LSI Tops Expectations – Analyst Blog

LSI Corporation (LSI) reported revenues of $637 million in the first quarter of 2010, up 32% year over year but essentially flat sequentially and toward the high end of management’s revised guidance of $620 – $640 million.

 

Revenues from the semiconductor business grew 28% year over year and increased 9% sequentially driven by increases in networking standard and custom products, SAN and IP licensing.

 

Within the semiconductor segment, storage semiconductor revenues (which include hard disk drive silicon, SAS standard components and storage area network ICs) grew 4.4% to $286 million. Networking revenue came in at $114 million, up 21% sequentially. Revenues for the IP business were up in the first quarter to $16 million. Storage systems business (includes both external storage systems and server RAID adapters and software) generated revenues of $221 million, down 14% sequentially but up 40% year over year.

 

Gross margins (excluding special items) were 47.7%, up 30 basis points sequentially. Operating margin came in at 11.7% compared with 14.5% in the previous quarter.

 

Net income came in at $23 million or 3 cents per share compared with a net loss of $104 million or 16 cents per share in the year-ago quarter and a net income of $64.8 million or 10 cents per share in the previous quarter. Net income (excluding special items but including stock-based compensation expense) came in at 11 cents per share, easily beating the Zacks Consensus Estimate of 7 cents per share.

 

During the quarter, the company generated $106 million of cash from operations and used $27.3 million in capital expenditures. LSI repurchased 4 million shares for $26 million under its 250 million share repurchase program announced in March.

 

LSI ended the quarter with cash and investments of $1,015.5 million, up from $962.1 million at the end of the previous quarter. Debt was $350.0 million, same as the previous quarter. The debt pay down is due for May 2010 following which the company will be free of debts.

 

 

Management projects revenues between $635 million and $665 million in the second quarter of 2010. Revenues from the Storage Systems business along with storage and networking semiconductor business are expected to be sequentially up.

 

Gross margin is projected between 46.7% and 48.7%. The company expects to report second quarter EPS in a range of a loss of 3 cents to a profit of 6 cents. EPS excluding special items is forecasted at 8 cents – 14 cents.

 

LSI is currently focusing on fewer and larger end-markets. It aims to focus on established and growing applications and narrow its focus to market-leading customers.

 

Shares were down 2.50% in after-hours trading to close at $6.23. The stock earlier gained 2.08% to close at $6.39.

 

Headquartered in California, LSI Corporation offers a broad portfolio of products and services, which includes product ICs (custom and standard), adapters, systems and software.