This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

LSI Logic: Consumer Chips Ripe for Consolidation

When Abhi Talwalkar took the baton from LSI Logic (LSI) founder Wilf Corrigan in May 2005, he inherited a company that looked as if its best days were behind it.

Still suffering a post-dot-com depression, LSI was undergoing an identity crisis as it adjusted to a changing market for application-specific, or ASIC, chips.

Talwalkar, 42, has not been shy about making changes. The former head of Intel's (INTC) server business sold LSI's semiconductor fab facility, pruned certain products and overhauled the company's business model.

On Monday, chipmaker LSI Logic said it will acquire Agere in a $4 billion stock transaction, creating a company that will offer semiconductors, systems and software for storage, networking and consumer electronics products.

The combined company would start out with annual revenue of around $3.5 billion.

Since Talwalkar became CEO, LSI's stock has surged about 70%.

Still, LSI's revival remains a work in progress. Sales and profit margins could do better, and the company's consumer electronics business is dangerously undersized.

In an interview with (before LSI said it would acquire Agere), Talwalkar discusses the state of LSI's turnaround, opportunities for expansion and private equity's newfound appetite for chips. Nine months ago you reorganized LSI around two pillars: storage and consumer. Last quarter's results were overwhelmingly weighted toward storage, with consumer losing ground. Are you still committed to consumer or are you rethinking the strategy?

Talwalkar: Our objective in transforming the company was to move toward multiple growth platforms, or franchises. Being focused entirely on enterprise storage wasn't going to be sufficient to support our growth objectives, as well as feeling that adding some level of diversity is good.

We identified consumer as the second platform to invest in. If you look at that category today, there is no dominant player. It's fragmented and made up of many subscale companies.

Our perspective is that this market is poised to start consolidating over the next couple of years because it's getting fairly big. You've got a billion- or multibillion-dollar market in digital-TV silicon content, you've got the same in the set-top box, you've got the same in DVD players, you've got probably another $800 million to $1 billion in these portable products, and you've got digital cameras.

So you've got a market here that you can probably add up to be $5 billion to $8 billion in size. It's not going to be composed of 30 little companies, and so there's going to be some consolidation.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs