LSI Logic gets back on track

Resurgent chipmaker LSI Logic Corp. (NYSE: LSI) tacked on 1 1/8 to 54 5/16 Monday after Merrill Lynch reinstated coverage of the stock with a long-term "buy" recommendation and set a 12-month price target of $62 a share.

In its research report, Merrill said "with its intellectual property silicon cores and design methodology, we think the company offers a compelling value proposition to its customers: rapid time to market, lower costs and enhanced reliability."

Merrill also set a near-term "accumulate" rating.

In its latest quarter, LSI soared past analysts' estimates, earning $55 million, or 35 cents a share, on sales of $540 million.

First Call consensus expected it to earn only 30 cents a share in the quarter.

The $540 million in sales was a 36 percent improvement compared to the year-ago quarter when it earned $23 million, or 16 cents a share, on sales of $397 million. In the quarter, LSI's gross profit margin improved to 39.7 percent, up from 37.2 percent in the second quarter and 34.9 percent in the first quarter.

LSI shares hit a 52-week high of 62 1/2 in September after falling to a low of 14 last November.

Seventeen of the 21 analysts following the stock maintain either a "buy" or "strong buy" recommendation.