##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
   (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File
    No. 1-10317
 LSI CORPORATION
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

94-2712976(State or other jurisdiction
    of
    incorporation or organization)

(IRS Employer
    Identification No.)  1621 Barber Lane
 Milpitas, California 95035
 (Address of principal executive
    offices) (Zip Code)
  Registrants telephone number, including area code:
 (408) 433-8000
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value

New York Stock ExchangePreferred Share Purchase Rights

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 NONE
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large Accelerated
    Filer þ

Accelerated
    Filer o

Non-accelerated
    Filer o

Smaller reporting
    company o(Do not check if a smaller reporting
    company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





LSI
    CorporationForm 10-K
    For the Year Ended December 31, 2007
 PART 1Item 1.

Business

1Item 1A.

Risk Factors

10Item 1B.

Unresolved Staff Comments

17Item 2.

Properties

17Item 3.

Legal Proceedings

18Item 4.

Submission of Matters to a Vote of Security
    Holders

18PART IIItem 5

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

20Item 6.

Selected Financial Data

22Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations

23Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk

42Item 8.

Financial Statements and Supplementary Data

44Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure

98Item 9A.

Controls and Procedures

98Item 9B.

Other Information

98PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance

98Item 11.

Executive Compensation

99Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholders Matters

99Item 13.

Certain Relationships and Related Transactions,
    and Director Independence

99Item 14.

Principal Accounting Fees and Services

99PART IVItem 15.

Exhibits, Financial Statement Schedules

100SIGNATURES

101EXHIBIT INDEXEXHIBIT 10.33.1EXHIBIT 10.33.2EXHIBIT 10.34EXHIBIT 21EXHIBIT 23EXHIBIT 24EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2    FORWARD-LOOKING
    STATEMENTS
  Form 10-K Item 1A-Risk




---



##### Table of Contents



PART I  Item 1.
    Business  General
  silicon-to-system
      
    On March 13, 2007, we completed the acquisition of
    SiliconStor, Inc., a provider of semiconductor solutions for
    enterprise storage networks. SiliconStors products support
    the serial attached-SCSI, or SAS, and serial advanced technology
    attachment, or SATA, standards for connecting hard disks to
    computers and enabled our Storage semiconductor business to
    offer a more complete line of products.
    On April 2, 2007, we acquired Agere Systems Inc., a
    provider of integrated circuit solutions for a variety of
    communications and computing applications. Ageres
    customers included manufacturers of hard disk drives, mobile
    phones, advanced communications and networking equipment and
    personal computers. Agere also generated revenues from the
    licensing of intellectual property. As a result of the Agere
    acquisition, we believe that our Storage semiconductor business
    has a broader product line and additional resources, enabling it
    to be a stronger competitor. The acquisition also resulted in
    the addition of new products and resources for our Networking
    semiconductor business. We also expect that Ageres
    intellectual property licensing capabilities will allow us to
    generate more revenue from our pre-existing patents than we had
    generated as a stand-alone company.
    Because our Consumer business no longer had the scale necessary
    to be a strong competitor, we sold that business to Magnum
    Semiconductor, Inc., completing the sale on July 27, 2007.
    We saw risk in Ageres Mobility business because of the
    transition from one generation of technology, 2G products based
    on the Global Systems for Mobile Communications, or GSM,
    standard, to the next, 3G products based on the wideband Code
    Division Multiple Access, or W-CDMA, standard, and because
    of its limited customer base. We chose to sell that business,
    completing the sale to Infineon Technologies AG on
    October 24, 2007.
    On July 25, 2007, we announced our intention to exit our
    semiconductor and storage systems assembly and test operations.
    This will allow us to focus our resources and attention on our
    efforts to design leading-edge semiconductor and storage
    solutions. It will also allow us to have a more variable cost
    structure and avoid the capital expenses needed for facility
    upgrades. We have sold our semiconductor assembly and test
    facility in Thailand and are discontinuing operations at our
    Singapore semiconductor assembly and test facility and our
    Wichita, Kansas storage systems assembly and test facility. We
    are transitioning the activities conducted at those facilities
    to third party contract manufacturers.
    On October 3, we acquired Tarari, Inc., a maker of silicon
    and software that provides content and application awareness in
    packet and message processing, enabling advanced security and
    network control for service provider and enterprise networks. We
    believe these capabilities will become increasingly important as
    network operators seek additional billing and security
    capabilities. 1




---



##### Table of Contents




    Following the Agere acquisition, we have discontinued a number
    of development projects and have been reducing headcount in
    areas with overlap as we have sought to achieve significant cost
    synergies from the acquisition.        www.lsi.com Form 10-K, Form 10-Q, Form 8-K (800) 732-0330.
  Products
  SEMICONDUCTOR
    SEGMENT
  Storage
    Products
  Hard Disk and Tape Drive Electronics. back-up
  ® systems-on-a-chip, pre-amplifiers,
  system-on-a-chip,
  pre-amplifiers,
 2




---



##### Table of Contents



Storage Interface Products.
  
    Storage Standard Products.  Our standard
    product solutions include Fibre Channel; SAS; SATA; and small
    computer system interface, or SCSI, standard products, including
    host adapter integrated circuits for motherboard and adapter
    applications, SCSI and SAS expander integrated circuits, storage
    adapter boards and our own
    Fusion-MPTtm
    software drivers for these product families.
    Storage Custom Solutions.  We also offer custom
    solutions to customers who develop Fibre Channel and Fibre
    Channel over Ethernet storage area network, or SAN, switches and
    host adapters, storage systems, hard disk drives and tape
    peripherals. By leveraging our extensive experience in providing
    solutions for these applications, we have developed a full
    portfolio of high-speed interface intellectual property that is
    employed for custom solution platforms that provide a connection
    to the network, the SAN, memory and host buses. Using these
    pre-verified interfaces, our customers reduce development risk
    and achieve quicker time to market. Our intellectual property
    offerings include high performance SerDes cores supporting Fibre
    Channel, SAS, SATA, 10-Gigabit Ethernet, Gigabit Ethernet,
    Infiniband, SAS, Serial RapidIO and PCI-Express industry
    standards and a family of high-performance Fibre Channel,
    Ethernet, RapidIO, PCI-E, SAS and SATA protocol controllers.  Networking
    Products
      small-to-medium
 3




