LSI 8-K LSI Reports Fourth Quarter and Full-Year 2011 Results

Exhibit 99.1

NEWS RELEASE

Investor Relations Contact:	Media Relations Contact:
Sujal Shah	Greg Thomas
610-712-5471	408-433-4236
sujal.shah@lsi.com	greg.thomas@lsi.com

cc12-07/C1205

LSI Reports Fourth Quarter and Full-Year 2011 Results

Quarterly revenue up 11% year over year, driven by share gains and new product cycles

MILPITAS, Calif., January 25, 2012 –LSI Corporation (NYSE: LSI) today reported results for its fourth quarter and full year ended December 31, 2011.

Fourth Quarter and Full Year 2011 Highlights

• Fourth quarter 2011 revenues from continuing operations* of $523 million

• Fourth quarter 2011 GAAP** income from continuing operations of 2 cents per diluted share

• Fourth quarter 2011 non-GAAP*** income from continuing operations of 13 cents per diluted share

• Fourth quarter operating cash flows of $55 million

• Full-year 2011 revenues of $2.04 billion, up 9.3% year-over-year

First Quarter 2012 Business Outlook

• Projected revenues from continuing operations* of $550 million to $590 million

• GAAP** (loss)/income from continuing operations in the range of ($0.07) to $0.03 per share

• Non-GAAP*** income from continuing operations in the range of $0.09 to $0.15 per share

* On May 6, 2011, LSI completed the sale of its external storage systems business. The financial results of the external storage systems business have been classified as discontinued operations in LSI’s financial statements. Our ongoing business is referred to as “continuing operations.”

** Generally Accepted Accounting Principles.

*** Excludes goodwill and other intangible asset impairment, stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, and gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above-mentioned items. It also excludes, in the case of non-GAAP net income, gain from the sale of the external storage systems business.

“Our growth last year in a challenging macro environment and our guidance for the first quarter of 2012 demonstrate the results of our ongoing strategic focus on delivering semiconductors and software that accelerate storage and networking applications,” said Abhi Talwalkar, LSI president and CEO. “We enter 2012 building on strong business momentum and are accelerating our revenue growth with share gains and new design wins at key customers and in critical markets such as mega datacenters, cloud computing, mobile networks and flash storage.”

Fourth quarter 2011 revenues from continuing operations were $523 million, in line with guidance, compared to $471 million generated from continuing operations in the fourth quarter of 2010, and compared to $547 million generated from continuing operations in the third quarter of 2011.

Fourth quarter 2011 GAAP* income from continuing operations was $11 million or 2 cents per diluted share, compared to fourth quarter 2010 GAAP income from continuing operations of $5 million or 1 cent per diluted share. Third quarter 2011 GAAP income from continuing operations was $32 million or 5 cents per diluted share. Fourth quarter 2011 GAAP income from continuing operations included a net charge of $62 million from special items, consisting primarily of approximately $29 million of amortization of acquisition-related items, $12 million of stock-based compensation expense and $21 million of net restructuring and other items. Fourth quarter 2011 GAAP results from continuing operations also included a $9 million net tax benefit, or 2 cents per diluted share, primarily related to the expiration of statutes of limitations and other non-cash tax items.

Fourth quarter 2011 GAAP net loss was $2 million or 0 cents per diluted share, compared to fourth quarter 2010 GAAP net loss of $13 million or 2 cents per diluted share. Third quarter 2011 GAAP net income was $29 million or 5 cents per diluted share.

Fourth quarter 2011 non-GAAP** income from continuing operations was $73 million or 13 cents per diluted share, compared to fourth quarter 2010 non-GAAP income from continuing operations of $53 million or 8 cents per diluted share. Fourth quarter 2011 non-GAAP results included a $9 million net tax benefit, or 2 cents per diluted share, primarily related to the expiration of statutes of limitations and other non-cash tax items. Third quarter 2011 non-GAAP income from continuing operations was $83 million or 14 cents per diluted share.

Fourth quarter 2011 non-GAAP net income was $60 million or 10 cents per diluted share, compared to fourth quarter 2010 non-GAAP net income of $90 million or 14 cents per diluted share. Third quarter 2011 non-GAAP net income was $83 million or 14 cents per diluted share.

Cash and short-term investments totaled approximately $935 million at quarter end. The company completed fourth-quarter purchases of approximately 5 million shares of its common stock for approximately $27 million. In 2011, the company purchased approximately 72 million shares of its common stock for approximately $499 million under its $750 million share repurchase program.

