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WIKI ANALYSIS
Headquartered in Milpitas, California, LSI Corporation, designs, manufactures and markets application-specific integrated circuits (ASICs) and other standard products. An ASIC is a chip designed for a particular application. ASICs are built by connecting existing circuit building blocks in new ways. Although there can be significant upfront costs in designing an ASIC, it can be manufactured in volume once one is produced, and, therefore, the overall cost per chip can be relatively low.
In the communications end-market, ASICs can be found in edge switches and routers in the enterprise, metropolitan and wide area networks. They are also found in such consumer devices as: DVD players and recorders, digital set-top boxes, cable modems, DSL modems, residential gateways and digital cameras. ASICs are designed into storage area network switches and host adapters, storage systems, and hard disk drives.
LSI has two reportable segments: Semiconductor and the Storage systems. There are four businesses that comprise the Semiconductor segment Storage semiconductors, Networking, Mobility, and Consumer devices. The Networking and the Mobility business together can be treated as the Communications business. In fiscal 2006, the company generated $1.982 billion in revenue. LSI has many rivals within and outside the United States, including IBM, Texas Instruments, Philips Electronics, Toshiba, Adaptec, Broadcom, and MediaTek.
On April 2, LSI completed its merger with Agere in an all-stock deal. Each outstanding share of the Agere common stock was converted into the right to receive 2.16 shares of LSI common stock at the effective time of the merger at an average price of $9.905 per share. As a result, about 368 million LSI stocks were offered to the Agere shareholders for a total amount of $3.645 billion ($9.905*368 million). LSI also guaranteed Agere's 6.5% Convertible Subordinated Notes due December 15, 2009, the fair value of which was $370 million as of April 2, 2007. In addition to product synergy, the merger will lead to significant cost savings. By the second half of 2007, a reduction in operating expenses of $50 million is anticipated. By fiscal 2008, savings of at least $125 million and accretive pro forma earnings are expected.
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