LSI Corporation (LSI)
Q4 2009 Earnings Call
January 27, 2010 5:00 pm ET
Abhi Talwalkar - President & Chief Executive Officer
Bryon Look - Executive Vice President, Chief Financial Officer
Sujal Shah - Vice President of Investor Relations
Allan Mishan - Brigantine
Parag Agarwal - UBS
Suji De Silva - Kaufman Brothers
James Snyder - Goldman Sachs
Kaushik Roy - Wedbush
Sukhi Nagesh - Deutsche Bank
Romit Shah - Barclays Capital
Craig Berger - FBR Capital Markets
Daniel Amir - Lazard Capital Markets
Hans Mosesmann - Raymond James
Robert Maina - CRM, LLC
Sanjay Devgan - Morgan Stanley
Eric Ghernati - Bank of America
Previous Statements by LSI
» LSI Corporation Q3 2009 Earnings Call Transcript
» LSI Corporation Q2 2009 Earnings Call Transcript
» LSI Corporation Q1 2009 Earnings Call Transcript
I would now like to turn the conference over to your host, Sujal Shah, Vice President of Investor Relations at LSI; please go ahead.
Good afternoon and thank you for joining us. With me today are Abhi Talwalkar, President and Chief Executive Officer; and Bryon Look, Executive Vice President and Chief Financial Officer. Abhi will begin the call with some opening remarks and highlights from our business and then Bryon will provide fourth quarter and full year 2009 financial results and guidance for the first quarter of 2010.
During this call, we’ll be mentioning non-GAAP financial measures, which we may refer to as results excluding special items. Today’s earnings release describes the differences between our non-GAAP and GAAP reporting. You can find reconciliations of our non-GAAP financial measures to corresponding GAAP amounts on our website at www.lsi.com/webcast.
At that site you can also find a copy of the earnings release and a presentation which highlights the key points from today’s call and provides an overview of our business. This may be particularly useful to new investors. I want to remind you that today’s remarks will include forward-looking statements.
Our actual results could differ materially from those suggested by the statements made today. Information about factors that could affect future results is contained in our Quarterly Report on Form 10-Q for the quarter-ended October 4, 2009 and our Annual Report on the Form 10-K for the year ended December 31, 2008.
I would also like to mention that LSI will be hosting in Analyst Day on March 17 in New York City. This will include presentations from Abhi and Bryon as well as the leaders of our businesses. We will also running technology demos that showcase the products which we expect to contribute the future growth. Additional information and registration details for this event can be found on the Investor Relations section of our website.
With that it is now my pleasure to introduce Abhi Talwalkar.
Thank you, Sujal. Good afternoon and welcome. While 2009 was a challenging year in a difficult environment we continue to make significant progress in each of our businesses and are at the front edge of seeing the benefits of the successful transformation we began several years ago.
For Q4 revenues were at the high end of guidance with overall sequential growth of 10% and a systems business that generated record quarterly revenues and grew 24% sequentially. Our fourth quarter non-GAAP operating margins were 14.5% reflecting revenue growth and gross margin expansion and we generated positive operating cash flow of $77 million.
Before I talk about our businesses, here are the key takeaways that I would like you to get from this call. First, LSI is at a key inflection point of being able to benefit from a successful transformation over the past several years. Secondly, 2009 was another year of record design wins fueling future growth for the company. Third, storage capacity and network traffic are both forecast to grow significantly.
LSI represents and differentiates investment opportunity to capitalize on this growth. Over the past quarter I have emphasized that had LSI is a very different company then it was several years ago. Over the past three to four years we underwent a significant transformation much of which has taken place below the surface and I believe we are now at an inflection point with the company.
We have recast this company in just about every single dimension and our product lines are now completely rebuilt and highly competitive. Today our businesses are at scale with differentiated products, technology leadership, and wins with the market leaders. In addition, the revenue headwinds that have impacted the company’s overall growth rates over the past several years are now largely behind us.
Going forward, there will be far less drag on the ability of our business to grow. I am very pleased with our execution and the focus of our employees and driving the business forward. Even through a difficult environment in 2009 we are able to deliver on a number of things we said we would. We successfully expanded our customer base in HDDs, ramped 6-gig SAS solutions with nine out of the top ten server OEMs. We secured volume design wins with Intel and Cisco and networking and we have continued to expand the footprint of an already successful storage systems business.
In summary we laid a foundation for future growth. I also believe we have chosen the right markets to participate in. Storage capacity and network traffic are both forecasted to grow significantly driven by new mobile devices such as the iPhone other smartphones, netbooks and smartbooks applications’ restraining today’s networks and the demand is out pacing infrastructure build outs.
This flood of data and the drive towards IP based networks will provide great opportunities for LSI storage and networking products and we’re uniquely positioned with solution that is span this universe. Now I would like to review with you the business highlights for the last quarter in our storage and networking businesses. I will begin with storage systems which includes both external storage systems and server rate adapters and software.