Revenues grow 6% quarter over quarter; company sees continued strong demand for flash-based products

MILPITAS, Calif., July 25, 2012 –LSI Corporation (NYSE: LSI) today reported results for its second quarter ended July 1, 2012.

Second Quarter 2012 Highlights

  • Second quarter 2012 revenues from continuing operations* of $660 million
  • Second quarter 2012 GAAP** income from continuing operations of $0.10 per diluted share
  • Second quarter 2012 non-GAAP*** income from continuing operations of $0.21 per diluted share
  • Second quarter 2012 operating cash flows of $117 million
     

Third Quarter 2012 Business Outlook

  • Projected revenues from continuing operations* of $620 million to $660 million
  • GAAP** income from continuing operations in the range of $0.02 to $0.11 per share
  • Non-GAAP*** income from continuing operations in the range of $0.14 to $0.20 per share
*On May 6, 2011, LSI completed the sale of its external storage systems business. The financial results of the external storage systems business have been classified as discontinued operations in LSI’s financial statements. Our ongoing business is referred to as “continuing operations.” **Generally Accepted Accounting Principles. ***Excludes stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, gain on remeasurement of a pre-acquisition equity interest to fair value, gain/loss on sale/write-down of investments and, in the case of non-GAAP net income, gain from the sale of the external storage systems business. It also excludes the income tax effect associated with the above-mentioned items. 

“We are pleased with our performance in the second quarter as we delivered strong growth and further expanded our profitability in a challenging macroeconomic environment,” said Abhi Talwalkar, LSI’s president and CEO. “Demand, particularly for our flash-related products, was driven by rapid adoption across client and datacenter computing where customers are increasingly turning to LSI to enhance or accelerate application performance."

Second quarter 2012 revenues from continuing operations were $660 million, in line with guidance, compared to $501 million generated from continuing operations in the second quarter of 2011, and compared to $622 million generated from continuing operations in the first quarter of 2012.

Second quarter 2012 GAAP** income from continuing operations was $59 million or $0.10 per diluted share, compared to second quarter 2011 GAAP income from continuing operations of $28 million or $0.05 per diluted share. First quarter 2012 GAAP income from continuing operations was $75 million or $0.13 per diluted share. Second quarter 2012 GAAP income from continuing operations included a net charge of $62 million from special items, consisting primarily of approximately $26 million of stock-based compensation expense, $30 million of amortization of acquisition-related items and $6 million of net restructuring and other items.

Second quarter 2012 non-GAAP*** income from continuing operations was $121 million or $0.21 per diluted share, compared to second quarter 2011 non-GAAP income from continuing operations of $60 million or $0.10 per diluted share. First quarter 2012 non-GAAP income from continuing operations was $117 million or $0.20 per diluted share.

Cash and short-term investments totaled approximately $601 million at quarter end. The company completed second-quarter purchases of approximately 18 million shares of its common stock for approximately $138 million. On a cumulative basis, LSI has repurchased a total of 95 million shares and utilized approximately $675 million of the company’s current $750 million share repurchase program.

“We are making good progress toward our business model targets with strong year over year growth in sales and operating profits,” said Bryon Look, LSI’s chief financial officer. “We are generating solid operating cash flows and with our share buyback program we continue to return capital to our shareholders.”

LSI 3Q2012 Business Outlook for Continuing Operations

GAAP** Special Items Non-GAAP***
Revenue $620 million to $660 million $620 million to $660 million
Gross Margin 47% – 51% $20 million to $30 million 52% – 54%​
Operating Expenses $258 million to $278 million $30 million to $40 million $228 million to $238 million​
Net Other Income ​$3 million $3 million​
Tax Approximately $12 million​ Approximately $12 million​
(Loss)/Income from Continuing Operations Per Share​ $0.02 to $0.11 ($0.09) to ($0.12)​ $0.14 to $0.20​
Diluted Share Count​ ​570 million 570 million​

Capital spending is projected to be around $25 million in the third quarter and approximately $130 million in total for 2012.

Depreciation and software amortization is projected to be around $15 million in the third quarter and approximately $60 million in total for 2012.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss second quarter 2012 financial results and the third quarter 2012 business outlook. Internet users can access the conference call at http://www.lsi.com/webcast. Subsequent to the conference call, a replay will be available at the same web address.

Forward-Looking Statements: This news release contains forward-looking statements that are based on the current opinions and estimates of management. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause LSI’s actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: our ability to successfully integrate and manage the SandForce business and retain its key employees; our ability to achieve anticipated synergies and to develop integrated new products following our acquisition of SandForce; our ability to repurchase our common stock at prices we believe to be advantageous; our reliance on major customers and suppliers; our ability to keep up with rapid technological change; our ability to compete successfully in competitive markets; fluctuations in the timing and volumes of customer demand; the unavailability of appropriate levels of manufacturing capacity; and general industry and macro-economic conditions. For additional information, see the documents filed by LSI with the Securities and Exchange Commission, and specifically the risk factors set forth in the company’s most recent reports on Form 10-K and 10-Q. LSI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About LSI

LSI Corporation (NYSE: LSI) designs semiconductors and software that accelerate storage and networking in datacenters, mobile networks and client computing. Our technology is the intelligence critical to enhanced application performance, and is applied in solutions created in collaboration with our partners. More information is available at www.lsi.com.

LSI, the LSI & Design logo and the Storage.Networking.Accelerated. tagline are trademarks or registered trademarks of LSI Corporation. All other brand or product names may be trademarks or registered trademarks of their respective companies.