LSI Corporate Update: October 26, 2011

Transcription

1 LSI Corporate Update: Investor Relations October 26, 2011

2 Forward-Looking Statements and Non-GAAP Financial Measures This presentation contains forward-looking statements that are based on our current opinions and estimates. 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 obtain all necessary regulatory approvals for the SandForce acquisition, the successful consummation of the acquisition; 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 to NetApp; 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. In addition, the financial information in this presentation ti is summary in nature. For additional information, see the documents filed by LSI with the SEC, including the risk factors set forth in our most recent reports on Form 10-K and Form 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. In this presentation, we may discuss non-gaap financial information. You can find comparable GAAP information and reconciliations between the non-gaap and GAAP information on our website at Non-GAAP financial information excludes goodwill and other intangible asset impairment charges, stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, and net gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above mentioned items. We sometimes refer to these items as special items. LSI Proprietary 2

3 LSI Overview Announced acquisition of SandForce on October 26, 2011 Strongly positioned to benefit from explosion in data and network traffic Large pure-play Storage and Networking Semiconductor company #1 or #2 in most of the markets with improved product competitiveness Large, high-quality design wins positioning company for exciting growth Structured for OI expansion as company emerges from investment cycle Enabled to move to a richer business model target in the near future Solid balance sheet with no debt Significant cash flow generation for returning value to shareholders 3

4 The LSI Transformation Focus & Build Foundation Design Win Value* $3.0B $3.9B Drive Value $2.2B $2.4B Fragmented Subscale Inconsistent Performance Large Legacy Headwind Divest Non-Core Businesses Rebuild With Deep Investment Cycle Improve Execution & Competitiveness Win Customers & Build Pipeline Server & Storage Connectivity Silicon Server & Direct Attached RAID Software & Adapters HDD & SSD Silicon Standard & Custom Networking Silicon Emerge from Investment Cycle Pure Play Semiconductor Business Model Achievement Richer Business Model Target < & Beyond * Design Win value represents LSI internal estimate of lifetime Semi revenue opportunity from awarded development projects. Not intended as annual revenue guidance 4

5 Key Takeaways from Q3 11 Earnings Call Financials Financials Revenues: $547M from continuing operations Non-GAAP Gross Margins: 52.2% Non-GAAP Operating Expenses: $202.6M Non-GAAP EPS from continuing operations: $0.14 Cash & Short-term Investments: $879M No Debt Q Product Revenue IP 5% Networking 21% Business Highlights Awarded 6Gb SAS Controller design for HP s Romley generation of servers First in the industry to break the million IOPS performance barrier with a single 12Gb SAS RoC Won multiple designs at a Tier 1 Server OEM with our PCIe WarpDrive solution Axxia multi-core communications processor has been adopted by the leading wireless equipment provider Server & Storage 74% 5

6 The LSI Investment Proposition Strong end-market fundamentals with high business IT/Service Provider exposure Explosion in consumer digital content and business data Significant growth in wireless and enterprise IP networking Continued strength in the business upgrade cycle Strong product fit into cloud-oriented build out A leader in our product categories A leader in flash-oriented solutions #1 in Server and Storage SAS components #1 in Server and Direct Attached Storage Adapters & Software #2 in HDD Silicon #2 in Network Processors Positioned for solid operating leverage Emerging out of deep investment cycle Solid top-line growth with operating expense control Large historical headwinds diminished and behind company Solid balance sheet and cash flows to enable return of capital to shareholders 6

7 Applications And Services Users Storag ge Capacity (Exaby ytes) High Exposure to Increases in Business IT Spending 1,200 1, Consumer PC Enterprise Infrastructure 2012 E 2013 E 2014 E 2012 E 2013 E 2014 E Source: IDC Jan 2011 Network Traffic (Ex N xabytes/mo) Continuous Demand Cycle F li G Fueling Growth th 2011E All other applications Video E Source: Cisco VNI

8 Strongly Positioned in Large, Growing Markets Businesses Product Lines 2010 LSI Revenue 2010 SAM* SAM CAGR* HDD/SSD HDD: SoC & Preamps SSD Controllers 32% $599M $3.0B 11% RAID Adapters Server & Storage Connectivity SAS Server External Storage SAN Fabric 38% $703M $1.2B 9% Networking Investment Standard Products Custom Products PC Connectivity 25% $474M $3.1B 7% Networking Legacy IP IP Licensing 5% $94M *Source: LSI estimates derived from 2010 IDC, Delloro Reports 8

