MILPITAS, Calif., March 9, 2011 /PRNewswire-FirstCall/ -- LSI
Corporation (NYSE: LSI) today announced that it has signed a
definitive agreement to sell its external storage systems business
to NetApp, Inc. (Nasdaq: NTAP) for $480
million in cash. The company also announced today that its
board of directors has authorized a new stock repurchase program of
up to $750 million.
The company is emerging from a multi-year investment cycle which
has significantly increased the opportunities and potential of its
core semiconductor business. The strategic decision to divest the
external storage systems business was based on the company's
expectation that long-term shareholder value can be maximized by
becoming a pure-play semiconductor company.
"We're excited by the opportunities we have been pursuing in our
semiconductor business and are well positioned at the forefront of
a strong pipeline of design win ramps that we expect to drive top
line growth," said Abhi Talwalkar,
LSI president and chief executive officer. "Going forward as a
pure-play storage and networking semiconductor company, we believe
we can accelerate the achievement of our current business model,
establish a richer business model target, and deliver greater
long-term shareholder value."
Under terms of the agreement, NetApp will purchase substantially
all the assets of the LSI external storage systems business, which
develops and delivers Engenio® external storage systems products
and technology to a wide range of partners that provide storage
solutions to end customers. The business being purchased generated
revenues of $705 million in 2010.
The LSI RAID adapter business, which develops LSI® MegaRAID® and
3ware® storage controllers and software for direct-attached storage
environments, will remain with LSI.
Upon closing, most LSI external storage systems employees are
expected to join NetApp, a global provider of storage and data
management solutions.
"NetApp will build upon the success of the Engenio storage
platform and OEM business model to expand our total addressable
market and extend our market reach," said Tom Georgens, NetApp president and CEO. "We're
excited about the talented team that will join NetApp and the
valuable OEM partner relationships we're committed to supporting
and making successful."
Talwalkar added, "As the market requirements for external
storage systems continue to trend toward more comprehensive
solutions and offerings, greater investment levels are required to
enable additional growth opportunities. We believe that NetApp is
well positioned to provide the needed technologies and scale to
grow the external storage systems business and better serve our
customers going forward."
About the Transaction
As a result of the sale, LSI expects to eliminate $35 million to $40 million per quarter of
operating expenses upon closing of the transaction.
LSI expects the combined effect of the transaction, its
associated expense reduction, the new stock repurchase program and
anticipated strong revenue growth in its semiconductor business
going forward to be slightly dilutive to 2011 earnings per share
(EPS) and neutral to accretive to 2012 EPS.
The company does not expect to incur any material tax
obligations in connection with the transaction and expects to
provide additional financial information after closing the
transaction.
The transaction is expected to close in approximately 60 days,
subject to the satisfaction of customary closing conditions and
regulatory approvals including those required by the
Hart-Scott-Rodino Antitrust Improvements Act.
LSI Stock Repurchase Program
Stock repurchases under the newly authorized program are
expected to be funded from the proceeds of the sale of the external
storage systems business, available cash and short-term
investments.
"Our business is tracking consistent with the guidance we
provided in January, and we're confident that the steps we are
taking today will position us to achieve our business model
operating margin target by the end of 2011," said Bryon Look, LSI CFO and chief administrative
officer. "This new repurchase program underscores our belief in the
future earnings power of LSI as a pure-play semiconductor
company."
LSI Conference Call Information
LSI will hold a conference call today at 5 p.m. EST to discuss the transaction. Internet
users can access the conference call at http://www.lsi.com/webcast.
Subsequent to the conference call, a replay will be available at
the same web address.
Forward-Looking Statements: This news release contains
forward-looking statements that are based on the current opinions
and estimates of management. These statements are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking
statements. Factors that could cause LSI's actual results to differ
materially from those set forth in the forward-looking statements
include, but are not limited to: a delay in the closing of the sale
of our external storage systems business to NetApp; our ability to
eliminate costs related to our external storage systems business;
our ability to repurchase our common stock at prices we believe to
be advantageous; our reliance on major customers and suppliers; our
ability to keep up with rapid technological change; our ability to
compete successfully in competitive markets; fluctuations in the
timing and volumes of customer demand; the unavailability of
appropriate levels of manufacturing capacity; and general industry
and market conditions. For additional information, see the
documents filed by LSI with the Securities and Exchange Commission,
and specifically the risk factors set forth in the company's most
recent reports on Form 10-K and 10-Q. LSI disclaims any intention
or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
About LSI
LSI Corporation (NYSE: LSI) is a leading provider of innovative
silicon, systems and software technologies that enable products
which seamlessly bring people, information and digital content
together. The company offers a broad portfolio of capabilities and
services including custom and standard product ICs, adapters,
systems and software that are trusted by the world's best known
brands to power leading solutions in the Storage and Networking
markets. More information is available at www.lsi.com.
About NetApp
NetApp creates innovative storage and data management solutions
that accelerate business breakthroughs and deliver outstanding cost
efficiency. Discover NetApp's passion for helping companies around
the world go further, faster at www.NetApp.com.
Editor's Notes:
- All LSI news releases (financial, acquisitions, manufacturing,
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- LSI and the LSI & Design logo are trademarks or registered
trademarks of LSI Corporation. All other brand or product names may
be trademarks or registered trademarks of their respective
companies.
SOURCE LSI Corporation