California based LSI Corporation (LSI) , a manufacturer and provider of complex high-performance semiconductors and storage systems, has recently announced to buyback up to $500 million worth of its common stock either in the open market or through negotiated purchases.
According to the new share repurchase program, the company will have the discretionary power to repurchase its common stock at any time depending on the prevailing market condition and other associated factors. LSI Corp. intends to fund its share repurchases with its existing cash and short-term investments. Exiting the second quarter of 2012, the company had cash and short-term investments of $601.1 million.
This latest share repurchase authorization program will be coupled with the company’s current $750 million buyback program, of which roughly $75 million remains pending.
The buying back of common shares is likely to be one of the best strategic moves which will help enhancing investors' confidence in the company. Management averred that the company is in a good position to repurchase shares judging by its current performances and long-term targets.
LSI Corp. has been taking various strategic steps to improve its business model and transform itself into a storage and networking company over the past two years. The company’s continuing adoption of newer storage protocols such as SAS and ramp in new entry-level storage systems may steadily improve its position in the hard drive market.
Even though LSI Corp. globally established itself, it should be aware of the tough competition prevalent in the industry. Ominous rivals of the company include AuthenTec, Inc. , Mellanox Technologies, Ltd. (MLNX - Snapshot Report) and Marvell Technology Group Ltd. (MRVL - Analyst Report) who are exhibiting striking results.
The current Zacks Consensus Estimates for LSI Corp. are 13 cents and 61 cents for the third quarter of 2012 and for the full year of 2012, respectively. The estimates represent year-over-year growth of 4.17% for the third quarter of 2012 and 59.21% for 2012.
As the current macro-economic conditions continue to be challenging; we maintain a ‘Neutral’ recommendation on LSI Corp. The stock also bears a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.