Good News for LSI's OEM Customers

LSI Corporation (LSI - Analyst Report) recently demonstrated the semi-conductor industry’s first ever 28nm read channel in its True Store RC5100. By using its innovative decoding design and low-density parity check (LDPC), HDDs shall now be revolutionized with higher areal density, efficient power usage and better performances.

The company’s latest TrueStore venture, the RC5100 can be used in notebooks, desktop PCs, and enterprise HDDs, thereby enhancing the host device’s power efficiencies. It is scheduled for launch early 2012 to its OEM customers.

At a time when technological advancements seem to dominate economic development of nearly all sectors, competition is both prevalent and fierce, whereby every big player is fighting to gain some edge over the other making the scope for innovations even more challenging. In this regard, LSI makes an invaluable contribution which deserves commendable approbation as transmission and storage of digital data has become a burgeoning area of interest and reliance not only for industries but also for general consumers.

LSI recently announced its third quarter financial results of 2011, whereby it earned revenues worth $547 million rising 20.7% year over year; well within management’s expectations. The net income per share came to 14 cents which beat the Zacks Consensus Estimate of 12 cents. Server and storage semiconductor revenues came to $403 million accounting for nearly 74% of total revenues.

The long-term growth plans for its storage technology solutions division are lucid from the aggressive strategies being implemented by LSI, which include the acquisition of SandForce Inc. for nearly $322 million. This, coupled with the recent sale of NetApp Inc. for $480 million seems to put the company in a favorable position as it enters 2012.

It is imperative that LSI continues to actively focus on its innovations and profitable acquisitions to battle its fierce competitors, Dot Hill Systems Corporation (HILL - Snapshot Report), Infortrend Technology Inc. and PMC-Sierra Inc. (PMCS - Analyst Report).

LSI, established in 1980 and headquartered in Milpitas, California, provides silicon-to-system solutions, integrated circuits used in HDDs, computer servers, communication and storage systems and also in PCs. It caters mainly to OEMs directly and also operates through resellers and distributors.

We currently have a Neutral recommendation on LSI Corporation. The stock currently carries a Zacks #3 Rank, which translates into a short-term rating of Hold.

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