S&P's LSI Logic ratings unaffected

Standard & Poor's said LSI Logic Corp.'s (BB-/stable) announcement that it will focus on the information storage and consumer markets and redirect its research and development expenditures toward those industries, while favorable for the business, does not immediately affect the company's ratings or outlook.

LSI Logic will deemphasize its merchant application-specific integrated circuit business and deemphasize or divest noncore activities including its RapidChip and ZSP units, and the planned initial public offering of its storage systems subsidiary, Engenio Information Technologies Inc., has been cancelled.

The refocusing action likely would increase the company's reliance on a limited customer base, which has caused noticeable seasonality in past years. Still, S&P said that the action, if successful, could strengthen the company's presence in two growing areas and lead to improved revenue growth and profitability over time.

While the financial implications of these business changes have not been disclosed, LSI will become much less asset-intensive, and capital expenditures are likely to remain modest over the long term, the agency predicted. Continued improvement in operating performance could lead to stronger credit metrics and a positive outlook.

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