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Share of LSI Corporation hovered around its acquisition price of $11.15 per share since the company announced its first-quarter of 2014 results on April 23. Avago Technologies (AVGO - Analyst Report) agreed to acquire LSI in Dec 2013 for approximately $6.6 billion or $11.15 per share and the deal is expected to close in May.

LSI’s first quarter adjusted earnings per share (excluding amortization, restructuring expenses but including stock-based compensation) came in at 14 cents in the reported quarter, which not only beat the Zacks Consensus Estimate of 13 cents but also increased 10.8% from the year-ago quarter.

Quarter Details

Although, LSI Corp.’s first-quarter revenues of $569.1 million increased 0.8% from the year-ago quarter, it lagged the Zacks Consensus Estimate of $582.0 million.

LSI Corp.’s adjusted gross margin (excluding amortization but including stock-based compensation) expanded 44 basis points (bps) from the year-ago quarter to 54.8%, primarily due to higher revenue and lower cost.

Adjusted operating margin (excluding amortization, restructuring expenses but including stock-based compensation) was 14.6%, up from 12.4% in the year-ago quarter, reflecting lower operating expenses. Operating expenses as a percentage of revenues were down from 42.0% in the year-ago quarter to 40.2%.

LSI Corp.’s adjusted net income (excluding amortization, restructuring expenses but including stock-based compensation) came in at $78.8 million or 14 cents compared with $68.5 million or 12 cents reported in the year-ago quarter.

LSI Corp. exited the quarter with cash and short-term investments of $883.3 million compared with $809.8 million in the previous quarter.

Cash from operating activities was $43.0 million compared with $134.2 million in the previous quarter.

The company neither purchased any stock nor paid any dividends to shareholders during the quarter owing to the acquisition.


LSI Corp. delivered mixed first-quarter results with earnings per share beating the Zacks Consensus Estimate but revenues missing the same. However, both increased on a year-over-year basis.

We believe that LSI was a potent acquisition target because of its broad range of products that enable it to serve a diverse clientele in the hard disk drive, server and networking end markets.

Moreover, LSI Corp. is gaining rapid traction in the growing PCIe flash adapter market segment, which is a big positive for the company.

LSI’s association with Cisco (CSCO - Analyst Report) in the networking space should positively impact the company. Popularity of the company’s flash suites can be gauged from some high-value customer wins, namely Intel Corp. (INTC - Analyst Report), International Business Machines Corp. and Oracle, to name a few.

Currently, LSI Corp. carries a Zacks Rank #3 (Hold).

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