LSI recorded full-year 2011 revenues from continuing operations of $2.04 billion, a 9.3% increase compared to $1.87 billion in 2010. The company reported 2011 GAAP net income of $331 million or 55 cents per diluted share. Full-year 2011 GAAP results compare to full-year 2010 GAAP net income of $40 million or 6 cents per share.

Full-year 2011 GAAP net income included a net charge of $191 million in special items from continuing operations, consisting primarily of $116 million in amortization of acquisition-related items, $51 million of stock-based compensation expense, and $24 million of restructuring costs and other items. Full-year 2011 GAAP net income also included $241 million of income from discontinued operations, net of taxes, which included a gain of $260 million related to the sale of the external storage systems business.

Non-GAAP net income for 2011 was $303 million or 50 cents per diluted share, compared to 2010 non-GAAP net income of $333 million or 52 cents per diluted share.

Bryon Look, LSI CFO and chief administrative officer, said, “We remain focused on driving improvements to operating margins. The combination of share gains, new product cycles, and continued expense control are expected to drive increased profitability levels going forward.”

LSI 1Q2012 Business Outlook for Continuing Operations

	GAAP*	Special Items	Non-GAAP**
Revenue	$550 million to $590 million		$550 million to $590 million
Gross Margin	42% – 46%	$35 million to $45 million	50% – 52%
Operating Expenses	$250 million to $270 million	$35 million to $45 million	$215 million to $225 million
Net Other Income	$5 million		$5 million
Tax	Approximately $9 million		Approximately $9 million
(Loss)/Income From Continuing Operations Per Share	($0.07) to $0.03	($0.12) to ($0.16)	$0.09 to $0.15
Diluted Share Count	575 million		575 million

Capital spending is projected to be around $20 million in the first quarter and approximately $65 million in total for 2012.

Depreciation and software amortization is projected to be around $18 million in the first quarter and approximately $70 million in total for 2012.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss fourth quarter and full year 2011 financial results and the first quarter 2012 business outlook. Internet users can access the conference call athttp://www.lsi.com/webcast. Subsequent to the conference call, a replay will be available at the same web address.

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: our ability to successfully integrate and manage the SandForce business and retain its key employees; our ability to achieve anticipated synergies and to develop integrated new products following our acquisition of SandForce; our ability to eliminate costs related to the external storage systems business that we sold in 2011; our ability to repurchase our common stock at prices we believe to be advantageous; the impact of the recent flooding in Thailand; our reliance on major customers and suppliers; our ability to keep up with rapid technological change; our ability to compete successfully in competitive markets; fluctuations in the timing and volumes of customer demand; the unavailability of appropriate levels of manufacturing capacity; and general industry and macro-economic conditions. For additional information, see the documents filed by LSI with the Securities and Exchange Commission, 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.

About LSI

LSI Corporation (NYSE: LSI) designs semiconductors and software that accelerate storage and networking in datacenters and mobile networks. Our technology is the intelligence critical to enhanced application performance. The company applies its technology in solutions created in collaboration with our partners. More information is available at www.lsi.com.

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LSI and the LSI & Design logo are trademarks or registered trademarks of LSI Corporation. All other brand or product names may be trademarks or registered trademarks of their respective companies.

LSI CORPORATION

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

	December 31, 2011			October 2, 2011			December 31, 2010
Assets
Current assets:
Cash and short-term investments	$	935.5		$	878.9		$	676.6
Accounts receivable, net		246.5			248.4			326.6
Inventories		180.0			210.4			186.8
Prepaid expenses, assets held for sale and other current assets		60.7			91.4			73.8
Total current assets		1,422.7			1,429.1			1,263.8
Property and equipment, net		180.6			176.7			223.2
Goodwill and identified intangible assets, net		506.2			534.8			749.8
Other assets		122.6			132.5			188.1
Total assets	$	2,232.1		$	2,273.1		$	2,424.9
Liabilities and Stockholders’ Equity
Current liabilities	$	460.9		$	464.4		$	484.6
Pension, tax and other liabilities		712.2			533.7			622.8
Total liabilities		1,173.1			998.1			1,107.4
Stockholders’ equity:
Common stock and additional paid-in capital		5,629.2			5,629.6			6,004.3
Accumulated deficit		(4,037.0	)		(4,035.2	)		(4,368.5	)
Accumulated other comprehensive loss		(533.2	)		(319.4	)		(318.3	)
Total stockholders’ equity		1,059.0			1,275.0			1,317.5
Total liabilities and stockholders’ equity	$	2,232.1		$	2,273.1		$	2,424.9

