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Doug Freedman, an analyst with American Technology Research, yesterday picked up coverage of LSI Logic (LSI) with a Buy rating and $13 price target.

Kind of interesting timing: Tuesday the stock slumped after a weak March quarter revenue forecast from communication component supplier Agere (AGR), a company LSI is in the process of buying. Freedman notes that a shareholder vote on the pending deal is planned for March 29.

The deal “will open up new revenue opportunities in low-end and enterprise markets, protect current business in very competitive end markets, lead to additional IP-related revenue for combined entity via LSI’s know-how and Agere’s underutilized patent portfolio, and drive cost savings and scale for the combined entity,” he wrote in a research note.

Freedman sees multiple potential catalysts for LSI shares:

  • Closure of the merger.
  • Upside to targeted $125 million in merger cost savings; says it could be $150 million to $175 million.
  • Potential new revenue from IP portfolio.
  • Solid results from hard drive customers, specifically Seagate (STX).
  • Potential sale of Agere’s baseband segment at favorable valuation.
  • Execution of $500 million buyback plan.
  • LSI yesterday was down a penny at $10.17; Agere was off 6 cents at $21.79.

    Source: LSI: Multiple Potential Catalysts for Shares