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LSI Corporation (LSI) designs, manufactures and markets application-specific integrated circuits (ASICs) and other standard products. Although there can be significant upfront costs in designing an ASIC, it can be manufactured in volume after one is produced, and, therefore, the overall cost per chip can be relatively reduced.
There are many positives in the investment story surrounding LSI Corporation. LSI has a dominant market share in the SCSI controller and the Fibre Channel host adapter markets. The demand for storage continues to depict a strong secular trend driven by a number of factors, including the rise of data-intensive content such as video, and the ability of companies to collect a steady stream of consumer data over the Internet.
The company has challenges ahead. For one, LSI Corporation competes against larger and better-capitalized companies in its ASIC business. Firms such as IBM Corp. (IBM) have been taking market share in high-end ASICs, hurting both LSI's top-line and bottom-line. Second, firms such as Altera Corporation (ALTR) and Xilinx, Inc. (XLNX) have been successful at offering FPGAs [field-programmable gate arrays] as a substitute technology for ASICs.
Going forward, management stated that it had limited visibility and expects revenues around $670-$710 million in Q4. Non-GAAP EPS is expected around $0.08-$0.14. We maintain our Hold rating on the stock with a target price of $3.50.
Read the full analyst report on LSI.
Read the full analyst report on IBM.
Read the full analyst report on ALTR.
Read the full analyst report on XLNX.
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