Broad-Based End Customer Demand Fuels Strong Sequential Growth
Third quarter 2007 GAAP* net loss was $141 million or 20 cents per diluted share, compared to third quarter 2006 GAAP net income of $44 million or 11 cents per diluted share. Third quarter 2007 GAAP results compare to second quarter 2007 GAAP net loss of $378 million or 50 cents per diluted share. Third quarter 2007 GAAP net loss included a net charge of $184.7 million from special items, including $101.2 million of restructuring costs relating primarily to the sale of our mobility business, $70.6M in the amortization of acquisition-related items and $21.8 million of stock-based compensation expense.
Third quarter 2007 non-GAAP** net income was $44 million or 6 cents per diluted share, compared to third quarter 2006 non-GAAP net income of $65 million or 16 cents per diluted share. Second quarter 2007 non-GAAP net loss was $14 million or 2 cents per diluted share.
Cash and short-term investments totaled approximately $1.1 billion at quarter end. LSI also announced today that to date it has purchased approximately 67.3 million shares of its common stock for approximately $549 million under two repurchase authorizations totaling $1 billion.
"Our solid quarterly results were driven by strong end customer demand in our storage and networking businesses and by achieving substantial cost reductions during our second full quarter of combined operations with Agere," said Abhi Talwalkar, LSI president and chief executive officer. "Since the beginning of the third quarter, we have made significant progress on completing the first phase of our three-phase business acceleration plan, including completing the sale of our consumer products business to Magnum Semiconductor, our mobility products business to Infineon Technologies and our Thai final assembly and test operations to STATS ChipPAC.
"As a more focused company, we are now experiencing a significantly higher level of engagement with our customers and substantial increases in design win opportunities," added Talwalkar. "We are also continuing to execute our strategy to invest for long-term revenue growth in our core areas of storage and networking, acquiring Tarari, Inc., a recognized leader in deep packet inspection technology that enables advanced security and network control for service provider and enterprise networks. Through these initial actions and our strong focus, we are poised to achieve our long-term growth and profitability objectives."
Bryon Look, LSI chief financial officer, said, "We experienced healthy demand in both our semiconductor and storage systems segments, with double-digit sequential revenue growth in storage and networking semiconductors. Our continuing focus on driving organizational efficiencies and maintaining tight controls contributed to significantly lower operating expenses and improved margins."
LSI Fourth Quarter 2007 Business Outlook GAAP* Special Items Non-GAAP** Revenue $700 million $700 million to to $730 million $730 million Gross Margin 36 - 41% $30 to $50 million 43 - 45% Operating Expenses $270 million $25 to $45 $245 million to to $300 million $255 million million Net Other Income $2 million $2 million Tax Approximately Approximately $12 million 25% Net (Loss)/Income Per Share ($0.09) to ($0.06) to $0.05 to $0.03 ($0.14) $0.09 Diluted Share Count 700 million 705 million
Capital spending is projected to be around $20 million in the fourth quarter and approximately $60 million in total for 2007.
Fourth quarter depreciation and software amortization is expected to be approximately $20 million.
LSI Conference Call Information
LSI will hold a conference call today at 2 pm PDT to discuss third quarter financial results and the fourth quarter 2007 business outlook. 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 or may be accessed by calling 1-866-410-5843 within the U.S. and 1-203-369-0645 for all other locations.
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; 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.