---



##### Table of Contents



Network
    Processors
  ®
  Digital
    Signal Processors
  Voice-over-IP,
  Content
    Inspection Processors
    Network
    Traffic Aggregation and Framing Solutions
    Broadband Aggregation Devices.
  E-carrier point-to-point
  SONET/SDH Network Devices.
 4




---



##### Table of Contents



Personal
    Connectivity Solutions
    point-of-sale
  Other
    Networking Products
      STORAGE
    SYSTEMS SEGMENT
  sub-assemblies sub-assemblies
  sub-assemblies e-commerce,
  ®
   5




---



##### Table of Contents



Marketing
    and Distribution
  Semiconductor
    Marketing and Distribution
      Storage
    Systems Marketing and Distribution
    go-to-market
  Customers
    Manufacturing
  Semiconductor
    Manufacturing
   6




---



##### Table of Contents



Storage
    Systems Manufacturing
  sub-assemblies,
  sub-assemblies build-to-order, configure-to-order,
  Backlog
  Semiconductor
    Backlog
    Storage
    Systems Backlog
   7




---



##### Table of Contents



Competition
  Semiconductor
    Competitors
        
    design capabilities;
    differentiating product features;
    product performance characteristics;
    time to market;
    price;
    breadth of product line;
    customer support;
    logistics and planning systems; and
    utilization of emerging industry standards.      Storage
    Systems Competitors
   8




---



##### Table of Contents




    features and functionality;
    product performance and price;
    reliability, scalability and data availability;
    interoperability with other server, storage networking and
    storage system platforms;
    interoperability with industry applications, including database,
    email, and internet content delivery systems;
    support for emerging industry and customer standards;
    levels of training, marketing and customer support;
    level of easily customizable features;
    quality and availability of supporting software;
    quality of system integration; and
    technical services and support.    Patents,
    Trademarks and Licenses
    
    Integrated circuit and optoelectronic manufacturing processes;
    A number of technologies related to storage systems;
    Consumer electronics products such as digital cameras, digital
    audio players, DVD players, digital televisions and personal
    computers;
    Modems, digital signal processors, wireless communications,
    network processors and communication protocols; and
    Optoelectronic products including lasers, optical modulators,
    optical receivers and optical amplifiers.         9




---



##### Table of Contents



Research
    and Development
    Working
    Capital
    Environmental
    Regulation
    
    the need for additional capital improvements to comply with such
    regulations or to restrict discharges;
    liability to our employees
    and/or third
    parties; and/or
    business interruptions as a consequence of permit suspensions or
    revocations or as a consequence of the granting of injunctions
    requested by governmental agencies or private parties.  Employees
      Seasonality
    Item 1A.
    Risk
    Factors   10




---



##### Table of Contents



We
    depend on a small number of customers. The loss of, or a
    significant reduction in revenue from, any of these customers
    would harm our results of operations.
    If we
    fail to keep pace with technological advances, or if we pursue
    technologies that do not become commercially accepted, customers
    may not buy our products and our results of operations may be
    harmed.
      We
    operate in intensely competitive markets, and our failure to
    compete effectively would harm our results of
    operations.
     11




---



##### Table of Contents



We may
    fail to realize benefits expected from our merger with Agere,
    which could harm our stock price.
    Customer
    orders and ordering patterns can change quickly, making it
    difficult for us to predict our revenues and making it possible
    that our actual revenues may vary materially from our
    expectations, which could harm our results of operations and
    stock price.
    We
    depend increasingly on outside suppliers to manufacture,
    assemble, package and test our products; accordingly, any
    failure to transition successfully our manufacturing, assembly,
    packaging and test operations to suppliers, to secure and
    maintain sufficient manufacturing capacity or to maintain the
    quality of our products could harm our business and results of
    operations.
    
    a supplier may be unwilling to devote adequate capacity to the
    production of our products or may be unable to produce our
    products;
    a supplier may fail to develop, or may discontinue,
    manufacturing methods appropriate for our products;
    manufacturing costs may be higher than planned;
    product reliability may decline;
    a manufacturer may not be able to maintain continuing
    relationships with suppliers; and
    we may have reduced control over delivery schedules, quality,
    manufacturing yields and costs of products.     12




---



##### Table of Contents



Failure
    to qualify our semiconductor products or our suppliers
    manufacturing lines with key customers could harm our business
    and results of operations.
    Any
    defects in our products could harm our reputation, customer
    relationships and results of operations.
    
    cancellation of orders;
    product returns, repairs or replacements;
    diversion of our resources;
    legal actions by customers or customers end users;
    increased insurance costs; and
    other losses to us or to customers or end users.    As
    part of our integration efforts with Agere, we intend to
    transition Ageres operation to our enterprise resource
    planning system. Any issues that may arise with this transition
    could interfere with our business and harm our operating results
    or our ability to produce accurate and timely financial
    statements.
     13




---



##### Table of Contents



We may
    be subject to intellectual property infringement claims and
    litigation, which could cause us to incur significant expenses
    or prevent us from selling our products.
    If we
    are unable to protect or assert our intellectual property
    rights, our business and results of operations may be
    harmed.
        A
    decline in the revenue that we derive from the licensing of
    intellectual property could have a significant impact on our net
    income.
   14




---



##### Table of Contents



We are
    exposed to legal, business, political and economic risks
    associated with our international operations.
  non-U.S. suppliers
  
    political, social and economic instability;
    fluctuations in foreign currency exchange rates;
    exposure to different legal standards, particularly with respect
    to intellectual property;
    natural disasters and public health emergencies;
    nationalization of businesses and blocking of cash flows;
    trade and travel restrictions;
    imposition of governmental controls and restrictions;
    burdens of complying with a variety of foreign laws;
    import and export license requirements and restrictions;
    unexpected changes in regulatory requirements;
    foreign technical standards;
    difficulties in staffing and managing international operations;
    international trade disputes;
    difficulties in collecting receivables from foreign entities or
    delayed revenue recognition; and
    potentially adverse tax consequences.  We use
    indirect channels of product distribution over which we have
    limited control.
    Our
    failure to attract, retain and motivate key employees could harm
    our business.
   15




