* Sees Q1 revenue $620-$640 mln vs Street view $608 mln
* Raises Q1 EPS forecast to 7-11 cents from 4-10 cents
* Sets $250 million share buyback plan
* Shares up as much as 12 percent
(Adds CFO, CEO and analyst's comments; updates shares)
By Ian Sherr
SAN FRANCISCO, March 17 Microchip maker LSI
Corp (LSI.N) raised its first-quarter results forecast on
Wednesday on signs of renewed strength in corporate technology
spending, boosting its shares as much as 12 percent.
The company's updated outlook underscored expectations that
a corporate spending rebound will help lead the chip makers and
the technology sector in general out of the worst recession in
LSI's raised outlook follows speculation among investors
that Intel Corp (INTC.O) would beat earnings estimates for the
current quarter. That helped drive Intel shares up 4 percent
and the Philadelphia Semiconductor Index .SOXX up nearly 3
percent on Tuesday. [ID:nN16101121]
The company, whose chips are used in hard drives and
networking hardware, estimated first-quarter revenue at $620
million to $640 million, up from a previous $590 million to
$620 million and higher than the average estimate of $608
million, according to Thomson Reuters I/B/E/S.
Analysts estimate that LSI derives about 80 percent of its
revenue from corporations.
The company now expects first-quarter earnings per share of
7 to 11 cents, excluding special items. In January, it had
forecast a profit of 4 cents to 10 cents. Analysts, on average,
were expecting 7 cents a share.
LSI also said its board of directors had authorized a stock
repurchase program of up to $250 million, which is equivalent
to about 6 percent of its current market value of roughly $4
LSI Chief Financial Officer Bryon Look said that although
the company focuses on maintaining its cash position, it would
not rule out future repurchases.
"Our revised guidance reflects greater-than-anticipated
strength in the recovery of enterprise IT (information
technology) spending during the first quarter," LSI Chief
Executive Officer Abhi Talwalkar said in a statement, adding
that the company had seen strength across all product groups.
The Semiconductor index was up over 1 percent on Wednesday, as
were Intel shares.
For a graphic on U.S. semiconductor index performance,
All of that impressed Kaufman Brothers analyst Suji De
Silva, but he warned that LSI could still face challenges as
the economy recovers.
"I don't think people would say there's a clear enterprise
recovery yet -- these guys are levered to that," he said.
ROOM FOR GROWTH
At an investor conference on Wednesday, LSI executives said
they aim to expand margins in the company's hard drive segment
by focusing on revenue growth and cutting design costs, while
expanding the company's networking business as the world
economy continues to recover.
De Silva said that as LSI increases its production volume
to meet growing sales, its manufacturing partner will likely
offer better rates, allowing LSI to grow its margins.
Talwalkar said the company had recently secured an
important contract to deliver next-generation networking
equipment to a wireless infrastructure player. He declined to
specify the company, but mentioned Ericsson (ERICb.ST) and
Nokia's NOK1V.HE networking equipment arm Nokia Siemens
Networks as possibilities.
Company executives have long stressed the opportunity in
wireless network and infrastructure expansion as multimedia
wireless devices continue to proliferate.
"It's not just the capacity to move data around, but it's
the fact that the data getting moved around is much richer in
content," said LSI General Manager of Semiconductors Jeff
Richardson. "Now you look at all the things we can do on our
phones and you realize the amount of content flowing through
the network ... is tremendous."
With products aimed at both supporting the wireless
infrastructure delivering that data, and the storage servers
maintaining that information, LSI executives believed the
company was well positioned in the market.
"The firm's sharpened strategic focus and higher-value
product offering is contributing to improved design win
momentum that should translate into stronger revenue growth in
2011-2012," FBR Capital Markets analyst Craig Berger said in a
note to investors.
Talwalkar also said that although LSI has seen increased
demand in each of its segments, there is still room for growth
from its market share of 20 percent.
"We're certainly nowhere near saturated," he said. "We're
very confident that we've positioned the company both in terms
of our current product line and future plans, (as well as) the
pipeline that we've built, to grow faster than the markets that
we participate in across all our product lines."
Shares of Milpitas, California-based LSI rose as high as
$6.54, before trading up 8.76 percent at $6.33 on the New York
Stock Exchange late Wednesday afternoon.
(Reporting by Ian Sherr in San Francisco; Additional reporting
by Franklin Paul in New York; Editing by Lisa Von Ahn, Matthew
Lewis and Richard Chang)