When Abhi Talwalkar took the baton from LSI Logic ( LSI) founder Wilf Corrigan in May 2005, he inherited a company that looked as if its best days were behind it. Still suffering a post-dot-com depression, LSI was undergoing an identity crisis as it adjusted to a changing market for application-specific, or ASIC, chips. Talwalkar, 42, has not been shy about making changes. The former head of Intel's ( INTC) server business sold LSI's semiconductor fab facility, pruned certain products and overhauled the company's business model. On Monday, chipmaker LSI Logic said it will acquire Agere in a $4 billion stock transaction, creating a company that will offer semiconductors, systems and software for storage, networking and consumer electronics products. The combined company would start out with annual revenue of around $3.5 billion. Since Talwalkar became CEO, LSI's stock has surged about 70%. Still, LSI's revival remains a work in progress. Sales and profit margins could do better, and the company's consumer electronics business is dangerously undersized. In an interview with TheStreet.com (before LSI said it would acquire Agere), Talwalkar discusses the state of LSI's turnaround, opportunities for expansion and private equity's newfound appetite for chips. TheStreet.com: Nine months ago you reorganized LSI around two pillars: storage and consumer. Last quarter's results were overwhelmingly weighted toward storage, with consumer losing ground. Are you still committed to consumer or are you rethinking the strategy?Talwalkar: Our objective in transforming the company was to move toward multiple growth platforms, or franchises. Being focused entirely on enterprise storage wasn't going to be sufficient to support our growth objectives, as well as feeling that adding some level of diversity is good. We identified consumer as the second platform to invest in. If you look at that category today, there is no dominant player. It's fragmented and made up of many subscale companies. Our perspective is that this market is poised to start consolidating over the next couple of years because it's getting fairly big. You've got a billion- or multibillion-dollar market in digital-TV silicon content, you've got the same in the set-top box, you've got the same in DVD players, you've got probably another $800 million to $1 billion in these portable products, and you've got digital cameras. So you've got a market here that you can probably add up to be $5 billion to $8 billion in size. It's not going to be composed of 30 little companies, and so there's going to be some consolidation.