---



##### Table of Contents



We may
    engage in acquisitions and strategic alliances, which may not be
    successful and could harm our business and operating
    results.
    The
    semiconductor industry is highly cyclical, which may cause our
    operating results to fluctuate.
    Our
    operations and our suppliers operations are subject to
    natural disasters and other events outside of our control that
    may disrupt our business and harm our operating
    results.
  and/or
  We are
    subject to various environmental laws and regulations that could
    impose substantial costs on us and may harm our
    business.
   16




---



##### Table of Contents



Our
    stockholder rights plan and Delaware law contain provisions that
    may inhibit potential acquisition bids, which may harm our stock
    price, discourage merger offers or prevent changes in our
    management.
      Class
    action litigation due to stock price volatility or other factors
    could cause us to incur substantial costs and divert our
    managements attention and resources.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties           17




---



##### Table of Contents



Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Executive
    Officers of LSI
    Name

Age

PositionAbhijit Y. Talwalkar


43


President and Chief Executive OfficerPhilip G. Brace


37


Senior Vice President, Corporate Planning and MarketingPhilip W. Bullinger


43


Executive Vice President, Engenio Storage GroupJon R. Gibson


62


Vice President, Human ResourcesBryon Look


54


Executive Vice President and  Chief Financial OfficerAndrew Micallef


43


Executive Vice President, Worldwide Manufacturing OperationsJean F. Rankin


49


Executive Vice President, General Counsel and SecretaryD. Jeffrey Richardson


43


Executive Vice President, Network and Storage Products GroupFlavio Santoni


49


Executive Vice President, Server and Storage Customer SalesClaudine Simson


54


Executive Vice President, Chief Technology OfficerRuediger Stroh


45


Executive Vice President, Storage Peripherals Group            18




---



##### Table of Contents



21-year
          23-year
     19




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      2007


2006High  Low


High  LowFirst Quarter

$
10.67  8.78


$
11.81  7.96Second Quarter

$
10.68  7.40


$
11.79  8.41Third Quarter

$
8.37  5.99


$
9.17  7.41Fourth Quarter

$
7.80  5.06


$
11.08  8.01       Issuer
    Purchases of Equity Securities
  Maximum Number (orTotal Number of


Approximate DollarTotal Number





Shares (or Units)


Value) of Shares (orof Shares


Average Price


Purchased as Part of


Units) that May Yet(or Units)


Paid per Share


Publicly Announced


Be Purchased UnderPeriod

Purchased


(or Unit)


Plans or Programs


the Plans or ProgramsOctober 1  October 31, 2007


6,250,000


$
6.61



6,250,000


$
409,561,970November 1  November 30, 2007


22,620,700


$
6.30



22,620,700


$
267,069,888December 1  December 31, 2007


6,500,000


$
5.82



6,500,000


$
229,247,788Total


35,370,700


$
6.27



35,370,700    20




---



##### Table of Contents



PERFORMANCE
    GRAPH
    
  Dec 31, 2002

Dec 31, 2003

Dec 31, 2004

Dec 31, 2005

Dec 31, 2006

Dec 31, 2007LSI Corporation

$
100


$
153.73


$
94.97


$
138.65


$
155.98


$
92.03S&P 500 Index

$
100


$
128.68


$
142.69


$
149.70


$
173.34


$
182.86S&P 500 Semiconductors Index

$
100


$
197.49


$
156.24


$
175.24


$
159.62


$
178.74Philadelphia Semiconductor Index

$
100


$
187.74


$
151.34


$
172.14


$
159.60


$
171.98  21




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Five-Year
    Consolidated Summary
  Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share amounts)Revenues

$
2,603,643


$
1,982,148


$
1,919,250


$
1,700,164


$
1,693,070Cost of revenues


1,699,785



1,158,983



1,150,042



1,039,804



1,092,663Gross profit


903,858



823,165



769,208



660,360



600,407Research and development


655,224



413,432



399,685



427,805



453,107Selling, general and administrative


381,409



255,569



238,265



245,460



239,319Restructuring of operations and other items, net


148,121



(8,427
)


119,052



423,444



180,597Goodwill and intangible impairment charges


2,021,463















Acquired in-process research and development


188,872



4,284











(Loss)/income from operations


(2,491,231
)


158,307



12,206



(436,349
)


(272,616
)Interest expense


(31,020
)


(24,263
)


(25,283
)


(25,320
)


(30,703
)Interest income and other, net


46,762



51,277



34,000



22,170



18,933(Loss)/income before income taxes and minority interest


(2,475,489
)


185,321



20,923



(439,499
)


(284,386
)Provision for income taxes


11,326



15,682



26,540



24,000



24,000(Loss)/income before minority interest


(2,486,815
)


169,639



(5,617
)


(463,499
)


(308,386
)Minority interest in net income of subsidiary


4



1



6



32



161Net (loss)/income

$
(2,486,819
)

$
169,638


$
(5,623
)

$
(463,531
)

$
(308,547
)Basic net (loss)/income per share

$
(3.87
)

$
0.43


$
(0.01
)

$
(1.21
)

$
(0.82
)Diluted net (loss)/income per share

$
(3.87
)

$
0.42


$
(0.01
)

$
(1.21
)

$
(0.82
)Year-end status:Total assets

$
4,396,390


$
2,852,144


$
2,796,066


$
2,874,001


$
3,447,901Long-term obligations

$
1,148,689


$
429,400


$
699,050


$
859,545


$
1,007,079Stockholders equity

$
2,484,996


$
1,895,738


$
1,627,950


$
1,618,046


$
2,042,450          22




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Managements discussion and analysis should be read
    in conjunction with the other sections of this
    Form 10-K,
    including Part 1, Item 1: Business;
    Part II, Item 6: Selected Financial Data;
    and Part II, Item 8: Financial Statements and
    Supplementary Data.
  OVERVIEW
             23




---



##### Table of Contents



Fair Value ofTangible NetAssets/




Amortizable


In-ProcessEntity Name; Segment Included in;

Acquisition

Total


Type of


(Liabilities)




