4 million gain on the receipt of warrants to purchase JNI and Chaparral common stock. For fiscal 1999, other income represented the gain on the sale of land of $1.6 million.

    Interest Expense.  Our fiscal 2001 interest expense was $11.9 million, compared to $11.6 million and $12.1 million in fiscal 2000 and fiscal 1999, respectively. Interest expense was primarily related to the outstanding 4³/4% Convertible Subordinated Notes. During fiscal 2000, a noteholder converted $0.2 million of the 4³/4% Convertible Subordinated Notes into 3,871 shares of our common stock.

    Gain on the Sale of PTS.  We sold the high-end PTS business line to TI in November 1998 for $8.5 million in cash. These assets included manufacturing and testing equipment with a net book value of $3.8 million and inventory with a carrying value of $0.3 million. The unamortized goodwill of $4.2 million associated with the acquisition of Western Digital was written off against the sale proceeds from TI. Additionally, we incurred legal, accounting and consulting costs of $0.2 million. We did not recognize a gain or loss on this transaction.

    We sold the mainstream removable PTS business line to ST in January 1999 for $72.1 million in cash and $3.3 million in cost reimbursements. The assets sold included manufacturing and testing equipment with a net book value of $5.5 million and inventory with a carrying value of $2.3 million. The unamortized goodwill of $18.3 million and the unamortized intangible asset of $1.7 million associated with the purchase of ASIC technologies from ADI and certain other intangible assets of $1.6 million were written off against the sale proceeds from ST. Additionally, we incurred severance and benefits costs of $12.0 million and legal, accounting and consulting costs of $2.5 million. We recorded a gain of $10.0 million, net of taxes of $21.5 million, on this transaction in the fourth quarter of fiscal 1999.

    Income Taxes.  Our effective income tax rate for fiscal 2001 was 63% of income from continuing operations, compared to 31% and 272% for fiscal 2000 and 1999, respectively. Our effective income tax rate is generally less than the combined U.S. federal and state statutory income tax rate of 40%, primarily due to income earned in Singapore where we are subject to a significantly lower effective tax rate, resulting from a tax holiday relating to certain of our products. The terms of the tax holiday provide that profits derived from certain products will be exempt from tax through fiscal 2005, subject to certain conditions. However, in fiscal 2001 and 1999, the reduction in our effective income tax rate from the Singapore tax holidays was more than offset by items such as asset impairment charges, write-off of acquired in-process technology, amortization of goodwill and other intangibles in excess of amounts deductible for tax purposes and the gain on the sale of PTS.

    Our tax related liabilities were $95.6 million and $100.7 million as of March 31, 2001 and 2000, respectively. Fluctuations in the tax related liability account were a function of the current tax provisions and the timing of tax payments. Tax related liabilities primarily consisted of income, withholding and

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transfer taxes accrued by us in the taxing jurisdictions in which we operate around the world, including, but not limited to, the U.S., Singapore, Japan, Germany and Belgium. The amount of the liabilities was based on management's evaluation of our tax exposures in light of the complicated nature of the business transactions entered into by us in the global business environment.

Agilent Agreement

    In January 2000, we entered into a four-year agreement with Agilent to co-develop, market and sell fibre channel host bus adapters using fibre channel host bus adapter and software driver technology licensed from Agilent. In exchange, we issued warrants to Agilent to purchase 1,160,000 shares of our common stock at $62.25 per share. The warrants have a term of four years from the date of issuance and are immediately exercisable. The warrants were valued at $37.1 million using the Black-Scholes valuation model. The value of the warrants, or the Warrant Costs, was recorded as an intangible asset and was amortized ratably over the term of the agreement.

    In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of," we evaluated the recoverability of the Warrant Costs during the third quarter of fiscal 2001. Based on the assessment, we believed that the estimated undiscounted future cash flows generated by the sales of our fibre channel products incorporating the technology licensed from Agilent would not be sufficient to recover any of the carrying value of the Warrant Costs. As such, we recorded an asset impairment charge of $28.2 million, representing the remaining unamortized balance of the Warrant Costs as of December 31, 2000.

