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LSI earnings beat expectations

Semiconductor maker LSI Logic beats analyst expectations by 2 cents, but the stock is dropping in morning trading.

Semiconductor maker LSI Logic (LSI) failed to keep pace with its first-quarter results of a year ago, but still beat analyst estimates.

LSI, which reported after the market closed yesterday, posted net income for the quarter ending March 31 of $38.4 million, or 28 cents a share. That's down from $42.3 million, or 31 cents a share, in the same period a year earlier. Wall Street analysts were expecting 26 cents a share, according to a First Call consensus.

Nevertheless, in early trading today LSI's stock lost as much as 2-7/8 from yesterday's close of 39-3/8.

Revenue for the quarter was $308.3 million, down from $311.4 million for the first quarter a year earlier.

Despite the drop in revenue and net income compared to the same quarter of 1996, the company has showed some improvement for the past two consecutive quarters.

And analysts agree this quarter marks another step forward after the industry's collapse in July of last year.

"This quarter will be just another step along that improvement as inventories, OEMs, and distribution channels start to rebuild up to normal levels after being deflated in 1996," said UBS Securities analyst Charles Boucher.

Compared to the fourth quarter of 1996, this quarter's revenues were up 2.2 percent, gross margin expanded from 44.8 percent to 46.8 percent, and net income increased from 10.2 percent to 12.5 percent of revenues. The company says it is confidant that it can keep up the pace.

During the quarter LSI Logic made several announcements including the introduction of its eleventh generation, G11, CMOS/ASIC process technology; an agreement with Sun Microsystems to produce Sun's microSPARC-Ilep processor; a licensing agreement with Motorola's Information Systems Group in which Motorola's V.34 software modems will be embedded into LSI's advanced semiconductors; and the addition of the 66-MHz Peripheral Component Interconnect (PCI) architecture into LSI's CoreWare library of system on a chip cores.

Last week, the company passed its 52-week high of 42-3/8 per share.

In the later part of the year, analysts expect semiconductor manufacturers to continue to rebound as companies ramp up upgrades and move toward more expensive machines.

"We believe firmer DRAM prices and low inventories at OEMs and distributors...suggest that near-term visibility has improved," according to a recent Prudential Securities report.

For the industry, the first quarter has show some upside surprises. Advanced Micro Devices came in 11 cents higher than analyst expectations and Intel reported 14 cents higher than the analyst consensus.