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Chipmaker LSI meets lowered targets amid slowdown

The custom chipmaker matches reduced fourth-quarter targets but warns that the pain isn't over yet.

Custom chipmaker LSI Logic met reduced fourth-quarter targets Tuesday and warned the pain isn't over yet.

After market close, the maker of chips for communications, networking and multimedia applications reported fourth-quarter net income of $116 million, or 34 cents per share, excluding goodwill write-downs. That was in line with First Call's analyst consensus estimate, which was reduced after LSI's profit warning in December.

LSI predicted first-quarter earnings of 21 cents a share on revenue of roughly $660.9 million, a 12 percent sequential decrease from fourth-quarter sales of $751 million.

Analysts were looking for a first-quarter profit of 34 cents per share on sales of $780.9 million, according to First Call.

The company expects to grow about 10 percent in 2001, with faster growth in the second half, said CEO Wilfred J. Corrigan. First Call consensus was predicting annual revenue growth of 35 percent. Last month, the company pointed to an oversupply of chips on the market. The company currently is seeing slowing demand from customers, Corrigan said.

"The global broadband market has clearly eased, and networking and storage components are experiencing inventory rebalancing," he said. "Once the inventory buildup has been alleviated, we anticipate seeing a resumption of growth toward the second half of the year for communications applications."

Broadband entertainment business should revive in the second quarter, Corrigan said.

Business is strong for storage components, storage area networking, and Sony PlayStation 2 chips, he added. Fourth-quarter revenue increased 28 percent year over year and 3.2 percent sequentially.