LSI Narrows Loss (Update)

LSI posted a loss of $14 million, or 2 cents a share, compared to a loss of $378 million, or 50 cents a share, at this time last year, when it incurred $340 million in special charges stemming from its acquisition with Agere Systems.

LSI said the loss in its recently ended quarter included $97 million in special charges, including restructuring charges and stock compensation expenses.

Excluding those items, LSI said it earned 13 cents a share. On that basis, analysts were expecting 9 cents a share.

In the current quarter, LSI said its earnings could range from a loss of 3 cents to a profit of 4 cents, which would represent its first quarter in the black since the Agere deal.

Excluding special items, LSI's EPS forecast ranged between 11 cents and 15 cents, vs. the 11 cents expected by analysts.

During a post-earnings conference call, some analysts questioned LSI's projected gross margin in the current quarter, which will range between 39% and 41%, compared to the second quarter level of 41.2%.

LSI executives said the decline was due to a natural shift in seasonality, as the third quarter favors lower-margin hard drive chip sales. What's more, LSI experienced a greater-than-expected boost in the second quarter from legacy networking products -- chips no longer under development -- which the company does not necessarily view as sustainable.

Talwalkar said the company remained committed to its goal of becoming the No. 1 maker of chips for PC hard disc drives, overtaking Marvell Technology(MRVL Quote), although he did not provide a timeframe for achieving the feat.