Intangible


Research andDescription of Acquired Business

Date

Consideration


Consideration


Acquired


Goodwill

Assets


DevelopmentTarari, Inc.; Semiconductor segment; Silicon and software
    solutions for security and network control

October 3, 2007

$
93.0


$
93.0 cash


$
6.3


$57.4

$
23.3


$
6.0Agere Systems Inc.; Semiconductor segment; Integrated circuit
    solutions for communications and computing applications

April 2, 2007

$
3,720.1



368 million
    shares of LSI
    common stock


$
231.8


$1,584.2

$
1,727.7


$
176.4SiliconStor, Inc.; Semiconductor segment; Silicon solutions for
    enterprise storage based on SAS and FC-SATA

March 13, 2007

$
56.4


$
56.4 cash


$
1.5


$37.8

$
10.6


$
6.5     RESULTS
    OF OPERATIONS
   24




---



##### Table of Contents



Revenues
  Year Ended December 31,2007


2006


2005(In millions)Semiconductor segment

$
1,778.9


$
1,223.1


$
1,244.3Storage Systems segment


824.7



759.0



675.0Consolidated

$
2,603.6


$
1,982.1


$
1,919.3     2007
    compared to 2006
    Semiconductor
    Segment
      
    A decrease in revenues from consumer products due to the sale of
    the Consumer Products Group;
    A decrease in demand for semiconductors used in consumer product
    applications such as digital audio players where our
    customers solution was not included in the new generation
    of its customers products and a decrease in demand for
    semiconductors used in DVD products and cable set-top box
    solutions;
    A decrease in demand for semiconductors used in storage
    interface connect products; and
    A decrease in demand for semiconductors used in communication
    product applications such as enterprise networking,
    telecommunications and printing.  Storage
    Systems Segment:
    
    An increase in sales from the ramp of our entry level storage
    products, which were introduced in the fourth quarter of 2006;
    An increase in demand for our premium feature software
    products; and
    Continued strength in our mid-range class products.    2006
    compared to 2005:
   25




---



##### Table of Contents



Semiconductor
    Segment:
      Storage
    Systems Segment:
      Revenues
    by Geography:
    Year Ended December 31,2007


2006


2005(In millions)North America*

$
858.7


$
956.7


$
932.2Asia including Japan


1,401.3



797.1



756.0EMEA**


343.6



228.3



231.1Total***

$
2,603.6


$
1,982.1


$
1,919.3     *
    
    Primarily the United States.**
    
    EMEA refers to Europe, Middle East and Africa. Our business is
    in Europe and the Middle East.***
    
    Revenues by geography are accumulated based on the revenues
    generated by our subsidiaries located within the three
    geographic areas noted in the above table. In the second half of
    2005, our Storage Systems business formed new subsidiaries
    within EMEA. As a result, the amounts in the table reflect that
    change as of June 21, 2005. Prior to that, all revenues
    generated by our Storage Systems business in EMEA were reported
    in North America.  2007
    compared to 2006:
  North America:
  Asia including Japan:
  EMEA:
 26




---



##### Table of Contents



2006
    compared to 2005:
  North America:
  Asia including Japan:
  EMEA:
  Gross
    Profit Margin, Operating Costs and Expenses
    Gross
    Profit Margin:
  Year Ended December 31,2007


2006


2005(In millions)Semiconductor segment

$
603.7


$
561.7


$
548.3Percentage of segment revenues


33.9
%


45.9
%


44.1
%Storage Systems segment

$
300.2


$
261.5


$
220.9Percentage of segment revenues


36.4
%


34.5
%


32.7
%Consolidated

$
903.9


$
823.2


$
769.2Percentage of total revenues


34.7
%


41.5
%


40.1
%     2007
    compared to 2006:
   27




---



##### Table of Contents



Semiconductor
    Segment:
    
    An increase of $143.2 million in the amortization of
    intangible assets primarily related to the acquisition of Agere;
    Inventory charges of $47.9 million related to fair valuing
    the inventory acquired from Agere; and
    $19.0 million in charges related to required purchases
    under a wafer supply agreement with ON Semiconductor that were
    in excess of what we believed we could sell.  Storage
    Systems Segment:
    2006
    compared to 2005:
    Semiconductor
    Segment:
      
    Higher scrap costs in early 2006, mainly due to a manufacturing
    issue with a vendor; and
    Stock-based compensation expense associated with the adoption of
    FAS 123R as of January 1, 2006.  Storage
    Systems Segment:
      
    Higher product costs associated with the ramp of new integrated
    storage products and drive modules beginning in mid-2006;
    Higher expedite fees in the fourth quarter of 2006 as the result
    of orders coming in later than expected; and
    Stock-based compensation expense associated with the adoption of
    FAS 123R. 28




---



##### Table of Contents



Research
    and Development:
  Year Ended December 31,2007


2006


2005(In millions)Semiconductor segment

$
525.4


$
315.9


$
307.7Percentage of segment revenues


29.5
%


25.8
%


24.7
%Storage Systems segment

$
129.8


$
97.5


$
92.0Percentage of segment revenues


15.7
%


12.8
%


13.6
%Consolidated

$
655.2


$
413.4


$
399.7Percentage of total revenues


25.2
%


20.9
%


20.8
%   2007
    compared to 2006:
    Semiconductor
    Segment:
      Storage
    Systems Segment:
      2006
    compared to 2005:
    Semiconductor
    Segment:
     29




---



##### Table of Contents



Storage
    Systems Segment:
    Selling,
    General and Administrative:
  Year Ended December 31,2007


2006


2005(In millions)Semiconductor segment

$
264.1


$
157.4


$
150.6Percentage of segment revenues


14.8
%


12.9
%


12.1
%Storage Systems segment

$
117.3


$
98.2


$
87.7Percentage of segment revenues


14.2
%


12.9
%


13.0
%Consolidated

$
381.4


$
255.6


$
238.3Percentage of total revenues


14.6
%


12.9
%


12.4
%   2007
    compared to 2006:
    Semiconductor
    Segment:
    Storage
    Systems Segment:
    2006
    compared to 2005:
   30




