December 5, 2000 7:40 AM PST

LSI Logic warns it will miss profit targets

Custom-chip maker LSI Logic on Tuesday warned that it will miss previously stated fourth-quarter profit targets due to a short-term customer slowdown.

LSI Logic said it anticipates fourth-quarter earnings of 34 cents a share, as opposed to the company's prior goal of 36 cents a share. Analysts polled by First Call/Thomson Financial expected LSI to match its projections.

LSI, based in Milpitas, Calif., also said it now expects fourth-quarter revenue to be up 3 to 4 percent sequentially from the $728 million the company had reported in the third quarter. The chipmaker had expected a 10 percent increase in revenue in the quarter.

The company attributed the profit shortfall to a buildup in warehouse inventory as a result of a sales slowdown. LSI said the slowdown is short term.

Two weeks ago, LSI saw its shares shed 20 percent following the departure of two key executives. Executive vice president John Daane, who was seen by many as the possible successor to company founder and chief executive Wilfred Corrigan, left LSI to become chief executive of Altera. The company also recently bid farewell to its chief financial officer Douglas Norby, who ditched LSI to become CFO at a privately held fiber-optics company.

LSI said fourth-quarter gross margin, a measure of profitability, is expected to be comparable to 43.3 percent in the third quarter. Its prior target was a slightly higher gross margin of about 44 percent.

The company said that it is still on track to report record revenue and profits in the fourth quarter despite the warning.

 

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