SAN JOSE, Calif. Abhi Talwalkar is not calling the bottom. But the chief executive of LSI Corp. is looking for glimmers of hope in his company's latest quarterly results in which it lost $104 million as sales tumbled 27 percent compared to the first three months of 2008.
The company generally expects flat to declining sales in the next three months as spending remains tight in business and carrier networks where the company sells its chips, boards and systems. But Talwalkar said in recent weeks the company has seen some positive signs.
LSI "saw strength in the last six weeks or so in hard drive and networking" chip sales, Talwalkar said in a conference call Wednesday (April 29). "Q2 bookings are starting to get back to our historical experience which would suggest inventories and demand are starting to reach equilibrium, but whether end market demand is stabilizing--that's the unknown for all of us."
The company posted first quarter 2009 revenues of $482 million down 21 percent compared to the fourth quarter of 2008. Losses ballooned compared to a $14 million shortfall a year ago, due to charges including $42 million of amortization from an acquisition, $25 million in restructuring and $18 million of stock-based compensation expenses.
LSI ended the quarter with cash and marketable securities valued at $1.1 billion which it suggested it intends to hold as a hedge against the bad market conditions. The company tightened its belt on operating expenses which declined eight percent sequentially.
Talwalkar made a pitch to Wall Street analysts on the call that over the next year LSI could grow in a difficult market. He alluded to a number of design wins including multiple DSPs going into base stations from HuaWei of China where a significant build out of 3G cellular networks is continuing despite the downturn.
LSI is gaining ground with hard disk chip sales to Seagate and Hitachi thanks in part to its latest read channel devices. The company expects hard disk makers including Fujitsu, Samsung and Western Digital to move to dual-sourcing, opening new sockets for LSI, Talwalkar added.
LSI is working with three OEMs to develop a controller for solid state drives that could go into production early next year, he said. In addition, the company is about to announce a strategic deal to design database accelerators using the coprocessor acquired from startup Tarari.
"Although IT purchases have temporarily contracted, this can't persist long," he said, pointing to rising data traffic due to increasing use of video and mobile networks.