History (1998): Hyundai Relinquishes Symbios to Adaptec

For $775 million in cash, Adaptec acquires Symbios from Hyundai, for a near monopoly of the I/0 storage technology market.

Completion of the transaction is subject to approval under the Hart-Scott-Rodino Act, which in this case will probably not be just a mere formality, with the union of the 2 companies forming a giant worth nearly $1.7 billion and employing some 6,000 people, one that will have a near total monopoly in I/0 storage technology.

In the host adapter market, Adaptec competes with a number of small manufacturers. Principal competitors in the mass storage market are captive suppliers and Cirrus Logic.

A windfall for Hyundai
For Symbios’ (formerly Symbios Logic) parent company, Hyundai Electronics America (HEA), which is in turn a wholly-owned subsidiary of Korean group Hyundai, the deal is a windfall.

The Asian company needed cash urgently, as a result of financial difficulties in its own country and throughout the Asian region.

And the sum is no small potatoes: $775 million for a firm that averages $620 million a year, and which, when it was known as AT&T Microelectronics (and before that NCR Microelectronics), was purchased in 1995 by Hyundai for only $300 million wihen its annual business was $550 million.

At that time, Adaptec, already interested in acquiring the firm, did not come up with a higher bid. This time, a source inside Adaptec informs us that Intel was also interested in Symbios, which may have driven the bidding up considerably.

Adaptec had in the meantime gone into acquisition mode with mixed results: Future Domain, Incat, Trillium, Cogent, Data Kinesis, Western Digital’s connectivity solutions group, some assets of Corel, Sigmax, Toast Technology, Skipstone and a few other small bits.

A lot to digest
This time, it’s not a little deal, but a huge one, in fact, the largest in the history of the company that has enjoyed phenomenal success, steady and strong growth, with profits every quarter for over 13 years!

The acquisition of Symbios includes the firm’s analog capability in ASIC design, its strength in ASICs for Unix applications, and MetaStor, a young division focused on RAID subsystems for Windows NT. It also brings in a strong OEM customer base including NCR, Sun, and new divisions of HP, IBM and Compaq. Finally, Adaptec will acquire a wafer fab in Colorado. Until now, Adaptec purchased the majority of its wafers through a supply agreement with Taiwan Semiconductor Manufacturing Co. (TSMC), and the remainder mostly from SGS-Thomson Microelectronics and Seiko Epson.

Charles Christ had only recently been hired on as president and CEO of Symbios, where he had initiated a major reorganization that will now be halted mid-stream, particularly since it is unlikely he will keep his position.

And Maxtor?
The acquisition of Symbios forces a few questions about the future of another Hyundai subsidiary, Maxtor, particularly as the latter is just becoming profitable. The current president and CEO of HEA, Dr. C. S. Park filled in at Maxtor, incidentally, between the terms of Larry Smart and Mike Cannon. The Korean group is now faced with the choice of either selling off immediately, or waiting for the confirmation of the current good results and for better conditions in the storage industry, before undertaking a successful IPO.

This article is an abstract of news published on issue 122 on March 1998 from the former paper version of Computer Data Storage Newsletter.

Note: In June 1998, Adaptec has been forced to abandon its $775 million cash offer for Symbios following hints that the US Federal Trade Commission was planning to block the deal.