ADIC acquires SAN company in $265 million deal

Automated tape library maker Advanced Digital Information Corp. (ADIC) announced an agreement today to acquire privately-held SAN specialist Pathlight Technology Inc. in a stock deal estimated at $265 million.

The merged companies plan to broaden their combined range of storage products, including SAN management, connectivity, and virtualization products that complement ADIC's existing storage hardware and software solutions.

"Pathlight saw early on that protocol-aware technology addressed not only the SCSI-to-Fibre interface question but offered a direct path to any-to-any connectivity, resource virtualization and storage network management," said Peter van Oppen, chairman and CEO of ADIC.

In a teleconference for investors Wednesday morning, van Oppen went on to say that ADIC needs to build various elements of intelligent storage into its systems to give the customer the capability to dispense with the large number of boxes it takes to build a SAN or a large NAS environment. The aim is to combine the complementary technologies into a simple, manageable, complete storage solution.

Redmond, Wash.-based ADIC is most interested in Pathlight's storage virtualization, SAN management and connectivity technologies.

The deal calls for ADIC to exchange 10.3 million shares of common stock for all of the outstanding stock, warrants and stock options of Ithaca, N.Y.-based Pathlight. Based upon ADIC's closing price on Jan. 29, the transaction has a value of about $265 million.

ADIC expects to report one-time acquisition costs of approximately $10 to $12 million during its second quarter ending April 30, 2001. Directors of both companies have approved the merger, and approximately 75% of the Pathlight shares have agreed to vote in favor of it, the companies said. ADIC shareholder approval is not required.,

Following completion of the transaction, Pathlight Co-Founder and Executive Vice President Said Rahmani will become Executive Vice President of Research and Development at ADIC.

Pathlight had revenues of approximately $20 million for the 12 months that ended October 31, 2000 and pre-tax earnings of approximately $5 million.

ADIC also announced that it expects to increase various expenses, including research and development, during fiscal 2001 as a result of the merger. That may result in reducing earnings per share by as much as 10% this year. The company also expects the merger to significantly contribute to its revenues in 2002.

ADIC and Pathlight share some of the same resellers and OEM partners, including Dell and IBM. ADIC said it will "review and verify" its existing OEM relationships and is optimistic that its current relationships will remain in place after the acquisition.

According to ADIC, its first move will be to rebrand Pathlight's existing products. The new boxes will combine Pathlight's connectivity and management technology with ADIC's tape library products.

Pathlight's SAN Gateway and SAN Router are high-speed storage networking solutions that include connectivity via multiple Fibre Channel ports and SCSI channels, open systems interoperability, and simultaneous support for heterogeneous host and device connections, operating systems and storage system interfaces. Pathlight's SAN Director software is a JAVA-based management solution that provides system administrators with a single point of control, remote or local, to maintain, monitor and configure a storage network from end-to-end.

In a separate announcement, ADIC also said it was terminating its stock repurchase program because of the merger.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

For more information:

Advanced Digital Information Corp.

Pathlight Technology Inc.

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