---



##### Table of Contents



Semiconductor
    Segment:
    Storage
    Systems Segment:
    Restructuring
    of Operations:
    2007:
      2006:
    2005:
   31




---



##### Table of Contents



Goodwill
    impairment charge:
    Acquired
    In-process Research and Development:
    2007:
        Estimated Cost





Revenue ProjectionsCompany

Acquisition Date

Projects

IPR&D


to Complete


Discount Rate


Extend Through(Dollar amounts in millions)Tarari

October 3, 2007

Content
    Inspection-Abraxas-5 Gbps;
    Abraxas-10Gbps; Electra

$
6.0


$
2.9



22.7
%


2013Agere

April 2, 2007

Storage  read channel and preamps; Mobility  HSPDA
    for 3G; Networking  modems, Firewire, serdes, media
    gateway, VoIP, network processors, Ethernet, mappers and framers

$
176.4


$
85.8
*


13.8
%


2021SiliconStor

March 13, 2007

Storage  SATA/SAS multiplexers

$
6.5


$
4.4



27.0
%


2017     *
    
    This amount excludes estimated cost of $144.2 million to
    complete the Mobility-HSPDA for 3G project due to the sale of
    the Mobility Products Group to Infineon Technologies during the
    fourth quarter of 2007. 32




---



##### Table of Contents



2006:
      Revenue ProjectionsCompany

Acquisition Date

Projects

IPR&D


Discount Rate

Extend Through(Dollar amounts in millions)StoreAge

November 2006

Storage systems software

$
2.4


28%

2013Metta

November 2006

Graphics and Audio intellectual property

$
1.9


Not applicable, used a variation of the Cost Approach

Not applicable, used a variation of the Cost Approach   StoreAge Networking Technologies Ltd.
  Metta Technology.
  2005:
    Interest
    Expense:
        Interest
    Income and Other, Net:
   33




---



##### Table of Contents



Provision
    for Income Taxes:
  non-U.S. net
       34




---



##### Table of Contents



Minority
    Interest in Net Income of Subsidiary:
    FINANCIAL
    CONDITION, CAPITAL RESOURCES AND LIQUIDITY
    Working capital.
  
    Cash, cash equivalents and short-term investments increased by
    $388.7 million;
    Prepaid expenses and other current assets increased
    $79.1 million, primarily due to the acquisition of Agere, a
    $20.0 million short term note receivable in connection with
    the sale of semiconductor assembly and test operations in
    Thailand to STATS ChipPAC in the fourth quarter of 2007, a
    $6.5 million prepayment on a minimum supply agreement, and
    a $5.4 million increase in a deferred tax asset;
    Income taxes payable decreased by $72.6 million due to the
    adoption of FIN 48 in the first quarter of 2007, offset in
    part by an increase in the tax provision less tax payments;
    Accounts receivable increased $57.7 million primarily due
    to the acquisition of Agere, offset in part by improved
    collections; and
    Inventories increased $31.4 million primarily due to the
    acquisition of Agere, offset in part by decreases relating to
    sale of the Consumer Products Group.    
    Accrued salaries, wages and benefits increased
    $36.7 million primarily due to the acquisition of Agere,
    slightly offset by timing differences in payment of salaries,
    benefits and performance-based compensation;
    Accounts payable increased $129.3 million primarily due to
    the acquisition of Agere, offset by a decrease due to the timing
    of invoice receipts and payments; and
    Other accrued liabilities increased by $142.4 million
    primarily due to the acquisition of Agere, in addition to an
    increase in restructuring reserves, merger related accruals, and
    an increase in liabilities with third party manufacturers,
    offset in part by a decrease in deferred taxes, and other
    accruals and liabilities.    
    Cash, cash equivalents and short-term investments increased by
    $70.0 million;
    Accounts receivable increased by $25.3 million to
    $348.6 million as of December 31, 2006 from
    $323.3 million at December 31, 2005. The increase is
    mainly attributable to higher revenues in the fourth quarter of
    2006;
    Inventories increased by $14.7 million to
    $209.5 million as of December 31, 2006, from
    $194.8 million as of December 31, 2005. The increase
    in inventory was required to meet the ramp up of new products in
    early 2007 that were not in production in early 2006; and
    Current portion of long-term debt decreased by
    $273.9 million due to the repayment of Convertible
    Subordinated Notes on November 1, 2006. 35




---



##### Table of Contents




    Prepaid expenses and other current assets decreased by
    $94.4 million primarily due to decreases in assets held for
    sale due to the sale of our Gresham, Oregon manufacturing
    facility and two Colorado facilities, and a decrease in prepaid
    software maintenance;
    Accounts payable increased by $28.6 million due to the
    timing of payments;
    Other accrued liabilities increased by $15.8 million due to
    an increase in deferred tax liabilities, deferred revenues and
    other miscellaneous items, offset in part by a decrease in the
    restructuring reserve;
    Income taxes payable increased by $9.0 million due to the
    timing of income tax payments made and the income tax provision
    recorded during 2006; and
    Accrued salaries, wages and benefits increased by
    $4.6 million primarily due to timing differences in payment
    of salaries, benefits and performance-based compensation.  Cash provided by operating activities.
  
    A net loss adjusted for non-cash transactions, the largest of
    which was a $2,019.9 million charge for goodwill
    impairment. The non-cash items and other non-operating
    adjustments are quantified in our Consolidated Statements of
    Cash Flows included in Item 8; and
    A net increase in assets and liabilities, net of assets acquired
    and liabilities assumed in business acquisitions, net of assets
    and liabilities sold in business divestitures, including changes
    in working capital components from December 31, 2006 to
    December 31, 2007, as discussed above.  Cash and cash equivalents provided by investing
    activities.
  
