LSI to Sell Mobility Products Business to Infineon for $450 Million
August 20 2007 - 4:42PM
PR Newswire (US)
Board Authorizes New Stock Repurchase Program for $500 Million
MILPITAS, Calif., Aug. 20 /PRNewswire-FirstCall/ -- LSI Corporation
(NYSE:LSI) announced today that it has signed a definitive
agreement to sell its mobility products business to Infineon
Technologies AG (NYSE: IFX; FSE) for $450 million in cash, plus a
performance-based payment of up to $50 million payable in the first
quarter of 2009. The sale is the result of a strategic review
within LSI of its business portfolio following its merger with
Agere Systems on April 2, 2007. LSI expects to benefit from the
sale by realigning its resources to pursue growth opportunities for
its storage systems and storage and networking semiconductor
businesses. "Since closing our merger with Agere, we have taken
significant steps to drive shareholder value, including
accelerating cost reductions, selling our consumer business,
transitioning to a global contract manufacturing model, and
completing a $500 million stock buyback," said Abhi Talwalkar, LSI
president and chief executive officer. "The sale of our mobility
business will allow us to further focus our efforts on attractive
market opportunities in storage and networking, where we have a
strong presence, significant differentiation and the scale needed
to be successful over the long term." Under terms of the agreement,
Infineon will purchase the LSI Mobility Products Group (MPG), which
designs semiconductors and software for cellular telephone handsets
and complete chip-level solutions for satellite digital audio radio
applications. Upon closing, approximately 700 LSI employees will
join the Infineon Communications Solutions business group, which
manufactures and markets end-to-end semiconductor products and
solutions for cellular, wireless and wired communications. Infineon
will also enter into additional agreements with LSI, including an
intellectual property agreement, a transition services agreement
and a supply agreement. "This move demonstrates our commitment to
maintain and grow our leadership in the wireless market. The
business acquired from LSI will significantly strengthen our
position at important mobile phone makers and will add highly
qualified experts to the Infineon team," said Dr. Wolfgang Ziebart,
President and CEO of Infineon Technologies. "Infineon's strong
commitment to the mobility market will ensure our customers have
access to a stronger supplier and a broader portfolio of solutions
to address their needs," added Talwalkar. "LSI is fully committed
to work with Infineon to provide a seamless transition for
customers." LSI Stock Repurchase Program LSI also announced today
that its board of directors has authorized a new stock repurchase
program of up to $500 million. The repurchases are expected to be
funded from the proceeds of the sale of the Mobility Products
Group, available cash and short-term investments. "This new program
underscores our confidence in the long-term benefits of the
strategic actions we have taken since closing our merger with Agere
and our belief in the future of LSI as a more focused company,"
said Bryon Look, LSI executive vice president and chief financial
officer. About the Transaction As a result of the sale, LSI expects
to avoid significant future investments needed to sustain a
competitive position in the mobility space and expects to
accelerate the progress toward attainment of its operating model
and improve return on investment. The Mobility Products Group
generated revenues of $186 million in the first half of 2007, with
$91 million in the second quarter of 2007. The company expects MPG
revenues to grow sequentially in the third quarter. LSI expects to
eliminate approximately $25 million per quarter in direct operating
expenses upon closing of the transaction. The company also plans to
reduce indirect costs associated with the mobility business. LSI
expects the combined effect of the actions announced today to be
roughly neutral to non-GAAP* earnings per share by the end of 2008.
LSI expects to use the proceeds from this transaction to fund the
aforementioned stock repurchase program and potential future
strategic acquisitions in the storage and networking spaces. The
company does not expect to incur any material tax obligations in
connection with the transaction and expects to provide additional
financial information upon closing of the transaction. The
transaction is expected to close in the fourth quarter, subject to
the satisfaction of customary closing conditions and regulatory
approvals including those required by the Hart-Scott-Rodino
Antitrust Improvements Act. *Non-GAAP (Generally Accepted
Accounting Principles) excludes stock-based compensation,
amortization of acquisition-related intangibles, restructuring of
operations and other items, net, purchase accounting effect on
inventory, loss on write-down of equity securities and acquired
in-process research and development. It also excludes the income
tax effect associated with the above mentioned items. 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: the challenges and costs of integrating and
restructuring our operations and achieving anticipated synergies
following our recent acquisition of Agere Systems; a delay in the
closing of the sale of our mobility business to Infineon
Technologies; our ability to eliminate indirect costs related to
our mobility business; our ability to repurchase our common stock
at prices we believe to be advantageous; our ability to
successfully and timely transition our assembly and test operations
to third parties; fluctuations in the timing and volumes of
customer demand; our reliance on major customers and suppliers; our
ability to compete successfully in competitive markets; our ability
to keep up with rapid technological change; 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 SEC, 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, Networking and Mobility markets. More
information is available at http://www.lsi.com/. About Infineon
Infineon Technologies AG, Neubiberg, Germany, offers semiconductor
and system solutions addressing three central challenges to modern
society: energy efficiency, communications and security. In fiscal
year 2006 (ending September), the company achieved sales of Euro
7.9 billion (including Qimonda sales of Euro 3.8 billion) with
approximately 42,000 employees worldwide (including approximately
12,000 Qimonda employees). With a global presence, Infineon
operates through its subsidiaries in the US from Milpitas, CA, in
the Asia-Pacific region from Singapore, and in Japan from Tokyo.
Infineon is listed on the Frankfurt Stock Exchange and on the New
York Stock Exchange (ticker symbol: IFX). DATASOURCE: LSI
Corporation CONTACT: Investors, Sujal Shah, +1-610-712-5471, , or
Media, Robert Guenther, +1-610-712-1514, , both of LSI Corporation
Web site: http://www.lsilogic.com/
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