    Pursuant to the agreement, we were to pay royalties to Agilent based on revenues generated from the fibre channel products incorporating the licensed technology. The agreement provided for minimum royalty fees of $6.0 million in the first contract year and $12.0 million in the second contract year. We estimated we would incur royalty fees of $1.0 million in the first contract year and $2.0 million in the second contract year associated with the sales of our products incorporating the licensed technology. Therefore, we accrued for and expensed the remaining minimum royalty fees of $5.0 million for the first contract year in fiscal 2000, and $10.0 million for the second contract year in fiscal 2001.

    Subsequent to March 31, 2001, we terminated the agreement with Agilent. As a result, we paid the minimum royalty fees to Agilent of $18.0 million for the first and second contract years and received a fully paid, non-exclusive, worldwide perpetual license to use Agilent's fibre channel host bus adapter and software driver technology. In addition, Agilent will continue to supply us with the Tachyon chips used in our fibre channel products. The termination of the agreement does not affect the warrants issued to Agilent.

Roxio Spin-Off

    On April 12, 2001, our Board of Directors formally approved a plan to spin off our Software segment, Roxio, into a fully independent and separate company. Roxio is a provider of digital media software solutions that enable individuals to create, manage and move music, photos, video and data onto recordable CDs. Our Board of Directors declared a dividend of the shares of Roxio's common stock to our stockholders of record on April 30, 2001. The dividend was distributed after the close of business on May 11, 2001, in the amount of 0.1646 shares of Roxio's common stock for each outstanding share of our common stock. We distributed all of the shares of Roxio's common stock, except for 190,936 shares that are retained by us for issuance upon the potential exercise of the warrants held by Agilent to purchase shares of our common stock (see "Agilent Agreement" section above). The distribution of the shares of Roxio's common stock was intended to be tax-free to us and to our stockholders.

    As a result of the spin-off, our historical consolidated financial statements have been restated to account for Roxio as discontinued operations for all periods presented in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of

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Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."

    Under the Master Transitional Services Agreement we entered into with Roxio, we agreed to provide Roxio certain corporate support services, including information technology systems, supply chain, human resources administration, product order administration, customer service, buildings and facilities, and legal, finance and accounting services. Our fees for providing these services are typically the cost of providing the services, plus five percent. Other than the five-year lease for Roxio's corporate headquarters, these transitional service and leasing arrangements generally have a term of one year following the legal separation.

    In addition, we also entered into a Tax Sharing Agreement, or TSA, with Roxio for tax matters. The TSA provides for the allocation of income, losses, credits and other tax attributes prior to the distribution of the shares of Roxio's common stock to our stockholders, and assigns certain responsibilities for administrative matters such as the filing of returns, payment of taxes due, retention of records and conducts of audits, examinations or similar proceedings. The TSA provides that we retain the risk of any modification of tax liabilities for periods prior to the distribution date. In addition, the TSA requires Roxio to indemnify us for certain taxes and similar obligations that we could incur if the distribution does not qualify for tax-free treatment due to certain events, such as an acquisition of a controlling interest in Roxio's or our common stock after the distribution, Roxio's failure to continue its business after the distribution or a repurchase of Roxio's common stock.

Liquidity and Capital Resources

    Operating Activities.  Net cash provided by operating activities during fiscal 2001 was $102.0 million. Operating cash was primarily generated from net income of $42.6 million, adjusted for the gain on sale of properties and JNI common stock, and other non-cash items including restructuring and other charges, depreciation and amortization, and income tax benefits related to employees' stock transactions.

    Net cash provided by operating activities during fiscal 2000 was $279.2 million. Operating cash was primarily generated from net income of $164.3 million, adjusted for the gain on sale of land and receipt of warrants, and other non-cash items including the write-off of acquired in-process technology, depreciation and amortization, and income tax benefits related to employees' stock transactions.

