LSI Logic shares drop on executive departures
Shares of the custom chipmaker dip 20 percent after announcing the departure of two key executives, including one seen as the possible successor to the company founder and chief executive.
Executive vice president John Daane, who heads the company's communications chip business, is leaving to become chief executive of an unspecified company. Daane started at LSI in 1985 as an engineering intern while a student at the University of California, Berkeley.
Separately, chief financial officer Douglas Norby is leaving the Milpitas, Calif.-based company to become CFO at Sunnyvale, Calif.-based Novalux, a privately held fiber-optics company. He will continue to serve on LSI's board. Byron Look, who has headed LSI's merger and acquisition business, will become chief financial officer.
Merrill Lynch downgraded LSI on the news, shifting its rating down two notches to "neutral" from "buy."
"We view these announcements negatively," Merrill Lynch analyst Joe Osha wrote in a report Tuesday. "Daane has been instrumental in focusing and growing LSI?s communications business. Under his direction, the business has become a larger part of the total business, accounting for over 50 percent of total revenues."
Osha added that the resignations "could signal the beginning of difficult times for LSI."
At market close, LSI shares were down $5.81, or 20 percent, at $22.94.
With Daane's departure, LSI will split its communications business into two units: a networking products unit to be headed by Jordan Plofsky and the broadband communications unit, which will be led by Giuseppe Staffaroni. Both are current LSI executives who have been promoted to executive vice president.
LSI spokesman Kevin Brett said the two departures are unrelated.
Prudential Securities analyst Hans Mosesmann said in a research note Tuesday that Daane's departure leaves a void as he was seen as Corrigan's "heir apparent."
"There is now no clear path for succession," Mosesmann said. "We view the changes as slightly negative."
In a statement, Corrigan wished both men well.
"Both John Daane and Doug Norby have served LSI Logic with distinction and both were offered tremendous opportunities with other companies," Corrigan said.