LSI Life Storage Inc

LSI Corporation (LSI) generated revenues of $501 million in the second quarter of 2011, up 6% year over year and sequentially and surpassed management’s expectations of revenues between $465 million and $495 million.

On May 6, 2011, LSI completed the sale of its external storage systems business to NetApp (NTAP). The financial results of the external systems business have been classified as discontinued operations.

The growth in revenues was driven by strength in the hard disk drive and networking business.

Server and storage semiconductor revenues (accounting for 72% of total revenues), which include hard disk drive silicon, SAS standard components, RAID storage adapters and software and storage area network ICs grew 7% sequentially to $359 million.

Revenues from the networking business (accounting for 23% of total revenues) were up 4% sequentially to $117 million. Revenues from the IT business were sequentially flat at $24 million.

Gross margin (excluding special items) came in at 51.9%, down from 52.4% in the previous quarter primarily due to unexpected costs associated with manufacturing scrap along with higher gold prices. Operating margin came in at 12.4% compared to 12.0% in the previous quarter.

Net income from continuing operations came in at $28.4 million or 5 cents per share compared to $10.1 million or 3 cents per share in the previous quarter and net income of $7.4 million or 1 cent per share in the year-ago quarter.  

Excluding one-time items, net income per share from continuing operations came in at 11 cents, easily beating the Zacks Consensus Estimate of 8 cents.

During the quarter, LSI Corp generated $38.3 million of cash from operating activities and used $15.7 million in capital expenditures. After repurchasing 42 million shares, LSI Corp ended the June quarter with cash and short-term investments of $906.5 million, up from $682.3 million at the end of the previous quarter. 

Going forward, management expects revenues between $535 million and $565 million in the third quarter of 2011, up 10% sequentially.

Revenues from server and storage semiconductor business and networking business are projected to be up in Q3. Gross margin is projected around 52%, +/- 1%.

Income from continuing operations is forecasted to come around $0.01 – $0.11. Excluding one-time items and stock-based compensation, income from continuing operations came in at $0.11 – $0.17.

The positive results and guidance boosted the stock price which gained 11.65% in after-hours trading to close at $7.19.

 
LSI CORP (LSI): Free Stock Analysis Report
 
NETAPP INC (NTAP): Free Stock Analysis Report
 
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