Shares of LSI Logic ( LSI) rose Thursday after a Wall Street analyst blessed the company's turnaround plan.

Citing LSI's recently announced decision to phase out some of its products and focus exclusively on the storage and consumer markets, Bank of America analyst Sumit Dhanda said LSI was "on a path of improved profitability."

Dhanda estimated the potential savings from LSI's moves to be between $50 million and $70 million and changed his rating on LSI from sell to buy. He set a new target price of $13.50.

LSI's stock was up 65 cents, or 6%, to $11.46 in midday trading.

Under the leadership of former Intel ( INTC) senior executive Abhi Talwalkar, LSI has taken a series of steps to reorganize its business. The company said last September that it would sell its sole chip-fabrication facility in Oregon and move completely to a fabless model to cut costs.

Last week, the company said it would sell a chunk of its communications business, cease development on its RapidChip product and focus on the consumer and storage markets.

Dhanda said LSI's expectations of 5% to 7% revenue growth in its storage business was too modest. He also said the company's gross margin target of 45% may prove conservative. Dhanda doesn't own shares of LSI, and Bank of America has no business with the company.

Dhanda set a 2007 EPS forecast of 73 cents on revenue of $2.25 billion. The average analyst estimate, according to Thomson First Call, projects EPS of 66 cents on sales of $2.21 billion.

While LSI won't see a meaningful payoff from its actions until 2007, "we now believe that a bearish stance on the shares is no longer warranted, as LSI has morphed into a restructuring story that is likely to produce a more profitable business model," Dhanda said.