Oct. 28, 2009 (Business Wire) -- Adaptec, Inc. (NASDAQ: ADPT), the global leader in I/O innovation, today released the following letter to Adaptec’s stockholders from the Chairman of Adaptec’s Board of Directors:

To Our Stockholders:

In its quest for control of the Board of Adaptec, Steel Partners has unfortunately decided to avoid the real issues that drive stockholder value and instead has used “governance” as a smoke-screen and has even resorted to a misleading smear campaign attacking Adaptec’s chief executive officer. It is time to set the record straight, starting with how we arrived at this point.

In 2005, after the prior management team failed to integrate a series of acquisitions into a coherent product strategy and vision for the future, the Board recruited Adaptec’s current chief executive officer, S. “Sundi” Sundaresh. At the time, it was recognized that recovery would take time and would require shedding unprofitable businesses, repairing troubled relationships with key customers, replacing Adaptec’s supply chain with a more cost-effective solution, and creating a new product development strategy more in tune with emerging trends in IT and data center operations.

Against a backdrop of declining revenues from Adaptec’s legacy products, Mr. Sundaresh successfully sold or shut down unprofitable businesses, articulated a vision of leading-edge market opportunities that capitalized on Adaptec’s technical excellence, acquired and integrated a company that brought expertise that is central to Adaptec’s future product plans, and has recently launched new products that are meeting critical eco-friendly requirements of today’s data centers. In the process, under Mr. Sundaresh’s leadership, nearly all of Adaptec’s debt was repaid and cash balances grew to more than $350 million.

By 2007, however, the Company’s large cash position pushed it to the top of the spreadsheets at Steel. When that hedge fund threatened a proxy fight, the Board responded by giving Steel an opportunity to make good on its claims that it could be a good partner in creating value for all stockholders – claims that, today, appear to be without foundation. When Steel’s own financial and legal woes worsened this spring, Steel’s conduct in the boardroom also worsened: suddenly its threats of proxy fights and personal liability became incessant.

The real conflict, one that you should carefully consider, is this:

We believe Steel wants to turn Adaptec into a vehicle for leveraged “hedge fund” style investments. The Board majority has successfully resisted this approach, taking the position that without definitive shareholder guidance, such a move is inconsistent with why we think shareholders invested in Adaptec in the first place. To me, this is the REAL issue of “good governance.”

Last month, in an attempt to settle the consent solicitation, the Board majority offered to put a non-binding resolution on the agenda of the annual meeting so stockholders could voice their opinions, with the losing side agreeing to resign from the Board to clear a path for the execution of the stockholder’s will. Significantly, Steel called the proposal a “non-starter” and refused to even discuss it.

So today, Adaptec stands at a crossroad. Steel has declined to argue the merits of its real agenda (to date, it has offered no proposal to the Board for use of the Company’s cash assets). Instead, Steel has resorted to a campaign of misleading statements, creative press releases and personal attacks that seem designed to distract everyone from the real issues. It has singled out corporate governance as its whipping boy.