Conservative Guidance Costs LSI Logic

An in-line forecast offsets strong results.
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LSI Logic

(LSI) - Get Report

again topped its financial targets, as second-quarter results were helped by strong demand for the company's storage components and storage systems.

Expectations for the third quarter, however, were more conservative than investors liked, and shares pulled back to $9.50 on Island ECN after closing the regular session off 0.7% to $9.92.

For the second quarter ended June 30, LSI reported net income of $25.3 million, or 6 cents a share, and sales of $481.3 million. During the same quarter last year, LSI earned $7.2 million, or 2 cents a share, on sales of $447.9 million.

Excluding one-time items and charges, LSI earned 11 cents a share vs. 7 cents in the second quarter last year. Analysts had expected earnings excluding charges of 9 cents a share and sales of $470 million.

During a midquarter update on June 10, LSI boosted its expected sales target range to between $465 million and $475 million from an earlier range of $450 million to $465 million.

For the third quarter, LSI said it expects earnings between 5 and 7 cents a share and sales between $470 million and $500 million. First Call was expecting sales of $491 million. Excluding charges, LSI predicted earnings between 10 and 12 cents a share vs. Wall Street's target of 11 cents a share.

The Milpitas, Calif.-based company makes chips used to access and store data, voice and video. End products with its processors include disk drives, servers, MP3 players, DVD players and network switches and routers.

LSI's stock has been on a tear this year as the company has made a

series of changes to its operating structure and some of its end markets have come back to life. For the year, share are up more than 80% but have wavered in the past week after topping out at $10.48, a 15-month high.

In May, LSI appointed a new chief executive, Abhi Talwalkar, a highly respected former


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executive. A month later, another Intel executive, Jeff Richardson, became LSI's executive vice president of global strategic planning.

LSI still has an IPO on hold for its storage systems business, which accounts for roughly one-quarter of LSI's total sales base. The unit grew second quarter sales to $118.9 million from $106.4 million in the previous quarter and $112.3 million in the same quarter last year.

Executives have said as recently as last month that they were waiting for more favorable market conditions before resurrecting IPO plans for the unit.