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LSI Corporation Q1 2010 Earnings Call Transcript

LSI Corporation Q1 2010 Earnings Call Transcript

LSI Corporation (LSI)

Q1 2010 Earnings Call

April 28, 2010 5:00 PM ET


Sujal Shah – Vice President, Investor Relations

Abhi Talwalkar – President and CEO

Bryon Look – Executive Vice President and CFO


Kaushik Roy – Wedbush Securities

Blayne Curtis – Jefferies

Craig Berger – FBR Capital Markets

Sukhi Nagesh – Deutsche Bank

Parag Agarwal – UBS

Daniel Amir – Lazard Capital Markets

Allan Mishan – Brigantine

Hans Mosesmann – Raymond James

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Harlan Sur – JP Morgan

Mark Heller – CLSA

Sanjay Devgan – Morgan Stanley

Mark Delaney – Goldman Sachs



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Ladies and gentlemen, thank you for standing by. Welcome to the LSI Corporation Investor Relations Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Sujal Shah, Vice President of Investor Relations at LSI. Please go ahead.

Sujal Shah

Good afternoon. And thank you for joining us. With me today are Abhi Talwalkar, President and Chief Executive Officer; and Bryon Look, Executive Vice President and Chief Financial Officer. Abhi will begin the call with some opening remarks and highlights from our business and then Bryon will provide results and guidance for the second quarter of 2010.

During this call, we will be mentioning non-GAAP financial measures which we may refer to as results excluding special items. Today’s earnings release describes the differences between our non-GAAP and GAAP reporting. You can find reconciliations of our non-GAAP financial measures to corresponding GAAP amounts on our website at


At that site, you can also find copies of the earnings release and a presentation, which highlights the key points from today’s call and provides an overview of our business. This may be particularly useful to investors who are new to LSI.

I want to remind you that today’s remarks will include forward-looking statements. Our actual results could differ materially from those suggested by the statements made today. Information about factors that could affect our future results is contained in our annual report on Form 10-K for the year ended December 31, 2009.

With that, it is now my pleasure to introduce Abhi Talwalkar.

Abhi Talwalkar

Thank you, Sujal. Good afternoon and welcome. I continue to be pleased with our execution and progress we are making across our businesses. Just last month, we held an event with analysts and investors where we talked about the successful transformation of LSI and the strong opportunities we have for growth as we move forward.

We appreciate all of the positive feedback we’ve received from analysts, existing holders and potential new shareholders following this event. I will reinforce some of those highlights today and also provide further updates in each of our businesses.

For Q1, revenues were at the high-end of the upwardly revised guidance range that we provided in mid-March. We grew 9% sequentially in our semiconductor business driven by increases in networking standard and custom products, SAN and IP licensing.

We also have revenue significantly above typical seasonality in our storage systems, HCD and SAS businesses reflecting improving end demand. Our first quarter non-GAAP operating margins were 11.7%.

LSI generated a double-digit operating margins in the first quarter of the calendar year, which is typically our weakest seasonal quarter, demonstrating the operating leverage we have created to the transformation of the company. During the quarter, we also repurchased $26 million worth of stock under our $250 million share repurchase authorization.

Before I talk about our businesses, here are the key takeaways that I would like you to get from this call. First, we continue to secure significant design wins with industry leaders across our businesses.

Second, we are positioned to grow faster than the markets we serve and third we are executing for our business and financial milestones and our focus on delivering solid progress, against our business model this year.

At our Analyst Day event last month, we showed the transformation at LS -- that has occurred at LSI over the past several years. This included focusing on fewer and larger end markets going after established and growing applications and narrowing our focus to market-leading customers.

This focus, combined with product leadership has resulted in a design win pipeline that is unprecedented in value and robustness for LSI. Our annual design win values over the past few years in our semi segment have been in the range of 1.5 to 2 times higher than our reported annual revenues in that segment.

Additionally, in our networking business, our strategy is resulting in an improved design win conversion rate, which is percentage of design win value that we expect to reach production and materializing the revenue. All of this gives us great confidence in the future revenue growth.

I’m very pleased that we are successfully executing on design win milestones we outlined. Last year, we had told the investment community that we would expand our customer base and HCD and growing SAS. Last month, we indicated that we had one SoC’s across all five HCD OEMs and that two of the top three server OEMs chose LSI SAS RoC and ServerRAID solutions for the 2011 [Intel RAM] server generation.

We also successfully intercepted the solid state drive market at the right time and continue to win with market leaders in networking, where we announced our first major Axxia network processor win at one of the top two wireless infrastructure players.

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