Investor Presentation. January 28, 2009

Transcription

1 Investor Presentation January 28, 2009

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 reliance on major customers and suppliers; our ability to keep up with rapid technological change; our ability to compete successfully in competitive markets; our ability to achieve anticipated synergies following our acquisition of Agere Systems; fluctuations in the timing and volumes of customer demand; the unavailability of appropriate levels of manufacturing capacity; and general industry and market conditions. In addition, the financial information in this presentation 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 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, stock-based compensation, amortization of acquisition-related intangibles, restructuring of operations and other items, net, purchase accounting effect on inventory, loss on write-down of debt/equity securities, gain on repurchase of convertible subordinated notes, and acquired in-process research and development. 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 Who We Are LSI is a leading provider of silicon, systems and software solutions for the storage and networking markets. We have strong market presence, unique competencies and the ability to capitalize on growth opportunities. Our heritage includes more than 50 years of industry leadership and innovation with a strong IP portfolio. We are committed to driving industry-leading technologies and standards. LSI Proprietary 3

4 Key Takeaways from Q4 08 Earnings Call We have established a solid track record for execution and improved financial performance. Year-over-year achievements Delivered non-gaap earnings of $.44/share, representing nearly 70% growth over 2007 Expanded non-gaap gross margins by 320 basis points Generated operating cash flow of $278M Continued unprecedented design win activity We have made a number of changes that position us well to weather the downturn Reduction of expenses Divestiture of more volatile businesses Changed manufacturing strategy to an outsourced model We have 3 key objectives to emerge as a stronger company: Extend our competitive lead in key product areas Further elevate our design win momentum Effectively manage our strong cash position LSI Proprietary 4

5 LSI - Q408 Earnings Summary LSI Highlights Grew Systems, SAS, and SAN businesses yearover-year in 2008 Expanded our 6Gb/s SAS leadership, adding IBM, Dell, Fujitsu-Siemens, Intel and NEC as 6Gb/s SAS customers. Awarded new SoC wins at Seagate and Hitachi Ramping in IBM DS5000 mid-range storage system. Wins with Huawei, Ericsson and Nokia-Siemens in Networking Financials Revenues- $610M in Q408; $2.68B for 2008 Non-GAAP Gross margins - 45% for Q408; 47% for 2008 Non-GAAP EPS - $.06 in Q408; $.44 for 2008 Operating cash flow - $98M in Q4; $278M for 2008 Cash and short-term investments of $1.1B at year end Q Revenue Intellectual Property 3% ($21M) Networking DSPs, NPUs, Custom Silicon 19% ($114M) Storage Systems Storage Systems, RAID Adapters, RAID SW, System Mgmt SW 39% ($236M) Storage Semiconductors FC Switch, External Storage ICs, SAS, HDD SoCs 39% ($239M) LSI Proprietary 5

6 2007 Versus 2008 Performance Operating Model Revenue $2.60B** $2.68B Gross Margin* 43.7% 46.9% 47% R&D* as a % of Revenue 23.9% 24.0% 20% SG&A* as a % of Revenue Operating Income* as a % of Revenue 12.7% 11.8% 10% 7.1% 11.1% 17% **The $2.60B includes $268M of revenue from Consumer and Mobility, which were sold in 2007 LSI Proprietary 6 *Excluding special items

7 Explosion of Digital Content LSI Mission: To be the most trusted provider of technologies that connect people and information LSI Proprietary 7

8 LSI Storage Universe: Silicon + Systems + Software HDD/SSD ICs SAS Standard Products SAN Custom Solutions RAID Sub- Systems and Software LSI Proprietary 8

9 LSI: The Broadest OEM Storage Product Line: ~$2B in Annual Revenues Largest Storage OEM supplier Storage Systems & Software #1 OEM RAID Systems and Software Advanced OEM RAID solutions Value added RAID and data management software Major Customers Storage Semiconductors #1 SAN Custom Solutions Proven custom silicon targeted at high performance SAN interconnect solutions (HBAs and Switches) #1 SAS STD Products Industry leading family of SAS components in Server and Storage systems #2 Hard Disk Drive Components Interface Controllers, Read Channels, SoCs, & Pre-Amps in all HDD categories LSI Proprietary 9

10 THE Leading Provider of OEM External Storage Systems LSI Market Position Industry Proven Enterprise RAID Stack 1 st to market 2G & 4G FC, and SAS transitions Growth Opportunities New SAS/FC/iSCSI Entry Product line Host RAID Software and RAID-on-Chip Expansion Increasing Data Management Software Winning, ramping, and expanding customer base Future product line extensions Highlights 2008 represented the 7 th consecutive year of revenue growth IBM now shipping LSI 7900 technology under the DS5000 product line Believe we are worldwide leader in iscsi based on volumes shipped by our OEM customers HP selected our Storage Virtualization Manager software suite $1,000 $800 $600 $400 $200 $0 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Proven Revenue Performance ($M) LSI Storage Systems CAGR = 10% Growing External Storage TAM ($M)* SAN Storage Systems Market e 2008e 2009e 2010e 2011e PB 1-3 (Entry-level) PB 4-6 (Midrange) LSI Proprietary 10 *Source: IDC

