* Quarterly revenue meets expectations
* To buy SandForce solid-state drive maker
* Stock down after hours
By Noel Randewich
Oct 26 Chipmaker LSI plans to buy
high-end storage provider SandForce for $322 million to
strengthen its presence in the small but fast-growing market.
LSI also reported third-quarter results in line with
expectations as flooding in Thailand disrupts the country's
hard disk drive industry, for which LSI makes controllers.
Competition has been brewing in the young but booming
market for flash memory used in corporate data centers, and
analysts foresee consolidation as larger players move in.
Using solid-state drives made of NAND flash memory chips --
typically found in smartphones -- is expensive but is catching
on with social media companies, banks and other corporate
customers willing to pay top dollar for speedy and
As prices come down, solid state drives are expected to eat
into demand for traditional hard drives made by companies like
Seagate Technology , which is one of LSI's top
"If hard disk drives are going replaced with solid state
drives and you're not a player there, then you're going to be
in trouble," said Merriman Capital analyst Kaushik Roy.
LSI will assume $48 million of unvested stock options held
by employees and the acquisition is expected to close in early
2012, the company said on Wednesday.
Chief Executive Abhi Talwalkar told analysts on a
conference call that LSI's business has been hurt by flooding
in Thailand that has killed at least 373 people since mid-July
and devastated industrialized areas in the center of the
Seagate's factories in Thailand, the world's second-largest
exporter of hard drives, are running but it has warned it could
face problems getting components from suppliers.
"Our customers have talked about the disruption to their
factories, logistics, power and availability of labor. Some of
LSI's subcontractors in Thailand have been similarly impacted
and the effects of this have been factored into our outlook,"
Talwalkar also said the quarterly revenue guidance takes
into account a likely 10 percent dip in LSI's hard drive
business during the quarter caused by the flooding.
LSI forecast fourth-quarter adjusted profit from continuing
operations of 6 cents a share to 14 cents a share on revenue of
$500 million to $550 million.
Third-quarter revenue from continuing operations was $547
million, up from $453 million a year ago.
Analysts on average expected third-quarter revenue of $547
million, according to Thomson Reuters I/B/E/S.
In May, LSI sold its Engenio external storage business to
NetApp for $480 million, leaving LSI to focus on
microchips for hard drives and networking equipment.
The Milpitas, California company's third-quarter non-GAAP
income from continuing operations was $83 million, or 14 cents
per share, compared with $63 million, or 10 per diluted share,
a year earlier and line line with expectations.
Shares of LSI were down 3.9 percent in extended trading
after closing up 2.42 percent at $5.93.