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended									Year Ended
	December 31, 2011			October 2, 2011			December 31, 2010			December 31, 2011		December 31, 2010
Revenues	$	523,140		$	546,910		$	470,657		$	2,043,958	$	1,869,654
Cost of revenues		264,364			261,399			217,059			991,914		866,546
Amortization of acquisition-related intangibles		20,354			20,206			28,914			82,659		115,419
Stock-based compensation expense		1,597			1,460			1,821			6,921		7,044
Total cost of revenues		286,315			283,065			247,794			1,081,494		989,009
Gross profit		236,825			263,845			222,863			962,464		880,645
Research and development		139,061			137,937			136,087			552,342		539,520
Stock-based compensation expense		5,360			5,410			4,654			23,646		23,471
Total research and development		144,421			143,347			140,741			575,988		562,991
Selling, general and administrative		63,705			64,672			55,231			241,820		219,846
Amortization of acquisition-related intangibles		8,319			8,319			8,949			33,276		35,793
Stock-based compensation expense		4,881			4,883			5,226			20,343		23,487
Total selling, general and administrative		76,905			77,874			69,406			295,439		279,126
Restructuring of operations and other items, net		21,033			10,784			(1,043	)		23,719		9,201
(Loss)/income from operations		(5,534	)		31,840			13,759			67,318		29,327
Interest expense		—			—			—			—		(5,601	)
Interest income and other, net		8,124			7,610			7,701			26,472		13,848
Income from continuing operations before income taxes		2,590			39,450			21,460			93,790		37,574
(Benefit from)/provision for income taxes		(8,818	)		7,800			16,905			3,778		3,170
Income from continuing operations		11,408			31,650			4,555			90,012		34,404
(Loss)/income from discontinued operations, net of taxes		(13,194	)		(2,311	)		(17,956	)		241,479		5,568
Net (loss)/income	$	(1,786	)	$	29,339		$	(13,401	)	$	331,491	$	39,972
Basic (loss)/income per share:
Income from continuing operations	$	0.02		$	0.05		$	0.01		$	0.15	$	0.05
(Loss)/income from discontinued operations	$	(0.02	)	$	0.00		$	(0.03	)	$	0.42	$	0.01
Net (loss)/income	$	0.00		$	0.05		$	(0.02	)	$	0.57	$	0.06
Diluted (loss)/income per share:
Income from continuing operations	$	0.02		$	0.05		$	0.01		$	0.15	$	0.05
(Loss)/income from discontinued operations	$	(0.02	)	$	0.00		$	(0.03	)	$	0.40	$	0.01
Net (loss)/income	$	0.00		$	0.05		$	(0.02	)	$	0.55	$	0.06
Shares used in computing per share amounts:
Basic		563,721			567,790			616,809			585,704		638,998
Diluted		573,018			581,483			626,079			600,893		646,324

Reconciliations of certain GAAP measures to non-GAAP measures are included below.

	Three Months Ended									Year Ended
Reconciliation of GAAP net (loss)/income to non-GAAP net income:	December 31, 2011			October 2, 2011			December 31, 2010			December 31, 2011			December 31, 2010
GAAP income from continuing operations	$	11,408		$	31,650		$	4,555		$	90,012		$	34,404
Special items:
a) Stock-based compensation expense – cost of revenues		1,597			1,460			1,821			6,921			7,044
b) Stock-based compensation expense – R&D		5,360			5,410			4,654			23,646			23,471
c) Stock-based compensation expense – SG&A		4,881			4,883			5,226			20,343			23,487
d) Amortization of acquisition-related intangibles – cost of revenues		20,354			20,206			28,914			82,659			115,419
e) Amortization of acquisition-related intangibles – SG&A		8,319			8,319			8,949			33,276			35,793
f) Restructuring of operations and other items, net		21,033			10,784			(1,043	)		23,719			9,201
g) Write-down of investments, net of gain on sale		—			—			—			—			6,779
Total special items from continuing operations		61,544			51,062			48,521			190,564			221,194
Non-GAAP income from continuing operations	$	72,952		$	82,712		$	53,076		$	280,576		$	255,598
Non-GAAP income from continuing operations per share:
Basic	$	0.13		$	0.15		$	0.09		$	0.48		$	0.40
Diluted	$	0.13		$	0.14		$	0.08		$	0.47		$	0.40
GAAP net (loss)/income	$	(1,786	)	$	29,339		$	(13,401	)	$	331,491		$	39,972
Special items:
a) Total special items from continuing operations		61,544			51,062			48,521			190,564			221,194
b) Stock-based compensation expense – discontinued operations		—			(385	)		2,856			(592	)		12,439
c) Amortization of acquisition-related intangibles – discontinued operations		—			—			2,453			886			9,812
d) Restructuring of operations – discontinued operations		(67	)		3,040			49,548			40,863			49,684
e) Gain on sale of business		—			—			—			(260,066	)		—
Non-GAAP net income	$	59,691		$	83,056		$	89,977		$	303,146		$	333,101
Non-GAAP net income per share:
Basic	$	0.11		$	0.15		$	0.15		$	0.52		$	0.52
Diluted	$	0.10		$	0.14		$	0.14		$	0.50		$	0.52
Shares used in computing non-GAAP per share amounts:
Basic		563,721			567,790			616,809			585,704			638,998
Diluted		573,018			581,483			626,079			600,893			646,324

