LSI Logic Strong-Arms Storage Sector

"Our combined financial profile will be greatly strengthened," said LSI CEO Abhi Talwalkar. "The combined company will be well positioned to drive sustainable long-term revenue growth."

What that revenue growth will be, however, remains unclear. Executives declined to provide specific growth targets for the new company.

Cost Benefits

Neither LSI or Agere has posted a dazzling top line on its own. LSI's sales growth in its most recently completed quarter was 2%; Agere saw revenue decline 6.7% year over year.

The more immediate benefit of the deal involves costs. The companies projected $125 million in cost savings in 2008, as a result of manufacturing savings and operational efficiencies.

LSI CFO Bryon Look said the company would likely provide new profit margin targets -- LSI is currently a few percentage points shy of its 45% gross margin goal -- although he said it was too early to do so at this time.

Wedbush Morgan analyst Craig Berger called the deal a "good strategic combination" that strengthens the combined company's storage-chip offerings and engineering resources, and creates a formidable intellectual property arsenal that can be leveraged across various end markets to battle companies such as Marvell(MRVL Quote) and Broadcom(BRCM Quote).

Still, Berger, whose firm makes a market in shares of LSI and rates the stock a hold, said the purchase price was not cheap and was likely pressuring the stock.