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LSI Logic: Consumer Chips Ripe for Consolidation

LSI's top-line growth is currently under 5%.

There's a number of puts and takes because the company is in transition. If you look at our storage business in the third quarter, the overall storage business grew 15% to 17% year over year.

The best way to measure whether our strategy is working, is "are we growing faster than the market in our focus segments?" In storage we can say that across the board, from systems to silicon. In consumer, until we get that level of scale, we're still going to have a little bit of ... not unpredictability, but it's going to be dynamic.

What level of growth is LSI aiming for?

Companywide what we've said publicly is that we need to grow our top line and our bottom line on a consistent basis at a double-digit level.

Is this achievable next year, or is it a long-term goal?

I think it's more near term vs. long term. This isn't something that's five years out. We need to start producing that kind of growth rate pretty soon.

LSI is often cited as a company that has the traits sought by private-equity firms. What are your thoughts on private equity's recent appetite for semiconductor firms?

There's a ton of money out there, and some of [the buyouts] have been pretty surprising. The most surprising one, at least for some of us in the industry, was Freescale (FSL).

I think [among the] concerns out there is that a lot of these private-equity buyouts take on a tremendous amount of debt. A lot of the cash that comes from the cash flow of these companies has to go toward servicing that debt. And then in some cases are you going to put more strain on the businesses relative to helping them grow?

LSI has a clear strategy; we have capital and we have a very strong balance sheet to work with, so it's not like we need money from private equity or the market to go execute our strategy. Also, if we needed to raise more money, we could do that because our debt capacity is very good. So it is not necessarily something we've considered.

Have you had any talks with private-equity firms? No.

As you implement the new strategy, do you see any advantage in not having to manage for Wall Street every quarter?

Well there are pros and cons. And I think as a CEO and a board member, the objective is always to look at the best course of the company and the best option for shareholders.

Do we as a board always evaluate alternatives? Absolutely, that's our job -- it's our fiduciary responsibility. But we believe the current trajectory we're on is the best for our shareholders.
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