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 the Investor Relations section of our website at www.lsi.com/webcast. At that site, you can also find a copy of the earnings release and a presentation highlighting the key points from today's call. Also on the site, we have posted a full video replay of our Analyst Day event along with slides, which provide in-depth information about each of our businesses.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 future results is contained in our Form 10-K for the year ended December 31, 2011, our first quarter 10-Q and today's earnings release. With that, it is my pleasure to introduce Abhi Talwalkar. Abhijit Y. Talwalkar Thanks, Sujal. Good afternoon, and welcome. While we are in an environment with broad macro challenges, our strong results for the second quarter are a testament to our sound strategy, the contribution from our new product cycles in exciting and growing market segments and solid execution. Our revenue of $660 million was above the midpoint of guidance and represented 32% year-over-year growth and 6% sequential growth, driven by increases in our HDD business and better-than-expected growth in our newly acquired SandForce flash business. We continue to make progress towards our new business model target of 20% to 22% non-GAAP operating margins. In Q2, we obtained 18.6% non-GAAP operating margins, along with non-GAAP earnings per share of $0.21, which is at the high end of our guidance range. Going forward, our guidance for Q3 reflects a cautious outlook due to the macro environment and declines in shipments of SoCs and preamps for hard disk drives. Based on recent industry trends and revenue revisions by our largest customer, we believe that demand eroded faster than industry supply in the month of June. Therefore, we expect to see reductions in demand for our components in Q3, as our customers adjust inventory to bring supply back in line with lower demand levels. We expect this to be a single-quarter inventory adjustment and expect to see higher HD-related shipments in Q4, provided that the PC market experiences some level of normal seasonality.
While we expect our third quarter to be impacted by the macro environment and anticipated inventory adjustments in the HDD market segment, as the management team, we are driving improvements to what we can control. Our efforts have led to significantly better financial results and solid positioning in growing markets reflected by new product cycles and share gains. Year-over-year versus 2Q '11, revenues have grown over 30%; and on a non-GAAP basis, gross margin has expanded by 210 basis points; operating margins have grown from 12.4% to 18.6%; and EPS has doubled, from $0.10 a share to $0.21 per share.As a company, LSI is centered in applications driving strong secular growth in data and traffic. We are rapidly building momentum in the fastest-growing sectors in technology, such as flash oriented storage and mega data centers. As flash storage adoption increases in notebooks and data centers, LSI is in a leading position to deliver significant growth. We focused our strategy on hitting the inflection point of flash adoption, and as a result, have achieved key design wins that we believe will enable LSI to be the leader in this emerging, high-growth market segment. We believe we have the broadest and most competitive lineup of flash-based storage solutions. While end-demand environments remain challenging, we expect to benefit from a number of new product cycles that will be ramping into production in the coming months. In addition to our ramps of our SandForce FSPs, Q3 will be the first quarter of initial production ramps for our Nytro PCIe flash adapter products and Axxia multi-core standard products, and we remain on track to be in production with all HDD customers by the end of this year. Read the rest of this transcript for free on seekingalpha.com