709804--5/27/2010--ADAPTEC

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Risks Related to Consummation of the PMC Transaction If we do not complete the proposed sale of certain assets related to our business operations to PMC-Sierra, the continued operations of our business may result in losses from operations until an alternate course of action can be implemented. If the PMC Transaction is not consummated, we will have incurred substantial costs that may adversely affect our business, financial condition and results of operations and the market price of our common stock. The pending PMC Transaction may create uncertainty for our customers and employees Risks Associated with Operations after Consummation of the PMC Transaction If we are successful in consummating the PMC Transaction, our operating results and financial condition may be impacted by significant charges. We will likely incur significant restructuring expenses in the near future. If the PMC Transaction is consummated, the NASDAQ Stock Market may determine that we are operating as a public shell and may decide to subject us to delisting proceedings or additional and more stringent continued listing criteria. Should the PMC Transaction be consummated and our other operating assets sold, written-off or disposed of, we may be considered a shell company under federal securities laws and may become subject to more stringent reporting requirements. If the PMC Transaction is consummated and depending on our future activities and operations, we may be deemed an investment company, which could impose on us burdensome compliance requirements and restrict our activities, which may make it difficult for us to complete future business combinations or acquisitions. If the carrying value of our long-lived assets is not recoverable, an impairment loss must be recognized which would adversely affect our financial results. If our common stock becomes subject to the SEC s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be adversely affected If the PMC Transaction is consummated, failure to successfully identify and enter into a new line of business or identify possible acquisition candidates could cause our stock price to decline. There can be no assurance that we will be able to identify suitable acquisition candidates or business and investment opportunities once the PMC Transaction is consummated. Following the consummation of the PMC Transaction, our stockholders may be subject to the broad discretion of management. There may be risks associated with acquisitions and investments pursued after consummation of the PMC Transaction, including our decisions to sell, write-off or dispose of our remaining operating assets. We will incur significant costs in connection with our evaluation of new business opportunities and suitable acquisition candidates. We will likely have no operating history in our new line of business, which is yet to be determined, and therefore we will be subject to the risks inherent in establishing a new business. We may be unable to realize the benefits of our NOLs. We may issue a substantial amount of our common stock in the future which could cause dilution to our stockholders and otherwise adversely affect our stock price. We may face litigation from stockholders related to the consummation of the PMC Transaction Risk Factors Related to Operations Should the PMC Transaction not be Consummated As our revenue base continues to decline from our current operations, we may choose to exit or divest some or all of our current operations to focus on new opportunities. In the past, we have depended on a small number of large OEM customers for a significant portion of our revenues, and we may not be successful in obtaining new OEM designs wins, which may prevent us from sustaining or growing our revenues from OEM customers. We depend on a few key customers and the loss of any of them could significantly reduce our net revenues. If our design wins do not result in significant sales, our revenues will continue to decline. Our operations depend on the efforts of our workforce, particularly our executives, principal engineers and other key employees, the loss of whom could affect the growth and success of our business. If we do not meet our expense reduction and cost containment goals, we may have to continue to implement additional restructuring plans to reduce our operating costs. This may cause us to incur additional material restructuring charges and result in adverse effects on our employee capacities. Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment. We may sustain losses in our investment portfolio due to adverse changes in the global credit markets. If our customers or financial institutions that maintain our cash, cash equivalents and marketable securities, experience financial difficulties, which is more likely in the current weakened state of the economy, our revenues, operating results or cash balances may be adversely impacted. We depend on contract manufacturers and subcontractors, and if they fail to meet our manufacturing needs, it could delay shipments of our products and result in the loss of customers or revenues and increased manufacturing costs, which would have an adverse effect on our results. The impact of industry technology transitions and market acceptance of our new products may cause our revenues to continue to decline. Our dependence on new products may cause our net revenues to fluctuate or decline. If we lose the cooperation of other hardware and software producers whose products are integral to ours, our ability to sustain or grow our revenues could be adversely affected. If we are unable to compete effectively, our net revenues and gross margins could be adversely affected. We depend on the efforts of our distributors, which if reduced, could result in a loss of sales of our products in favor of competitive offerings. We currently purchase all of the finished production silicon wafers, chips and other key components used in our products from suppliers, and if they fail to meet our manufacturing needs, it would delay our production and product shipments to customers and negatively affect our operations. Because our sales are made by means of standard purchase orders rather than long-term contracts, if demand for our customers products declines or if our customers do not control their inventories effectively, they may cancel or reschedule shipments previously ordered from us or reduce their levels of purchases from us. If we fail to adequately forecast demand for our products, we may incur excess product inventory costs and our financial results will be adversely affected. Our operating results have fluctuated in the past, and are likely to continue to fluctuate, and if our future results are below the expectations of investors or securities analysts, the market price of our common stock would likely decline significantly. We may be subject to a higher effective tax rate that could negatively affect our results of operations and financial position. Our reliance on industry standards and technological changes in the marketplace may cause our net revenues to fluctuate or decline. We are subject to various environmental laws and regulations that could impose substantial costs upon us and may adversely affect our business. 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, we may lose revenues to our competitors. If there is a shortage of components used in our customers products, our sales may decline, which could adversely affect our results of operations and financial position. Product quality problems could lead to reduced revenues and gross margins. To execute our strategies, we may enter into strategic alliances with, or partner with companies with complementary or strategic products or technologies or make other structural changes to our business. Costs associated with these strategic alliances or partnerships may adversely affect our results of operations. This impact could be exacerbated if we are unable to integrate the products or technologies. If we are not successful in completing strategic alliances or partnerships with companies with complementary or strategic products or technologies, our future growth may be hindered. Some of our products contain open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business. Our international operations involve a number of political, economic and other risks that could adversely affect our ability to sell our products in certain countries, create local economic conditions that reduce demand for our products among our target markets and expose us to potential disruption in the supply of necessary components. We depend on third parties to transport our products. If actual results or events differ materially from those contemplated by us in making estimates and assumptions, our reported financial condition and results of operations for future periods could be materially affected. If we are unable to protect and enforce our intellectual property rights, we may be unable to compete effectively. Third parties may assert infringement claims against us, which may be expensive to defend and could divert our resources. We may be required to pay additional income taxes which could negatively affect our results of operations and financial position. Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue fluctuations and affect our reported results of operations. We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management s time and attention. We are exposed to fluctuations in foreign currency exchange rates. We hold non-controlling interests in privately held venture funds, and if these venture funds face financial difficulties in their operations, our investments could be impaired. Changes in securities laws and regulations have increased and may continue to increase our costs. Internal control deficiencies or weaknesses that are not yet identified could emerge. Internal control issues that appear minor now may later become material weaknesses. We may encounter natural disasters, which could cause disruption to our employees or interrupt the manufacturing process for our products. Manmade problems such as computer viruses or terrorism may disrupt our operations and harm our operating results. We may experience significant fluctuations in our stock price.

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709804--5/27/2010--ADAPTEC_INC