LSI Life Storage Inc

LSI Corporation (LSI) recently launched a new line of MegaRAID SATA+SAS controller cards. This new line is designed to deliver the high I/O transaction performance required to accelerate the most demanding database applications and datacenter workloads.

LSI offers a variety of direct-attach RAID solutions as part of its MegaRAID ® and 3ware ® product families. These solutions enable data storage using multiple drives and various data replication strategies to minimize the impact of the failure of any one drive.

The MegaRAID and 3ware products include single-chip RAID-on-motherboard solutions, a broad family of PCIe RAID controller boards featuring SAS and SATA interfaces, and software-only RAID products for entry level RAID data protection.

The controllers are expected to be generally available in April through the LSI worldwide network of distributors, system integrators and VARs. 

Over the last two years, LSI Corp. has invested heavily in a number of product lines, some of which have started to contribute to the top line in 2012. The company began to address markets for storage systems products beyond its traditional OEM customer base in an effort to grow and diversify its business.

The company recently divested its lower margin Engenio storage systems. We believe the divestiture of the storage systems business will positively impact the margin structure along with ramp up of higher margin networking and SAS products.

LSI recently completed its acquisition of Sand Force, Inc. for $322 million. The acquisition is expected to strengthen LSI’s strong position in storage technology solutions. We view this acquisition as positive as it will also use the cash derived from the divestiture of the external storage systems business (accounting for roughly 27% of total sales) to NetApp Inc. for $480 million in cash.

The acquisition is also expected to enhance LSI's competitive position in the fast-growing server and storage PCIe flash adapter space. Management stated that PCIe flash-based adapters and flash storage processors will together represent a greater than $2 billion TAM expansion for LSI in the next several years.

We have a Neutral recommendation on LSI Corporation. In the short-run, we have a Zacks #2 Rank, which translates into a Buy rating.

 
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