LSI Falls to Loss on Post-Merger Charges

Includes: CHIP, LSI-OLD
by: Susan Lerner

As expected, LSI Corp. fell to a loss in its first combined quarter with Agere Systems as the chipmaker took steps to accelerate the merger integration process. LSI posted a second-quarter loss of $378M ($0.50/share), or $14.2M ($0.02/share) excluding $363M of charges, on revenue of $670M.LSI 26 07 2007 Chart For the comparable period in 2006, LSI posted earnings of $54M ($0.13) or $57M ($0.14) after charges on revenue of $490M. Results were in line with the lowered guidance provided by the company in June. LSI, which during the second-quarter agreed to sell its consumer products business, on Wednesday announced a deal to sell its Thailand assembly and test operations to STATS ChipPAC for $100M, and also said it would transition similar functions at Singapore and Wichita, Kansas facilities to current partners. LSI believes the actions will result in the loss of 2,100 jobs and cut annual costs by $20M to $25M. "The steps taken during the second quarter and the manufacturing decisions announced today are significant components of positioning the company for profitable growth," said CFO Byron Look (see full conference call transcript). Lehman Bros. told clients it believed the second-quarter was "the bottom" for LSI and Deutsche Bank said the sale and restructuring would be positive drivers for the company. For the third quarter, LSI expects a loss of $0.09/share to $0.15/share, or earnings of $0.02/share to $0.05/share excluding items, on revenue of $675M-$705M and gross margin of 30%-34%. Second-quarter gross margin was 23%. Analyst estimates for the third quarter range from a loss of $0.01 to earnings of $0.07/share and revenue ranging from $660M to $738M. Shares gained 1.4% in after-hours trading.

Sources: Press release, Reuters, MarketWatch
Commentary: LSI To Cut 900 Jobs, Lowers Q2 GuidanceLSI: Multiple Potential Catalysts for Shares
Stocks/ETFs to watch: LSI. Competitors: TXN. ETFs: SMH, IGW, XSD

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