We maintain a Neutral recommendation on
) ahead of third quarter results on October 24, 2012.
Earnings estimates for 2012 remain largely unchanged as the
company provided weak guidance for the third quarter of 2012
despite the company surpassing the Zacks Consensus Estimates by
44.44% in the last four quarters. LSI Corporation expects
revenues between $620 million and $660 million in the third
quarter of 2012. Management continues to be cautious on the back
of uncertainty in the macro environment and declines in SoC
shipments and ramp up in hard disk drives.
Demand continues to be weak, and hence LSI Corp. expects to
see reduction in demand for components in the third quarter as
customers adjust inventory in accordance to the decline in
demand. Nevertheless, LSI Corp expects to see higher HD related
shipments in the fourth quarter assuming a recovery in the PC
Server and storage semiconductor revenues are projected to be
down sequentially in the third quarter. LSI Corp continues to
expect HDD declines in the quarter due to inventory adjustments,
partially offset by growth in flash and server-related products.
On a positive note, networking semiconductor revenue is expected
to be slightly up.
Gross margin is projected around 53%, (+/-1%). Net income from
continuing operations is forecasted between 2 cents and 11 cents.
Excluding one-time items, income from continuing operations is
expected to come in at 14 cents to 20 cents.
The company's second quarter earnings of 15 cents per share
were ahead of the Zacks Consensus Estimate by 2 cents. LSI
Corp. generated revenues of $660 million in the second quarter of
2012, up 31.7% year over year and 6.0% sequentially, surpassing
management's guidance of $630 million to $670 million.
The growth in revenues was driven by an increase in HDD
business and better-than-expected growth from the company's newly
acquired SandForce flash business.
We believe that LSI Corp, which competes with other industry
Marvell Technology Group Ltd.
) is well positioned to grow its market share based on its new
product cycles that will enable it to outgrow its storage and
However, the weak guidance forces us to confer a Zacks #4 Rank
on the stock, which translates into a short-term rating of Sell
on the stock.
LSI CORP (LSI): Free Stock Analysis Report
MARVELL TECH GP (MRVL): Free Stock Analysis
To read this article on Zacks.com click here.