    Cash acquired from the acquisition of Agere, net of acquisition
    costs;
    Proceeds from the sales of the Consumer Products Group, our
    semiconductor assembly and test operations in Thailand, and the
    Mobility Products Group. See Note 2 to the financial
    statements in Item 8;
    Proceeds from maturities and sales of debt and equity securities
    available for sale, net of purchases;
    Acquisition of other companies, net of cash acquired;
    Purchases of property, equipment and software, net of
    sales; and
    The receipt of income tax refund for pre-acquisition tax matters
    associated with an acquisition in 2001.    Cash and cash equivalents used in financing
    activities.
   36




---



##### Table of Contents



CONTRACTUAL
    OBLIGATIONS
    Payments Due by PeriodLess Than 1 Year


1-3 Years


4-5 Years


After 5 Years


Total(In millions)Convertible Subordinated Notes

$



$
711.7


$



$



$
711.7Operating lease obligations


104.7



144.5



35.1



8.5



292.8Purchase commitments


379.2



40.9



439.2







859.3Pension and post-retirement contributions


18.0















18.0FIN 48 tax liability


1.2















1.2Total

$
503.1


$
897.1


$
474.3


$
8.5


$
1,883.0   Convertible
    Subordinated Notes
     37




---



##### Table of Contents



Operating
    Lease Obligations
    Purchase
    Commitments
    Standby
    Letters of Credit
    CRITICAL
    ACCOUNTING ESTIMATES
      Stock-Based Compensation.
 38




---



##### Table of Contents



Stock
    Options:
    2007


2006Weighted average estimated grant date fair value per share

$
3.05


$
3.30Weighted average assumptions in calculation:Expected life (years)


4.29



4.33Risk-free interest rate


4.50
%


4.78
%Volatility


47
%


48
%             Employee
    Stock Purchase Plans:
  12-month
  Year Ended December 31,2007


2006Weighted average estimated grant date fair value per share

$
2.09


$
2.92Weighted average assumptions in calculation:Expected life (years)


0.7



0.7Risk-free interest rate


4%



5%Volatility


42%



35%  39




---



##### Table of Contents



Restricted
    Stock Awards:
      Inventory Valuation Methodology. first-in,
      Valuation of long-lived assets, intangible assets and
    goodwill.
     40




---



##### Table of Contents



Restructuring reserves.
  Income taxes.
    Retirement Benefits:
     41




---



##### Table of Contents



Recent
    Accounting Pronouncements
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Interest
    Rate Sensitivity
        Foreign currency exchange risk.
 42




---



##### Table of Contents



Equity price risk.
   43




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  LSI
    Corporation
  Consolidated
    Balance Sheets
  December 31,2007


2006(In thousands, exceptper share amounts)ASSETSCash and cash equivalents

$
1,021,569


$
327,800Short-term investments


376,028



681,137Accounts receivable, less allowances of $10,192 and $13,871


406,368



348,638Inventories


240,842



209,470Prepaid expenses and other current assets


147,751



68,692Total current assets


2,192,558



1,635,737Property and equipment, net


229,732



86,045Other intangible assets, net


1,225,196



59,484Goodwill


499,551



932,323Other assets


249,353



138,555Total assets

$
4,396,390


$
2,852,144LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
329,444


$
200,189Accrued salaries, wages and benefits


118,990



82,292Other accrued liabilities


298,343



155,986Income taxes payable


15,679



88,304Total current liabilities


762,456



526,771Long-term debt


717,967



350,000Pension, post-retirement and other benefits


137,543



Income taxes payable  non-current


185,036



Other non-current liabilities


108,143



79,400Total long-term obligations and other liabilities


1,148,689



429,400Commitments and contingencies (Note 14)Minority interest in subsidiary


249



235Stockholders equity:Preferred shares; $.01 par value; 2,000 shares
    authorized; none outstanding






Common stock; $.01 par value; 1,300,000 shares
    authorized; 680,595 and 403,680 shares outstanding


6,806



4,037Additional paid-in capital


6,152,421



3,102,178Accumulated deficit


(3,738,522
)


(1,220,306
)Accumulated other comprehensive income


64,291



9,829Total stockholders equity


2,484,996



1,895,738Total liabilities and stockholders equity

$
4,396,390


$
2,852,144    44




---



##### Table of Contents



LSI
    Corporation
  Consolidated
    Statements of Operations
  Year Ended December 31,2007


2006


2005(In thousands, except per share amounts)Revenues

$
2,603,643


$
1,982,148


$
1,919,250Cost of revenues


1,699,785



1,158,983



1,150,042Gross profit


903,858



823,165



769,208Research and development


655,224



413,432



399,685Selling, general and administrative


381,409



255,569



238,265Restructuring of operations and other items, net


148,121



(8,427
)


119,052Goodwill and intangible impairment charges


2,021,463







Acquired in-process research and development


188,872



4,284



(Loss)/income from operations


(2,491,231
)


158,307



12,206Interest expense


(31,020
)


(24,263
)


(25,283
)Interest income and other, net


46,762



51,277



34,000(Loss)/income before income taxes and minority interest


(2,475,489
)


185,321



20,923Provision for income taxes


11,326



15,682



26,540(Loss)/income before minority interest


(2,486,815
)


169,639



(5,617
)Minority interest in net income of subsidiary


4



1



6Net (loss)/income

$
(2,486,819
)

$
169,638


$
(5,623
)Net (loss)/income per share:Basic

$
(3,87
)

$
0.43


$
(0.01
)Diluted

$
(3,87
)

$
0.42


$
(0.01
)Shares used in computing per share amounts:Basic


641,823



398,551



390,135Diluted


641,823



405,163



390,135    45




---



##### Table of Contents



LSI
    Corporation
  Consolidated
    Statements of Stockholders Equity
  AccumulatedAdditional








OtherCommon Stock


Paid-in


Deferred Stock


Accumulated


ComprehensiveShares


Amount


Capital


Compensation


Deficit


Income


Total(In thousands)Balances at December 31, 2004


387,490


$
3,875


$
2,969,478


$
(8,936
)

$
(1,384,321
)

$
37,950


$
1,618,046Net loss


















(5,623
)Change in foreign currency translation adjustments






















(12,976
)Change in unrealized loss on available-for-sale securities






















(7,122
)Total comprehensive loss


























(25,721
)Issuance to employees under stock option and purchase plans


6,369



64



30,797















30,861Issuance or return from escrow of common stock in conjunction
    with acquisitions


156



1



(686
)














(685
)Grants of restricted shares










13,427



(13,427
)










Forfeiture of restricted shares and stock options assumed in an
    acquisition










(6,739
)


