LSI Logic Swings to a Profit

LSI is in the midst of a reorganization under the leadership of former Intel(INTC) senior executive Talwalkar, who took the helm of LSI in May. Talwalkar has restructured the company's business segments -- putting less emphasis on communications products -- and put the company's chip manufacturing facility up for sale, in a move to reduce operating costs by transforming LSI into a fabless semiconductor company.

During a conference call with analysts following the release of the results, Talwalkar hinted that a sale of the communications group could be in the works. The division's $76 million in fourth-quarter revenue accounted for 15% of LSI's overall sales, but the business continues to face challenges from key markets such as telecommunications. Without citing the communications group by name, Talwalkar noted that he would be providing clarity in the next few months about LSI's ongoing effort to sharpen its focus on fewer markets, through investments or disinvestments.

Asked by an analyst whether the communications group would be a natural candidate for divestiture, Talwalkar said the company was looking at various segments within the company. "We continue to determine whether we can be successful long term in communications," he noted.

LSI projected first-quarter revenue would come in between $465 million and $490 million, with 10 cents to 12 cents in EPS before charges. The average analyst forecast called for $472 million in sales with 9 cents EPS.

Talwalkar said the company was in good shape going into 2006, as trends in enterprise storage and consumer electronics would help lift sales at the company.

"We're coming into the year with a lot of momentum," said Talwalkar, citing lower prices for DVD recorders and the government-mandated transition to digital television as factors that will benefit LSI in 2006.

For the full 2005 year, LSI generated $1.92 billion in revenue, up 13% from 2004, with a loss of $6 million, or a penny a share.

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