    Net cash provided by operating activities during fiscal 1999 was $198.9 million. Operating cash was primarily generated from a net loss of $20.4 million, adjusted for the gain on sale of PTS and other non-cash items, including the write-off of acquired in-process technology, restructuring and other charges, depreciation and amortization, and income tax benefits related to employees' stock transactions.

    Investing Activities.  Net cash provided by investing activities during fiscal 2001 was $82.6 million. During fiscal 2001, we received proceeds from the sale of properties and JNI common stock, as well as sales and maturities of our marketable securities. The receipt of cash was offset partially by capital expenditures and purchases of marketable securities.

    Net cash used for investing activities during fiscal 2000 was $135.0 million. During fiscal 2000, we purchased certain net assets in connection with the acquisition of DPT. In addition, we invested in capital expenditures and marketable securities. The outflows of cash were offset partially by the proceeds received from the sale of properties as well as sales and maturities of our marketable securities.

    Net cash provided by investing activities during fiscal 1999 was $49.4 million. During fiscal 1999, we received proceeds from the sale of PTS, as well as proceeds from sales and maturities of our marketable securities. The receipt of cash was primarily offset by additional capital expenditures and purchases of marketable securities, as well as purchases of certain net assets in connection with the acquisitions of Ridge and the ASIC technologies from ADI.

33

    Financing Activities.  Net cash used for financing activities during fiscal 2001 was $162.8 million. The cash outflows were primarily a result of physically settling various equity contracts whereby we repurchased a total of 2.5 million shares of our common stock at prices ranging from approximately $23 to $46, resulting in a total cash payment of $97.3 million. No equity contracts were outstanding as of March 31, 2001. We also repurchased and retired a total of 3.0 million shares of our common stock under our authorized buy-back programs at an average price of approximately $24, resulting in a total cash payment of $71.1 million. In addition, $19.1 million of stock repurchases accrued as of March 31, 2000 was paid on April 1, 2000. The cash outflows were partially offset by the proceeds received from the issuance of common stock to employees.

    Net cash used for financing activities during fiscal 2000 and 1999 was $261.5 million and $172.7 million, respectively. The cash outflows were primarily as a result of repurchases of common stock under our authorized buy-back programs. In fiscal 2000, we repurchased 11.4 million shares of our common stock at an average price of approximately $35, resulting in a total cash payment of $396.7 million, of which $19.1 million was accrued as of March 31, 2000 and paid on April 1, 2000. In fiscal 1999, we repurchased 12.9 million shares of our common stock at an average price of approximately $15, resulting in a total cash payment of $200.2 million. The cash outflows were partially offset by the proceeds received from the issuance of common stock to employees.

    Lines of Credit.  In February 2001, we terminated our unsecured $80.0 million revolving line of credit. Subsequent to March 31, 2001, we obtained a new unsecured $20.0 million revolving line of credit which expires in July 2002.

    Liquidity.  As of March 31, 2001, we had $651.3 million of cash, cash equivalents and marketable securities, of which $483.0 million was held by our Singapore subsidiary. If we repatriate cash from our Singapore subsidiary to our U.S. parent company, additional income taxes will be incurred from the repatriation. In addition, subsequent to March 31, 2001, we obtained a new line of credit of $20.0 million. We believe our existing working capital, together with expected cash flows from operations and available sources of bank, equity and equipment financing, will be sufficient to support our operations through fiscal 2002.

Recent Accounting Pronouncements

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires recognition of all derivatives as assets or liabilities and measurement of those instruments at fair value. In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133," which defers the required date of adoption of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. We adopted SFAS No. 133 in the first quarter of fiscal 2002, and we believe that the adoption will not have a material effect on our financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. As of March 31, 2001, our investments consisted of available-for-sale securities, excluding those classified as cash equivalents, of $443.7 million (see "Note 3. Marketable Securities" of the Notes to Consolidated Financial Statements). These fixed income marketable securities included corporate bonds and government securities, all of which are of high investment grade. They are subject to interest rate risk and will decline in value if the market interest rates increase. If the market interest rates were to increase immediately and uniformly by 10% from levels as of March 31, 2001, the decline in the fair value of the portfolio would not be material to our financial position.