6,739











Engenio stock option exchange










3,889



(3,889
)










Amortization of deferred stock compensation














5,449











5,449Balances at December 31, 2005


394,015



3,940



3,010,166



(14,064
)


(1,389,944
)


17,852



1,627,950Net income


















169,638Change in foreign currency translation adjustments






















276Change in unrealized loss on available-for-sale securities






















(8,299
)Total comprehensive income


























161,615Adoption of FAS 123R  reclassification of
    deferred stock compensation










(14,064
)


14,064











Tax effect of FAS 123R on foreign entities










129















129Issuance to employees under stock option and purchase plans


8,944



90



60,923















61,013Issuance of common stock pursuant to restricted stock awards, net


721



7



(3,250
)














(3,243
)Amortization of stock-based compensation related to employee
    stock options










31,338















31,338Amortization of stock-based compensation related to employee
    stock purchases










10,842















10,842Amortization of stock-based compensation related to restricted
    shares










6,094















6,094Balances at December 31, 2006


403,680



4,037



3,102,178







(1,220,306
)


9,829



1,895,738Net loss


















(2,486,819
)Cumulative effect adjustment to accumulated deficit with respect
    to the adoption of FIN 48


















(27,193
)Adoption of EITF
    06-02 
    sabbatical leave


















(4,204
)Change in foreign currency translation adjustments






















6,982Change in unrealized gain on available-for-sale securities, net
    of tax $197






















5,682Actuarial gain on pension and post-retirement plan, net of tax
    $26,122






















41,798Total comprehensive loss


























(2,463,754
)Issuance of common stock in connection with Agere merger


368,002



3,680



3,641,384















3,645,064Agere restricted stock units & options vested as of
    acquisition date










50,158















50,158Repurchase of shares


(102,642
)


(1,026
)


(769,726
)














(770,752
)Issuance to employees under stock option and purchase plans


7,176



71



46,238















46,309Issuance of common stock pursuant to restricted stock awards, net


4,379



44



(11,869
)














(11,825
)Amortization of stock-based compensation related to employee
    stock options










47,127















47,127Amortization of stock-based compensation related to employee
    stock purchase plan










11,757















11,757Amortization of stock-based compensation related to restricted
    shares










35,174















35,174Balances at December 31, 2007


680,595


$
6,806


$
6,152,421


$



$
(3,738,522
)

$
64,291


$
2,484,996    46




---



##### Table of Contents



LSI
    Corporation
  Consolidated
    Statements of Cash Flows
  Year Ended December 31,2007


2006


2005(In thousands)Operating activities:Net (loss)/income

$
(2,486,819
)

$
169,638


$
(5,623
)Adjustments:Depreciation and amortization


278,542



82,263



146,169Stock-based compensation expense


77,267



47,049



5,449Non-cash restructuring and other items


98,909



(713
)


88,224Goodwill and intangible impairment charges


2,021,463







Acquired in-process research and development


188,872



4,284



Gain on sale of intellectual property






(15,000
)


Gain on sale of Gresham manufacturing facility and associated
    intellectual property






(12,553
)


Write-off of intangible assets acquired in a purchase business
    combination






3,325



Gain on repurchase of Convertible Subordinated Notes










(4,123
)Loss on write-down of equity securities/(gain) on sale of equity
    securities


2,396



(6,727
)


(6,475
)(Gain)/loss on sale of property and equipment, including assets
    held-for-sale


(9,399
)


(252
)


27Non-cash foreign exchange loss/(gain)


4,207



(1,089
)


(11,491
)Changes in deferred tax assets and liabilities


(3,619
)


(98
)


14,220Changes in assets and liabilities, net of assets acquired and
    liabilities assumed in business combinations:Accounts receivable, net


174,962



(24,617
)


(51,305
)Inventories


74,708



(18,062
)


24,086Prepaid expenses and other assets


21,557



(24,858
)


(22,582
)Accounts payable


(39,162
)


23,338



46,998Accrued and other liabilities


(108,885
)


21,223



25,129Net cash provided by operating activities


294,999



247,151



248,703Investing activities:Purchase of debt securities available-for-sale


(303,407
)


(603,624
)


(550,912
)Proceeds from maturities and sales of debt securities
    available-for-sale


616,224



595,135



462,530Purchases of convertible notes/equity securities


(10,500
)


(8,150
)


(150
)Proceeds from sales of equity securities






11,876



11,105Purchases of property, equipment and software


(102,823
)


(58,671
)


(48,055
)Proceeds from sale of property and equipment


16,166



118



4,894Proceeds from sale of Consumer Group


22,555







Proceeds from sale of Mobility Products Group, net of
    transaction costs


445,500







Proceeds from sale of semiconductor operations in Thailand, net
    of transaction costs


49,600







Proceeds from sale of intellectual property






22,670



Proceeds from sale of Fort Collins facility






10,998



Proceeds from sale of Colorado Springs facility






7,029



Proceeds from sale of Gresham manufacturing facility






96,426



Proceeds from sale of intellectual property associated with the
    Gresham manufacturing facility






5,100



Cash acquired from acquisition of Agere, net of acquisition costs


517,712







Acquisitions of other companies, net of cash acquired


(132,830
)


(55,328
)


Adjustment to goodwill acquired in a prior year for resolution
    of a pre-acquisition income tax contingency


3,230



2,282



36,307Net cash provided by/(used in) investing activities


1,121,427



25,861



(84,281
)Financing activities:Repurchase of Convertible Subordinated Notes










(148,126
)Repayment of debt obligations






(271,848
)


(129
)Issuance of common stock


46,280



61,014



30,862Purchase of common stock under repurchase programs


(770,752
)






Net cash used in financing activities


(724,472
)


(210,834
)


(117,393
)Effect of exchange rate changes on cash and cash equivalents


1,815



973



(1,103
)Increase in cash and cash equivalents


693,769



63,151



45,926Cash and cash equivalents at beginning of year


327,800



264,649



218,723Cash and cash equivalents at end of year

$
1,021,569


$
327,800


$
264,649    47




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements
  Note 1 
    Significant
    Accounting Policies  Nature of the business:
    Basis of presentation:
          Use of estimates:
  Acquisitions:
  Revenue recognition:
 48




