Two computer chip component makers abandoned a merger Thursday, hours before the government was set to take antitrust action against them, the companies and sources said.
Adaptec Inc. terminated its $775-million deal to acquire Hyundai Electronics America's Symbios Inc., as the Federal Trade Commission was set to vote that the deal violated antitrust laws.
"They were going to vote a complaint, which would have put us into litigation," Grant Saviers, Adaptec's chief executive, said in an interview. "Where we disagreed significantly was the definition of the market."
After spending six months on the deal, Adaptec did not wish to spend another six months or even longer in a lawsuit, even though it believed it would have won its case, the company said.
After the announcement, the FTC canceled its Thursday afternoon meeting.
A vote by the commission would have set in motion an antitrust suit. An expert said the FTC investigation demonstrates that the computer industry is now under close scrutiny by trustbusting watchdogs.
"This means that companies in the computer industry need to be concerned about antitrust even if they're not Intel or Microsoft," said Howard Morse, a former FTC official and now a Washington attorney.
Between them, Milpitas-based Adaptec and Fort Collins, Colo.-based Symbios have more than 80% of the market for SCSI (small computer system interface, pronounced "scuzzy") host controllers--chips that permit computers to communicate with peripheral devices such as scanners, hard drives and CD-ROMs.
These chips are also used in workstations and in computer servers to provide RAID (redundant array of inexpensive disks), which can protect against the loss of data.
Adaptec said it would take a $20-million charge in the fiscal first quarter, ending June 30, in connection with the decision.
Adaptec shares rose $1.06 to close at $16.69 on Nasdaq.