SAN FRANCISCO -- LSI ( LSI) swung to a profit in the third quarter, as healthy demand for its hard-drive chips and restrained spending boosted the company's bottom line.

Like just about every chipmaker in recent weeks, LSI said sales in the current quarter will decline sequentially.

The company said sales in the fourth quarter will range between $670 million and $710 million, a decline of 0.5% to 6% from the third quarter.

While LSI's projected revenue was below the average analyst expectation of $736 million, the forecasted decline was relatively moderate compared with the guidance delivered by other chip firms.

Shares of LSI were up 6 cents, or 1.69%, to $3.89, in after-hours trading on Wednesday.

In the three months ended Sept. 28, LSI posted a net income of $11.3 million, or 2 cents a share, compared with a net loss of $141 million, or 20 cents a share, a year ago, when LSI incurred massive charges related to its acquisition of Agere Systems.

Excluding $83 million in special charges and stock compensation expenses, LSI said it earned 14 cents a share in the third quarter. On that basis, analysts were expecting LSI to earn 13 cents a share.

"Significantly higher gross margins and continued focus on cost control contributed to third quarter EPS near the high end of our guidance range," said CFO Bryon Look in a statement.

LSI reported a gross margin of 41.6% in the third quarter, ahead of its own guidance.

The company said that gross margin in the current quarter will range between 38.5% and 41.5%, while adjusted EPS will range between 11 cents and 15 cents a share.

Analysts polled by Thomson Financial were looking for adjusted EPS of 14 cents a share.

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