LSI: Fiscal 4Q10 Financial Results

in US$ millions)	4Q09	4Q10	FY09	FY10
Revenues	637.8	664.5	2,219	2,570
*Growth*		4%		*16%*
Net income (loss)	64.8	(13.4)	(47.7)	40.0

(in US$ millions)	4Q09	4Q10	Growth
Semiconductor revenues	380.8	392.5	3%
Storage systems revenues	257.0	272.0	6%
TOTAL	637.8	664.5	4%

LSI Corporation reported results for its fourth quarter and full year ended December 31, 2010.

Fourth Quarter and Full-Year 2010 News Release Summary

Fourth quarter 2010 revenues of $664 million
Fourth quarter 2010 GAAP net loss of 2 cents per share
Fourth quarter 2010 non-GAAP net income of 14 cents per diluted share
Fourth quarter operating cash flows of $112 million
Full-year 2010 revenues of $2.6 billion

First Quarter 2011 Business Outlook

Projected revenues of $605 million to $635 million
GAAP net (loss)/income in the range of ($0.03) to $0.07 per share
Non-GAAP net income in the range of $0.07 to $0.13 per share

Fourth quarter 2010 revenues were $664 million, a 4% increase year over year compared to $638 million reported in the fourth quarter of 2009, and compared to $629 million reported in the third quarter of 2010.

Fourth quarter 2010 GAAP net loss was $13 million or 2 cents per share, compared to fourth quarter 2009 GAAP net income of $65 million or 10 cents per diluted share. Fourth quarter 2010 GAAP results compare to third quarter 2010 GAAP net income of $23 million or 4 cents per diluted share. Fourth quarter 2010 GAAP net income included a net charge of $103 million from special items, consisting primarily of $48 million of net restructuring and other items, $40 million of amortization of acquisition-related items, and $15 million of stock-based compensation expense.

Fourth quarter 2010 non-GAAP net income was $90 million or 14 cents per diluted share, compared to fourth quarter 2009 non-GAAP net income of $124 million or 18 cents per diluted share. Third quarter 2010 non-GAAP net income was $79 million or 13 cents per diluted share.

Cash and short-term investments totaled approximately $677 million at quarter end. The company completed fourth-quarter purchases of approximately 6 million shares of its common stock for approximately $32 million. In 2010, the company purchased approximately 51 million shares of its common stock for approximately $250 million, completing its repurchase program announced in March, 2010.

"We delivered solid quarterly revenue growth with revenues near the high end of our guidance range, reflecting seasonal strength in our storage systems and storage semiconductor businesses," said Abhi Talwalkar, LSI president and chief executive officer. "For the full year, our revenues grew substantially, driven by increased enterprise spending for IT infrastructure products that rely on our technology. As economic conditions continue to improve in 2011, we expect to benefit from higher enterprise spending levels and new product ramps with our tier one customers."

LSI recorded full-year 2010 revenues of $2.57 billion, a 16% increase compared to $2.22 billion in 2009. The company reported 2010 GAAP net income of $40 million or 6 cents per diluted share. Full-year 2010 GAAP results compare to full-year 2009 GAAP net loss of $48 million or 7 cents per share. Full-year 2010 GAAP net income included a net charge of $293 million from special items, consisting primarily of $161 million in the amortization of acquisition-related items, $66 million of stock-based compensation expense, $59 million of restructuring costs, and $7 million of net loss on the sale and write-down of investments.

Non-GAAP net income for 2010 was $333 million or 52 cents per diluted share, compared to 2009 non-GAAP net income of $232 million or 35 cents per diluted share.

Bryon Look, LSI CFO and chief administrative officer, said: "We delivered another quarter of solid operating performance, with operating cash flows growing 36% sequentially to $112 million. For the full year, our operating cash flows were $367 million, up 80% year over year. Our balance sheet further strengthened as we ended the year with $677 million of net cash while remaining debt free. On a full-year basis, our profitability also improved significantly as we continued to focus on making progress toward our business model targets."

Comments

Abstracts of the earnings call transcript:

Abhijit Talwalkar, president and CEO:

"Our Storage Systems business grew 14% sequentially and 6% year-over-year in Q4. We saw our growth across midrange and entry-level platforms, with sequential growth at IBM, Oracle and Dell. We also saw sequential growth with our emerging Tier 2 OEM base. We continue to see very strong adoption of our entry-level 2600 storage platform achieving the fastest volume ramp for new storage platform in our history. We've further expanded our customer base for this platform over the past quarter, with six additional customers now shipping the 2600, bringing our total to 16 OEMs in production.

"In our Server RAID Adapter and Software business, growth in 2010 far exceeded server unit growth due to share gains at OEMs and in the distribution channel through the combination of our MegaRAID and 3ware product families.

"I'll now turn to Storage Semiconductors, which includes SAS, SAN and HDD. In SAS, we have the broadest portfolio with our server and external storage solutions and continue to extend our leadership position. In 2010, our SAS product line revenues grew over 21%, outpacing both the server and external storage unit growth rates. This growth was accomplished through both share gains and OEMs and new products expanding our participation.

"Looking forward, we expect to extend our number one position in server SAS through 6-gig design wins we have already secured across a long list of server OEMs for the upcoming Intel Romley generation. Our wins include IBM, Dell, Cisco, Supermicro, Fujitsu, NEC, Hitachi, Toshiba, as well as Oracle.

"To further address opportunities in the flash market, last quarter we talked about bringing PCI Express base at 50 adapters to the market. We successfully launched this product in the channel and are pleased to announce that Cisco, Supermicro and SGI will be launching our SSD adapters this quarter. In addition, we expect to begin ramping SSD custom controllers targeted to enterprise applications this year.

"Turning to Hard Disk Drives. We are solidly in position to grow SSD share as our solutions become increasingly deployed by both existing and new customers. Last quarter, we increased shipments of our SoCs in the Seagate Savio and Constellation enterprise drives and began shipping 40-nanometer LDPC SoCs into Hitachi's Deskstar family of drives."

Bryon Look, CAO and CFO:

"Turning now to our Storage Systems business, which includes both external storage systems and server RAID adapters and software. Storage systems revenues were sequentially up 14% to $272 million, a record high for this business. This represented a 6% improvement in systems revenues as compared to Q4 2009. The Storage Systems segment represented 41% of LSI's total revenues in the fourth quarter.

"During the quarter, we made the decision to terminate several software programs associated with our External Systems business and recorded several charges as a result."