Earnings estimates of
) have inched up after the company reported better-than-expected
results for the fourth quarter and provided a positive guidance for
the first quarter of 2012.
The current Zacks Consensus Estimate is $0.47, up $0.03 in the
last 30 days. 2 out of the 6 analysts covering the stock have upped
their estimates for 2012 in the last 30 days while one moved in the
LSI is excited about the new product cycle ramps, accumulated
share gains and new opportunities ahead in areas like SandForce
flash storage processors, PCIe flash adapters, HDD SoCs, SAS for
Romley and multicore processors and custom products for
networking. LSI Corp. has been taking strategic steps to
improve its business model and transform into storage and
networking company over the past two years.
LSI recently completed its acquisition of Sand Force, Inc. for
$322 million. The acquisition is expected to strengthen LSI's
strong position in storage technology solutions. The acquisition is
expected to strengthen LSI's strong position in storage technology
We view this acquisition as positive as it will also use the
cash derived from the divestiture of the external storage systems
business (accounting for roughly 27% of total sales) to NetApp Inc.
for $480 million in cash. The acquisition is also expected to
enhance LSI's competitive position in the fast-growing server and
storage PCIe flash adapter space. Management stated that PCIe
flash-based adapters and flash storage processors will together
represent a greater than $2 billion TAM expansion for LSI in the
next several years. SandForce is expected to generate revenues of
$60 million in 2011.
On May 6, 2011, LSI completed the sale of its external
storage systems business to NetApp. The financial results of
the external systems business have been classified as discontinued
With the divestiture of storage systems business, LSI has
transformed into a pure play storage and networking semiconductor
company. We believe the divestiture of the storage systems
business will positively impact the margin structure along with
ramp up of higher margin networking and SAS products. We expect
margins to steadily pick up in 2012.
Although the supply constraints in the HDD business seem to have
eased of late and the company should return to growth in 2012, we
continue to maintain a Neutral recommendation.
In the short-run, we have a Zacks #2 Rank, which translates into
a short-term Buy rating.
LSI CORP (
): Free Stock Analysis Report
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