LSI: Fiscal 2Q12 Financial Results

(in US$ million)	2Q11	2Q12	6 mo. 11	6 mo. 12
Revenues	500.6	659.6	973.0	1,282
*Growth*		32%		*32%*
Net income (loss)	293.8	58.7	303.9	133.9

LSI Corporation reported results for its second quarter ended July 1, 2012.

Second Quarter 2012 Highlights

revenues from continuing operation of $660 million
GAAP income from continuing operations of $0.10 per diluted share
non-GAAP income from continuing operations of $0.21 per diluted share
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

"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 CFO. "We are generating solid operating cash flows and with our share buyback program we continue to return capital to our shareholders."

Comments

Abstracts of the earnings call transcript:

Abhijit Talwalkar, president and CEO:
"In flash, we are unique in offering 3 product families: standard product flash storage processors or FSPs, custom FSPs and PCIe flash adapters, strongly positioning LSI to benefit from a multiyear growth cycle in flash-based storage adoption. We had previously indicated that our flash businesses would grow 100% to 150% in 2012 from a rough base of $70 million in 2011. Based upon strong customer momentum and new design wins, we are seeing in SandForce, FSPs and Nytro PCIe solutions, we now believe that our revenues will exceed 200% growth year-over-year in 2012.
"In Q2, our standard product SandForce FSP revenues were above $45 million, representing 42% sequential growth and continued market share gains. Growth is being driven by increased penetration into the notebook market segment, with key wins at Toshiba, Intel, Hynix, Asus and others.
"In hard disk drives, we saw further growth in Q2, as a result of increased SoC and preamp shipments. However, we did see signs of industry softness in June and believe that HDD builds exceeded demand in the quarter.
"We have gained traction in next-generation notebook platforms and are well-positioned for 5-millimeter hybrid drives, which are expected to be a volume platform for ultrabooks. We also expect to be ramping SoCs and preamps Toshiba this quarter and remain 100% on track to be shipping SoCs in production to all ACD customers prior to the end of this year."

Bryon Look, CAO and CFO:
"Revenues for server and storage semiconductors were sequentially up $46 million, or 9%, to $535 million, and represented 81% of total revenues in the second quarter.
"Next is a discussion of our guidance for Q3 2012. Q3 revenues in the range of $620 million to $660 million were sequentially down about 3% at midpoint. This would represent, however, about 17% growth on a year-over-year basis. We expect our server and storage semiconductor revenues to be sequentially down in Q3. We expect HDD declines in the quarter due to inventory adjustments to be partially offset by growth in flash and server-related products. In addition, we expect our networking semiconductor revenues to be slightly up."