Financially Speaking, LSI is Storage Company

Caution this blog contains forward looking statements that may cause you to believe that LSI Logic is actually a storage company.  No need to call your attorney's on this one.  If I told you that LSI had approximately $1.3B in storage-related revenues in 2005, would you care? I bet you would care if I told you that if you use certain Seagate disk drives, Brocade switches, EMC arrays and IBM FASt or DS 4800 systems, you are an LSI customer.

Last week, LSI held a financial analyst day to update investors on progress that the company has made since it brought in new management and vertically integrated all of its storage business units.  Unfortunately, LSI's storage businesses are most known for the Engenio systems that are sold to IBM, Sun, and a host of other OEMs.  More recently, Engenio was in the spotlight as an impending spin-off and IPO were halted.  It is a shame, because LSI's Custom Silicon and Storage Components Group, coupled with Engenio, compose a growing business unit that continues to expand LSI's top line as SAS interface technology and next generation Fibre Channel systems come to market.

35% of LSI's revenue does come from the consumer market, primarily from DVD-R devices.  They are one of the reasons my wife can watch 'Oprah' every night when she gets home from work.  I am not sure if should thank LSI or not, but I can pause live TV and fast forward commercials during the best show on television (Boston Legal).  LSI is looking to expand its consumer market opportunity with a new platform optimized for portable devices such as personal navigation systems.

These two markets (Storage and Consumer) will keep LSI's new chief, Abhi Talwalkar, pretty busy.  Mr. Talwalkar is an impressive leader that reenergized a long standing, and sometimes stangnant, semiconductor company.  He certainly has his challenges, but with $100M per quarter in operating cash flow, there are several opportunities where he and his management teams' innovative ideas can come to fruition via the way of acquisition or strategic investment.

LSI has two major consumer platforms and north of 30 storage related products and solutions.  65% of its revenue is storage related.  The company sells to a few big name consumer products suppliers.  It sells to every major server and storage system provider.  What's that old saying: If it looks like a duck, walks like a duck and quacks, then it must be a..You get the picture.  Expect to hear more from LSI as this news permeates through the industry and Wall Street.  The company has a lot to say and its customers will benefit from the new management team and the renewed focus on two markets.

In case you are wondering why the company chose these markets, think about how many MP3's you store, the vast amount of dog pictures you have on your PC, or that the DISK DRIVE in your TiVo.  The answer, my friends, is market convergence.  One day, you may have a little RAID box with a backup process so you do not lose any Oprah episodes and your kids math homework is  not 'misplaced' in the 'recycle bin'.