LSI rises despite shaky 3Q results and outlook

AP News
Posted: Oct 25, 2012 2:16 PM
LSI rises despite shaky 3Q results and outlook

NEW YORK (AP) — Shares of chip designer LSI Corp. rose Thursday even though the company's third-quarter revenue and its fourth-quarter outlook fell short of Wall Street estimates.

THE SPARK: The Milpitas, Calif., company said late Wednesday that its net income rose 35 percent in the third quarter. The company earned 17 cents per share if one-time costs are excluded, and its revenue grew 14 percent to $624 million. Analysts expected net income of 17 cents per share and $638.1 million in revenue, according to FactSet.

LSI said it expects an adjusted profit of 11 to 17 cents per share in the current quarter on $570 million to $610 million in revenue from continuing operations. Analysts expect 18 cents per share and $649.3 million in revenue.

THE BIG PICTURE: LSI makes chips used in storage and networking. The company says that it's able to grow revenue and profitability even in a weak global economy, with "softness" in demand from key customers.

THE ANALYSIS: Wedbush analyst Betsy Van Hees downgraded LSI to "Neutral" from "Outperform," saying the company's three divisions are facing challenges as IT spending slows and demand for PCs wanes.

But Lazard Capital Markets analyst Daniel Amir said the company's flash storage business remains strong, and even the company's guidance, although below Wall Street expectations, still looks good compared to shares of competing companies.

SHARE ACTION: Up 49 cents, or 7.7 percent, to $6.78 in afternoon trading. Shares are up about 14 percent this year, but have been declining since early September.