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended									Year Ended
	December 31, 2011			October 2, 2011			December 31, 2010			December 31, 2011			December 31, 2010
Operating activities:
Net (loss)/income	$	(1,786	)	$	29,339		$	(13,401	)	$	331,491		$	39,972
Adjustments:
Depreciation and amortization *		43,357			43,533			65,954			189,200			266,672
Stock-based compensation expense		11,838			11,368			14,557			50,318			66,441
Non-cash restructuring of operations and other items, net		4,747			9,571			45,681			35,282			45,681
Write-down of investments, net of gain on sale		183			—			—			183			6,779
Gain on sale of business		—			—			—			(260,066	)		—
Loss/(gain) on sale of property and equipment		78			(35	)		(142	)		(465	)		11
Unrealized foreign exchange (gain)/loss		(2,215	)		(2,381	)		(2,063	)		(2,015	)		4,311
Deferred taxes		(1,100	)		822			3,478			(20,044	)		3,512
Changes in assets and liabilities:
Accounts receivable, net		1,850			(14,262	)		(12,737	)		80,065			12,357
Inventories		30,399			(17,063	)		33,348			(29,804	)		(17,437	)
Prepaid expenses, assets held for sale and other assets		(526	)		735			506			(10,782	)		14,404
Accounts payable		(2,179	)		(10,990	)		(11,672	)		(3,879	)		(35,213	)
Accrued and other liabilities		(29,230	)		(5,601	)		(11,869	)		(112,709	)		(40,315	)
Net cash provided by operating activities		55,416			45,036			111,640			246,775			367,175
Investing activities:
Purchases of debt securities available-for-sale		(12,284	)		(14,552	)		(20,425	)		(50,967	)		(44,643	)
Proceeds from maturities and sales of debt securities available-for-sale		5,472			8,543			20,320			37,460			56,529
Purchases of other investments		—			—			—			(4,000	)		(316	)
Proceeds from sales of other investments		—			—			—			—			9,795
Purchases of property and equipment		(14,079	)		(9,643	)		(25,080	)		(60,920	)		(92,342	)
Proceeds from sale of property and equipment		22,683			43			281			23,622			840
Proceeds from sale of business, net of transaction costs		—			—			—			475,150			—
Proceeds from maturity of a note receivable		10,000			—			10,000			10,000			10,000
Net cash provided by/(used in) investing activities		11,792			(15,609	)		(14,904	)		430,345			(60,137	)
Financing activities:
Redemption of convertible subordinated notes		—			—			—			—			(349,999	)
Issuance of common stock		14,980			15,129			18,826			81,040			40,883
Purchase of common stock under repurchase programs		(26,999	)		(74,995	)		(32,199	)		(498,786	)		(249,942	)
Net cash used in financing activities		(12,019	)		(59,866	)		(13,373	)		(417,746	)		(559,058	)
Effect of exchange rate changes on cash and cash equivalents		(528	)		147			(558	)		(1,349	)		(4,485	)
Net change in cash and cash equivalents		54,661			(30,292	)		82,805			258,025			(256,505	)
Cash and cash equivalents at beginning of period		725,150			755,442			438,981			521,786			778,291
Cash and cash equivalents at end of period	$	779,811		$	725,150		$	521,786		$	779,811		$	521,786

* Depreciation of fixed assets and amortization of intangible assets, software, and premiums on short-term investments.