Adaptec has decided to sell off its NAS division, leaving Snap Server customers to face an uncertain future.

Adaptec has been making increasing losses for the past three quarters. In its first fiscal year 2006 quarter, it lost $36 million - compared to an already tiny net income of $100,000 a year ago. The results have sparked management changes.

In May, this year president and CEO Robert Stephens resigned. Marketing VP S. 'Sundi' Sundaresh became president and D. Scott Mercer was appointed interim CEO.

A first move was to get out of the business of supplying add-on RAID controllers and connectivity products for IBM servers, which it did in September. Sundaresh said at the time: "It became clear to us that delivering add-on products for IBM's eServer iSeries and pSeries systems would not be a long term profitable business opportunity for Adaptec."

The NAS market is facing increasing commoditisation around Microsoft's Storage Server operating system and Intel chips. NAS boxes are very cheap to make and Dell is in the market. Making money unless you have market-leading volume is getting harder and harder. Even EMC, which topped the NAS charts over NetApp according to IDC in the past two quarters, is getting out of Windows NAS manufacture in favour of reselling a third party's products.

Adaptec's Snap Server NAS has won numerous awards and is clearly a good set of products, Nevertheless it has simply not sold well enough to justify Adaptec retaining the systems business division which is responsible for it.

There is a parallel here with both the PC and the hard drive industries where dozens of separate suppliers were whittled down to a small group of leaders such as Dell and HP in PCs.

Selling the systems business should gain cash and release management effort to concentrate on growth businesses. This was the position taken by Sundaresh: "It was a hard decision for us, but we feel that selling our systems business is the best move for the company and its shareholders as we take the necessary steps in Adaptec's recovery. This will allow us to focus our internal resources on capturing a leadership position in the emerging Serial ATA and Serial Attached SCSI markets."