9 HDD/SSD Product Line HDD SOCs SSD Controllers Solutions for Customers Preamps LSI SAM ( $B) $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 SSD Controller HDD PA/SoC E 2012E 2013E 2014E Source: IDC Jan 2011, LSI Estimates Favorable Market Trends 11% forecasted SAM growth, which factors in tablet growth Consolidation to 2 viable suppliers of SoCs and Preamps OEM s driving dual-source strategy 9

10 HDD/SSD: Gaining Share in a Growing Market LSI Differentiation 1 st to market with LDPC and 40nm technology Accelerating Read Channel cadence Signal to noise algorithm leader Enabling increased areal density Common Preamp for all platforms Delivering leading SSD IP Flexible business model Server & Storage expertise Str rong Grow wth Opportu nities New Customers Expanding customer base for SoCs and Preamps New Products Enterprise SOCs 40nm Client SOC s in volume production Custom SSD controllers Common Preamp technology Share Gains Supplier consolidation leads to share gain opportunities Mlti Multi-year share gains in preamps underway Strong Foundation Solid competitive position Large market Long-term roadmap in place 10

11 Server & Storage Connectivity Product Line Server SAS & RAID Flash SAN Fabric External Storage ROC/IOC Server RAID Adapters/SW Advanced Software (SW) PCI-e SSD Adapter Flash Management SW Application Aware SW Custom Fiber Channel Switch Custom Fiber Channel HBA SAS Expanders/Switch Storage Processors SAS IOC/Adapter LSI SA AM ($B) $1.8 $1.5 $1.2 $0.9 $0.6 $0.3 $ E 2012E 2013 E 2014 E SAN Server SAS & RAID Flash/PCI-E SSD External Storage SAS Favorable Market Trends Continued refresh cycle for Servers Virtualization & multi-core driving faster I/O performance & flash adoption Strong market growth expected in Flash & External Storage Source: IDC Dec 2010, LSI Estimates 11

12 New Products Driving Continued Growth PCIe Flash Solid State Adapter SAS Switch SAS in External Storage I/O Controller Storage Processor SAS/SATA Bridge Expander Accelerates applications for IO intensive Creating new Storage Switch segment SAS interconnect t growing over and latency sensitive workloads $1B+ new market opportunity 2-3x performance of current competitor Wins with Cisco, Supermicro and SGI 10x price/perf/port vs. Fiber Channel and iscsi Enables drive topologies >1,000 drives Optimal for cloud architectures incumbent Fiber Channel LSI first to ship 6Gb/s SAS end-to-end solutions with the broadest product line 12

13 Leveraging Core Strength To Expand Into Near Adjacencies LSI Differentiation Leading technology transitions in storage interconnects & storage area networks (SAN) Broadest family of server to external storage solutions Integrated MegaRAID software and silicon solutions Driving significant performance leadership over 4X performance gains in Server RAID in 2 yrs Accelerating product TTM pace Differentiation through advanced feature sets Growth Opportunitie es New Products First to introduce SAS switches; new $100M+ market PCI-E SSD adapters 1 st to sample 12Gb SAS to server OEMs Share Gains SAS in Intel Romley servers External storage SAS Strong Foundation 65% market share in core server SAS and RAID Market leader in Fiber Channel SAN 13

14 Networking Product Line Communication & Content Processors Media Processors DSPs Custom Silicon Solutions for the Wireless, Wireline and Enterprise Networking segments LSI SAM ($B) $5.0 $4.0 $3.0 $2.0 $1.0 Enterprise Wireline Wireless Favorable Market Trends Wireless infrastructure build outs Significant increases in networking traffic Richer & higher speed multi-media applications $ E 2012E 2013E 2014E Source: Dell oro Report 2010 Demand from Tier 1 Networking customers for differentiated custom silicon solutions 14

15 Bringing Differentiation to Our Customers LSI Differentiation Industry-leading quality-of-service, content inspection and security capabilities Multicore communication processors designed to achieve best cost/performance footprint Balanced integration of user plane, data plane and control plane in a single communication processor device Purpose-built multicore DSPs with industry-leading performance/watt efficiency i Leading edge technology & IP that enables customers to differentiate with Custom SoCs Flexible custom solutions engagement model ies Opportunit Growth New Customers Leading PC chipset OEM Leading data networking company New Products Next generation Gigabit Ethernet PHYs Wireless base station products Enterprise custom products Share Gains Ethernet PHYs, Communication Processor & DSP volume ramps Strong Foundation 50% Y/Y growth in investment areas Design wins at market-leading customers 15

16 LSI Proprietary 16 LSI Proprietary