LSI Corp Beats, Shares Up - Analyst Blog


LSI Corporation ( LSI ) generated revenues of $523 million in the fourth quarter of 2011, up 11.0% year over year but down 4.3% sequentially and surpassed management'sexpectations of  $500 million to $550 million.

The top line was impacted by Thailand flood to the tune of roughly $40 million.  

On May 6, 2011, LSI completed the sale of its external storage systems business to  NetApp ( NTAP ). The financial results of the external systems business have been classified as discontinued operations.

With the divestiture of storage systems business, LSI has tranformed into a pure play storage and networking semiconductor company. 

The company recently acquired SandForce, which should enable the company to benefit from the growing adoption of solid-state drives and flash storage solutions.

SandForce is a leading provider of flash storage processors for enterprise and client flash solutions and solid state drives (SSDs).

Server and storage semiconductor revenues (accounting for 74% of total revenue), which include products from ServeRAID adapter and software, Flash, SAS, SAN and HDD businesses, were sequentially down 4% to $389 million. The decline was primarily due to the flooding in Thailand and the related impact on the disk drive industry.

Revenues from the networking business (accounting for 21% of total revenue) were sequentially down 8% to $107 million, primarily due to softness in the wireless market along with supply chain constraints owing to the floods in Thailand. Revenues from the IP business were sequentially flat at $27 million.

In hard disk drives, LSI Corp unit TAM declined by approximately 30% from the third quarter due to flooding in Thailand. Nevertheless, LSI Corp continues to gain market share in Seagate's enterprise platforms and ramp new SSCs into client drives. The company is confident about supporting growth at its HDD customers in the first quarter of 2012.

LSI Corp generated revenues of $2.04 billion in fiscal 2011, up 9.3% from a year ago. Net income came in at $331.5 million or 55 cents per share compared to a net income of $39.8 million or 6 cents per share in 2010.


Gross margin (excluding special items) came in at 49.5%, down from 52.2% in the previous quarter and below management's expectation.

The company recorded an inventory charge of approximately $7.5 million related to inventory damaged at one of the subcontractors in Thailand during the flooding.

Operating margin came in at 10.7%, down from 15.2% in the previous quarter.

Net income from continuing operations came in at $11.4 million or 2 cents per diluted share compared to a net income of $31.6 million or 5 cents in the previous quarter and a net income of $4.5 million or $0.01 per diluted share in the year-ago quarter.  

Excluding one-time items, net income per share came in at 10 cents, easily beating the Zacks Consensus Estimate of 8 cents.

Balance Sheet:

During the quarter, LSI Corp generated $55.4 million of cash from operating activities and used $14.1 million in capital expenditures. The company repurchased 5 million shares for approximately $27 million in the third quarter.

In 2011, LSI repurchased 72 million shares for approximately $499 million under its $750 million authorized buy-back program. The company still has approximately $251 million remaining in its authorized buy-back program.

LSI Corp. ended the quarter with cash and short-term investments of $935.5 million, up from $878.9 million at the end of the previous quarter.


Going forward, management expects revenues between $550 million and $590 million in the fourth quarter of 2011. The company expects to meet all customer demand in the first quarter. Organic growth is expected at 16%.

LSI Corp expects server and storage semiconductors revenues to be sequentially up. The guidance also assumes approximately $20 million to $25 million of flash storage processor revenues associated with the SandForce acquisition. Server-related revenues are projected to be down sequentially down due to expected seasonality. Networking semiconductor revenues is projected to be relatively flat to down.

Gross margin is projected around 51%, (+/-1%). Income from continuing operations is forecasted to come around a loss of 7 cents to earnings of 3 cents per share. Excluding one-time items and stock-based compensation, income from continuing operations came in at  9 cents to 15 cents.

The better-than-expected results and upbeat guidance drove a 6.92% increase in the share price in after market hours trading to close at $7.57. The stock, earlier, lost 0.84% to close at $7.08 in regular trading.

LSI CORP ( LSI ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: LSI

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