LSI Logic Strong-Arms Storage Sector

In a recent interview with TheStreet.com, Talwalkar said LSI was actively looking for ways to increase its scale in the consumer market, pointing to set-top boxes and digital TVs as key areas of interest.

Because the Agere deal does nothing on that end, some analysts predicted that the merger will mark the end of LSI's efforts to build a business around living room-based electronics and could prompt LSI to sell its DVD-recorder business.

On Monday, LSI's Talwalkar said the company was still committed to the consumer electronics market, but he spent more time talking about LSI's new consumer play: cell-phone handsets.

LSI also will get a presence in consumer notebook and desktop PCs as a result of Agere's hard-disk drive chips, rounding out LSI's existing catalog of storage products aimed at corporate data centers.

"We now have the opportunity to grow our footprint with existing customers and expand our customer base," said Talwalkar.

CIBC World Markets analyst Alan Mishan agreed, saying that Agere's consumer hard drive and LSI's enterprise storage businesses fit together nicely. And networking could generate cost synergies as the companies integrate product lines, Mishan wrote in a note to investors.

But Mishan pointed out that Agere's management has had a tough time generating revenue growth from the business, and the deal simply hands off the challenge to someone else.

As a result, Mishan advised Agere shareholders to sell rather than wait to see what the new company is capable of.