LSI Corporation ( LSI - Analyst Report ) posted adjusted net income per share (excluding one-time items but including stock-based compensation) of 13 cents in the fourth quarter of 2012, beating the Zacks Consensus Estimate of 11 cents.

Revenues

The company generated revenues of $600.1 million in the fourth quarter, up 14.7% year over year. Reported revenues were at the mid point of management’s guidance range of $590.0 million to $610.0 million and above the Zacks Consensus Estimate of $591.0 million.

Server and storage semiconductor revenues (products include ServeRAID adapter and software, flash, SAS, SAN and HDD) were $479.0 million, up 23.0% from the year-ago quarter.

Networking revenue decreased 11.0% year over year to $95.0 million, mainly due to decline in legacy revenues. Revenue from the IP business was $26.0 million.

Margins

Reported gross margin came in at 50.1%, up from 45.3% in the year-ago quarter. Operating margin was 3.8% compared with (1.1%) in the year-ago quarter.

Net income from continuing operations was $29.1 million or 5 cents per share versus $11.4 million or 2 cents per share in the year-ago quarter. But excluding one-time items and including stock-based compensation expense, adjusted net income from continuing operations was $76.4 million or 13 cents compared with $61.1 million or 11 cents.

Balance Sheet & Cash Flow

LSI Corp. ended the quarter with cash and short-term investments of $676.0 million, up from $643.0 million in the previous quarter.

Cash from operating activities was $94.9 million, down from $111.8 million in the prior quarter. Capital expenditures were $27.5 million, up from $25.7 million in the previous quarter. The company repurchased 7 million shares for approximately $46.3 million in the quarter under its $750 million share repurchase program.

Guidance

Management continues to be cautious due to the uncertainty in the macro environment and weak PC demand.

For first quarter 2013, management expects revenues between $535.0 million and $575.0 million. GAAP gross margin is expected in the range of 48.0% to 52.0%, while non-GAAP gross margin is expected in the range of 53.0% to 55.0%. GAAP EPS will be in the range of (3)-6 cents, while non-GAAP EPS will be in the range of 9-15 cents.

Conclusion

LSI Corp. delivered decent fourth quarter results with the top and bottom lines exceeding the Zacks Consensus Estimates. The continuing macro uncertainty and dwindling PC market prompted the company to provide a sequentially weak guidance.

But we are encouraged by management’s optimism regarding positive long-term growth story. The company is confident of gaining market share backed by new product launches and penetration in growing markets. Moreover, continuous share buyback is also positive for earnings.

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

Investors should look out for some other stocks that are slated to report this earnings season with positive Zacks Rank and Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method).

Interdigital Inc. ( IDCC - Snapshot Report ) has a Zacks Rank #2 (Buy) with an ESP of +350.0%. Broadcom Corp. ( BRCM - Analyst Report ) has a Zacks Rank #2 (Buy) with an ESP of +1.9%. Yahoo Inc. ( YHOO - Analyst Report ) has a Zacks Rank #1 (Strong Buy) with an ESP of +14.8%.