34

    We are exposed to foreign currency exchange rate risk inherent in our sales denominated in currencies other than the U.S. dollar. On occasion, we enter into forward exchange contracts to hedge certain firm commitments denominated into foreign currencies. We do not use derivative financial instruments for trading or speculative purposes. Forward exchange contracts are denominated in the same currency as the underlying transaction, primarily Singapore dollars, and the terms of the forward foreign exchange contracts generally match the terms of the underlying transactions. The effect of an immediate 10% change in exchange rates on the forward exchange contracts would not affect our financial position or results of operations, as there were no forward exchange contracts outstanding as of March 31, 2001 and 2000.

Item 8. Financial Statements and Supplementary Data

    See the index appearing under Item 14(a)(1) on page 36 of this Annual Report on Form 10-K for the Consolidated Financial Statements at March 31, 2001 and 2000 and for each of the three years in the period ended March 31, 2001, the Report of Management and the Report of Independent Accountants.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

    Information with respect to our directors is incorporated by reference from the information under the captions: "Election of Directors—Nominees" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on August 23, 2001, or the Proxy Statement. Information with respect to our executive officers is included in Part I of this Annual Report on Form 10-K under the heading "Executive Officers."

Item 11. Executive Compensation

    Incorporated by reference from the information under the caption: "Executive Compensation and Other Matters" and "Report of Compensation Committee" in our Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management

    Incorporated by reference from the information under the caption: "Security Ownership of Management; Principal Stockholders" in our Proxy Statement.

Item 13. Certain Relationships and Related Transactions

    Incorporated by reference from the information under the caption: "Certain Relationships and Related Transactions" in our Proxy Statement.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)

The following documents are filed as a part of this Annual Report on Form 10-K:

1.

Index to Financial Statements:

    The following Consolidated Financial Statements, Report of Management and Report of Independent Accountants are contained in this Annual Report on Form 10-K:

36

2.

Financial Statement Schedule:

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 2001, 2000 AND 1999
(in thousands)

37

3.

Exhibits:

38

(1)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1987.

(2)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1993.

(3)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1994.

(4)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1995.

(5)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1998.

(6)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 1999.

(7)

Incorporated by reference to exhibits filed with Registrant's Annual Report on Form 10-K for the year ended March 31, 2000.

(8)

Incorporated by reference to Exhibits 10.1 and 10.2 to Form 10-Q as filed February 9, 1996.

(9)

Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed August 13, 1998.

(10)

Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed November 3, 2000.

(11)

Incorporated by reference to Exhibit 10.1 to Form 10-Q as filed January 26, 2001.

(12)

Incorporated by reference to Exhibits 2.1, 2.2, and/or 2.3, respectively, to Form 8-K as filed February 1, 1999.

(13)

Incorporated by reference to Exhibit 2.1 to Form 8-K as filed January 6, 2000.

(14)

Incorporated by reference to Exhibit 4.1 to Form 8-K as filed March 20, 2001.

39

(15)

Incorporated by reference to Exhibits 99.(D)1, 99.(D)2 and 99.(D)3 to the Registrant's Tender Offer Statement on Schedule TO filed on May 22, 2001.

†

Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of said form.

*

Confidential treatment has been granted for portions of this agreement.

**

Confidential treatment has been requested for portions of this agreement.

(b)

Reports on Form 8-K

    During the fourth quarter ended March 31, 2001, the Company filed with the Securities and Exchange Commission a current Report on Form 8-K dated February 1, 2001, to report under Item 5 thereof the adoption of the Company's Third Amended and Restated Rights Agreement.

(c)

Exhibits

    See Item 14(a)(3), above.

(d)

Financial Statement Schedules

    See Item 14(a)(2), above.

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SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

POWER OF ATTORNEY

    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert N. Stephens and David A. Young, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

41

ADAPTEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

See accompanying notes.

F–1

ADAPTEC, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

See accompanying notes.

F–2

ADAPTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)