LSI Looks Ahead

NEW YORK -- Component specialist LSI attempted to put its recent problems behind it today, outlining plans for new products tied to Solid State Disk (SSD), 10-Gbit/s Ethernet, and drive-level encryption at its annual analyst event. (See CEO Talks of 'Refounding' LSI and LSI Announces Board Changes.)

The semiconductor and storage systems vendor has had to weather a financial storm in recent quarters, absorbing blows from mergers, weakness in its networking business, and a slowdown in IT spending. (See LSI Promises Better, LSI Completes Agere Merger, LSI Reports Q2 Results, LSI Earnings Exceed Guidance, and LSI Announces Board Changes.)

LSI execs at this morning's meeting gave a peek into the firm's product roadmap, joining the growing number of vendors looking to exploit Solid State Disk (SSD) technology. (See Solid Data, Solid State for Small Biz, In-Stat Says SSDs on Way, and IDC: SSDs to Go Mainstream.) "We see SSDs becoming part of the enterprise storage arena at some point in time," said Jeff Richardson, executive vice president of LSI's networking and storage products group.

The exec explained that LSI is currently building a data management technology encompassing both SSD and traditional magnetic disk technology. "We're developing RAID technologies to address both these media in a common environment."

Although he did not go into specific details, the technology is likely to come from LSI's recent acquisition of storage management and virtualization specialist StoreAge. (See LSI Annexes StoreAge, LSI Buys StoreAge, and LSI Sniffs Out StoreAge.)

LSI also has its eye on the emerging market for 10-Gbit/s Ethernet solutions. (See 10-Gig Trends Up and Is It Time for 10-Gig?) "We're working very closely with the storage OEMs and the network OEMs on some innovative multi-protocol solutions," said Richardson. One such solution will be a transceiver capable of support both Fibre Channel and 10-Gbit/s Ethernet, he said.

Security is another key area of focus. "We're investing in new technologies around encryption and key management," said Richardson. "We're developing encryption capabilities that will go into disk drive silicon as well as our SAS storage controllers."

LSI, which recently announced its second-generation MegaRAID adapters, kept returning to the theme of SAS throughout the analyst meeting. (See LSI Delivers Adapters and SAS Wave Breaks Big.) "The emergence of SAS in storage systems is only just getting started," said CEO Abhi Talwalkar. "We will see SAS in the midrange as it becomes a credible alternative for Fibre Channel drives."

Despite the upbeat tempo of today's meeting, the CEO nonetheless admitted that he is not happy with his firm's recent performance. "Q2 was very challenging, very disappointing," he said. "We're glad it's behind us and we're making pretty good progress."

LSI, which spent $4 billion to buy chip specialist Agere earlier this year, has almost completed the integration of the two companies, although there is clearly work left to do. (See LSI to Buy Agere for $4B.) "Bringing two ERP platforms together is a process that spans a number of quarters -- typically, it's four to six quarters," he said, adding that the process is already underway.

The exec explained that the two vendors are also merging their R&D efforts. "You can't converge that design platform overnight -- that will take some time."

LSI has been hard at work restructuring other parts of its operation recently, outsourcing its manufacturing facilities and completing the sale of its consumer products division to Magnum Semiconductor earlier today. (See LSI Completes Sale.) "We have taken steps to narrow the focus," said Talwalkar.

The vendor also hinted that it is planning to follow its Agere, StoreAge, and SiliconStor acquisitions with more M&A. (See LSI Lassos SiliconStor and LSI Pays $55M for SiliconStor.) "We will continue to do that, [but] I don't think that we will see large acquisitions from us in the near term," said CFO Bryon Look.

There has been some speculation that 10-Gbit/s HBA specialist iVivity could be a potential target, but Talwalkar refused to flesh out the vendor's acquisition strategy during a Q&A session today. (See iVivity Chalks Up $10M More and IVivity Ingests $26M.) "It would be premature [to discuss the LSI M&A strategy]," he said, adding that his firm is currently focused on getting the most out of its Agere, StoreAge, and SiliconStor acquisitions.

In trading today, shares of LSI fell 27 cents (3.62%) to $7.19.

— James Rogers, Senior Editor Byte and Switch