11 Most Competitive And Complete HDD Portfolio LSI Market Position Broadest portfolio of products Read Channel and Preamp leadership 1 st to market with perpendicular recording and iterative decoding (65nm) Leading supplier to the HDD and Tape industries 30% (-1%) 7% (-) 8% (-2%) 8% (-1%) Growth Drivers Expanding footprint within existing customers Design wins at new customers Continued share gains in SoC and Pre-Amps Highlights Delivered world s fastest read channel 4Ghz data rates for enterprise drives Solely awarded multiple Desktop & Notebook SoC wins at Seagate, in addition to 2 future generations of Enterprise SoCs Secured new SoCs in Hitachi s desktop, notebook, and enterprise drives. Awarded Solid State Drive SoC at Seagate LSI technology shipped in > 1.7 billion drives 28% (+2%) 18% (+1%) HDD Provider Share (Units)* (Q/Q change) Source: IDC 1/2009 LSI Proprietary 11 * Source: IDC, April 2008

12 Millions Expanding SAS leadership LSI Market Position Server Storage Si TAM CAGR = 9. 9%* Clear leader in SAS; Co-developed SAS spec Broadest family of SAS products Leadership in servers and expanding in external storage Growth Drivers Server RAID-on-Chip (ROC) integration MegaRAID+ROC business expansion SAS in external storage systems SAS-SAS/SATA bridge silicon Highlights Grew 16% year-over-year in 2008 Dot Hill selected LSI 3Gb SAS controller Dell, Fujitsu-Siemens, IBM, Intel, NEC, and Sun have selected our 6Gb SAS RoC solutions Supermicro chose our 6Gb SAS solutions Higher Performance Lower Power Lower Cost Greater Density $300 $250 $200 $150 $100 $50 $0 ROC s Controllers & HBA s Increase $$ due to SAS Multiplier Effect SAS in External Storage LSI Proprietary 12 * Source: LSI Estimate

13 THE Leading Provider of Fibre Channel SAN Silicon Well positioned to gain share SAN Ports CAGR = 22% * LSI Share in 07 ** Additional Opportunity Share Gain Opportunities Through 09 Well positioned to gain share Millions of Ports Switch HBA e 2009e 2010e 2011e Highlights SAN HBAs SAN Switches Grew 28 percent year-over-year in 2008 Named Strategic Supplier of the Year by Brocade In development on Fibre Channel over Ethernet silicon designs and expect to ramp at major HBA and Switch companies in Gb/s HBA and Switch designs in production 8M+ FC HBA Silicon Shipped Since 2000 LSI #1 Share*** *Source: Dell Oro Group LSI ** Estimated Proprietary 13 *** Source: LSI Estimate, IDC

14 LSI Networking Market Focus Wireless Access Wireline Access Service Provider Network Wireless Base Station 2/3/4G Multi-Service Access Nodes Transactional / Data Warehouse Central Office Enterprise Network High Performance Media Gateway Voice / Video Service & Media Gateways IP / AN Backbone Content Delivery Highlights Awarded 2 significant design wins for Gigabit Ethernet Phy products Huawei shipping StarPro media processors Ericsson shipping communications processors in VDSL Access Nokia Siemens now shipping LSI communications processor & software in new mini-dslam Shipping StarPro media processors to 3 of top 4 networking OEMs OEM Customer Focus Business Gateways MSBG Enterprise Connectivity LAN/SAN Router & Switches Source: LSI Assessment Q1.08; Various Dell Oro and IDC reports; cisco.com, digital planet 2006 report, 2009/2010 data 14

15 LSI Unique Networking Advantage Broadest Portfolio of IP Flexible Engagement Model StarCore Digital Signal Processors Purpose-built with lowest cost & power per channel Advanced Communication Processors Separate data, control and security processing capabilities Tarari Content Processors Industry-leading content inspection & security technology Framers & Mappers Highly integrated solutions deliver PDH to packet solutions Modem and Firewire Best in class personal connectivity solutions Custom Silicon With over 10,000 US patents and patent applications, LSI is the world s leading networking SoC provider LSI IP Customer IP Flexibility - willingness / ability to work in the right model for the customer. 15

16 LSI Where We re Going We are committed to long term profitable growth. We are well positioned for the future Storage Systems Won IBM and HP for Storage Systems and Software Grew share significantly in Entry-level platforms in 2008 Storage Semi s 6Gb SAS wins at Dell, Fujitsu-Siemens, Intel, IBM, NEC, and Sun Awarded new desktop, notebook, and enterprise SoCs at Seagate and Hitachi New Solid State Drive SoC win at Seagate Networking Won 2 significant gigabit Ethernet Phy designs with a leading networking silicon provider Won new designs at Huawei, Ericsson, and NSN Strong patent portfolio and solid IP licensing revenues 16