LSI: Fiscal 2Q13 Financial Results

(in US$ million)	2Q12	2Q13	6 mo. 12	6 mo. 13
Revenues	659.6	589.6	1,282	1,158
*Growth*		-11%		*-10%*
Net income (loss)	58.7	24.6	133.9	43.1

LSI Corporation reported results for its second quarter ended June 30, 2013.

Second Quarter 2013 Highlights

Second quarter 2013 revenues of $590 million
Second quarter 2013 GAAP net income of $0.04 per diluted share
Second quarter 2013 non-GAAP net income of $0.15 per diluted share
Second quarter 2013 operating cash flows of $78 million

Third Quarter 2013 Business Outlook

Projected revenues of $590 million to $630 million
GAAP net income in the range of $0.01 to $0.11 per share
Non-GAAP net income in the range of $0.13 to $0.19 per share

"LSI delivered solid second quarter results as we established key inroads at strategic customers who are choosing LSI storage and networking solutions to improve performance and deliver higher service levels to their customers," said Abhi Talwalkar, LSI’s president and CEO. "We expect both our storage and networking businesses to be up in the third quarter, with new product cycles contributing to our growth."

Second quarter 2013 revenues were $590 million, in line with guidance, compared to $660 million in the second quarter of 2012, and compared to $569 million in the first quarter of 2013.

Second quarter 2013 GAAP net income was $25 million or $0.04 per diluted share, compared to second quarter 2012 GAAP net income of $59 million or $0.10 per diluted share. First quarter 2013 GAAP net income was $18 million or $0.03 per diluted share. Second quarter 2013 GAAP net income included a net charge of $59 million from special items, consisting primarily of approximately $29 million of amortization of acquisition-related items, $22 million of stock-based compensation expense and $8 million of net restructuring and other items.

Second quarter 2013 non-GAAP net income was $84 million or $0.15 per diluted share, compared to second quarter 2012 non-GAAP net income of $121 million or $0.21 per diluted share. First quarter 2013 non-GAAP net income was $94 million or $0.17 per diluted share.

Cash and short-term investments totaled approximately $673 million at quarter end. The company completed second-quarter purchases of approximately 9 million shares of its common stock for approximately $62 million.

"We are generating cash and healthy gross margins, while carefully managing spending in what continues to be an uncertain external environment," said Bryon Look, LSI’s CFO. "The dividend we announced, coupled with our ongoing share buyback program, further demonstrates our confidence and continued commitment to shareholder return."

LSI 3Q2013 Business Outlook (GAAP)

Revenue: $590 million to $630 million
Gross Margin: 49% to 53%, $17 million to $27 million
Operating Expenses: $259 million to $279 million
Net Other Income: $2 million

Capital spending is projected to be around $25 million in the third quarter and approximately $85 million in total for 2013.

Depreciation and software amortization is projected to be around $15 million in the third quarter and approximately $60 million in total for 2013.

Comments

Abstracts the earnings call transcript:

Abhijit Talwalkar, president and CEO:
"In hard disk drives, a new customer has gone into production using LSI SoCs. Also, we will be shipping into Seagate's recently announced Terascale enterprise drives through the second half of this year, with enterprise growth next year as we ramp new 28-nanometer SoCs to all HDD customers.
"In servers, we are in a leadership position in SAS for the expected second half transition from 6-gig to 12-gig and also expect OEMs to launch shared storage solutions based on our Syncro technology.
"In addition to our standard product controllers, in custom products, we have 17 different custom flash controllers that are either in production or in development across 6 different SSD providers.
"In enterprise SSDs, LSI has established new leadership in revenue share through a combination of standard and custom flash controllers, which can be found in enterprise SSDs offered by Samsung, SanDisk, Hitachi, Intel, SMART and others."

Bryon Look, CFO:
"Our server and storage semiconductor revenues, which include products from our server rate adapter and software, flash, SAS, SAN and HDD businesses, were $457 million, up 4% sequentially and down 14% on a year-over-year basis. The year-over-year decline is primarily due to our HDD revenues running at an elevated rate during the first half of 2012 following a snapback in demand at our primary customer as the HDD industry recovered from flooding in Thailand. The sequential increase in our storage and semiconductor revenues was primarily driven by growth in our server and storage connectivity businesses and our flash businesses. Server and storage semiconductors represented 77% of total revenues in the second quarter."