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    EITF 03-05
  and/or
  Earnings per share:
    Year Ended December 31,2007


2006


2005Per-Share








Per-Share








Per-Share(Loss)*


Shares+


Amount


Income*


Shares+


Amount


(Loss)*


Shares+


Amount(In thousands except per share amounts)Basic EPS:Net (loss)/income available to common stockholders

$
(2,486,819
)


641,823


$
(3.87
)

$
169,638



398,551


$
0.43


$
(5,623
)


390,135


$
(0.01
)Stock options, employee stock purchase rights and restricted
    stock awards


















6,612















Diluted EPS:Net (loss)/income available to common stockholders

$
(2,486,819
)


641,823


$
(3.87
)

$
169,638



405,163


$
0.42


$
(5,623
)


390,135


$
(0.01
)     *
    
    Numerator+
    
    Denominator   49




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Stock-Based Compensation Expense:
  Advertising:
  Sales and value added taxes:
  Cash equivalents:
  Accounts receivable and allowance for doubtful accounts:
  Investments:
    Inventories: first-in, work-in-process
 50




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Property and equipment:
  Buildings and improvements


20-40 yearsEquipment


3-5 yearsFurniture and fixtures


5 years     Software: and/or 24-month
  Impairment of long-lived assets:
  Goodwill:
  Fair value disclosures of financial
    instruments: and/or
 51




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Derivative instruments:
        Concentration of credit risk of financial
    instruments:
 52




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Product warranties:
  Litigation and settlement costs:
  Income taxes:
    Recent
    Accounting Pronouncements
   53




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
        No. 06-2 (EITF 06-02), EITF 06-02 EITF 06-02 EITF 06-02
  EITF 06-02
  Accumulated deficit as of December 31, 2006

$
(1,220,306
)Impact of adoption of FIN 48


(27,193
)Impact of adoption of EITF
    06-02


(4,204
)Accumulated deficit as of January 1, 2007

$
(1,251,703
)   No. FAS 157-2, FSP 157-2
   54




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
        No. 07-1 (EITF 07-1). EITF 07-1 EITF 07-1 EITF 07-1 EITF 07-1
  Note 2 
    Restructuring
    and other items  2007
    Restructuring
    and impairment of long-lived assets:
    Sale
    of the Mobility Products Group:
    
    A charge of $17.7 million for the difference between the
    proceeds of $450 million received and the
    $467.7 million net book value of MPG at closing;
    A charge of $27.5 million for future credits the buyer will
    receive from the Company on purchases of finished goods
    inventory; 55




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   
    A charge of $21.8 million for future inventory pricing
    benefits the buyer will receive for products manufactured at
    Silicon Manufacturing Partners Pte. Ltd. (SMP), a
    joint venture LSI has with Chartered Semiconductor Manufacturing
    Ltd. (Chartered Semiconductor);
    A charge of $14.4 million for the acceleration of stock
    awards previously granted to MPG employees whose positions will
    be eliminated as part of the sale of MPG; and
    A charge of $4.5 million for Mobility-related lease
    termination costs not assumed by Infineon, a $4.5 million
    charge for estimated transaction costs, a $3.2 million
    charge for severance and termination benefits for employees and
    a charge of $1.8 million for the write-off of MPG fixed
    assets not acquired by the buyer.    Sale
    of the Consumer Products Group:
    
    A credit of $1.3 million for the difference between the
    $22.6 million received and the $21.3 million net book
    value of the assets as of the date the transaction closed;
    A $12.8 million charge for severance and termination
    benefits for employees; and
    A $2.5 million charge related to facility lease termination
    costs not assumed by Magnum.    Sale
    of Thailand semiconductor assembly and test
    operations:
    
    A charge of $5.5 million to adjust the carrying value of
    the assets held for sale to fair market value; and
    A charge of $0.1 million for the difference between the net
    proceeds of $99.6 million received and the
    $99.7 million net book value at closing     56




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Other
    restructuring actions and charges
    
    A charge of $24.6 million for severance and termination
    benefits for employees, of which $13.3 million related to
    the general workforce reduction action announced on
    June 27, 2007, $7.9 million related to workforce
    reductions planned in 2008, and $3.4 million related to the
    transition of the Kansas manufacturing operations to
    manufacturing partners;
    A charge of $7.4 million to adjust the carrying value of
    the assets held for sale in Singapore to fair market values and
    a charge of $1.0 million for certain other asset write-offs;
    A charge of $1.5 million primarily for changes in sublease
    assumptions for previously accrued facility lease terminations
    and $2.0 million to reflect the change in time value of
    accruals for facility lease terminations;
    A charge of $1.8 million for the acceleration of stock
    awards previously granted to employees whose positions will be
    eliminated related to the planned workforce reductions in
    January 2008; and
    A net gain of $10.4 million for the sale of land in
    Colorado, which had a net book value of $2.0 million. Total
    proceeds from the sale were $12.4 million.    Balance at


Restructuring


Utilized


Balance atDecember 31,


Expense


During


December 31,2006


2007


2007


2007(In thousands)Write-down of excess assets and other liabilities(a)

$



$
75,344


$
(75,119
)

$
225Lease terminations(b)


23,169



10,672



(10,523
)


23,318Payments to employees for severance(c)


342



56,905



(32,430
)


24,817Total

$
23,511


$
142,921


$
(118,072
)

$
48,360     (a)
    
    Utilization includes reclassification of $53.8 million to
    other liability accounts recorded during third quarter.(b)
    
    The amount utilized represents cash payments. The balance
    remaining for real estate lease terminations is expected to be
    paid during the remaining terms of the leases, which extend
    through 2011.(c)
    
    The amount utilized represents cash severance payments to
    employees. The balance remaining for severance is expected to be
    paid by the end of 2008. 57




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   Assets
    held for sale:
      Restructuring
    Actions Associated with the Agere Merger:
  EITF 95-3,
    
    A reserve of $50.1 million for severance and termination
    benefits for employees as a result of the restructuring actions
    related to the Thailand and Singapore assembly and test
    facilities;
    A reserve of $14.5 million for facility lease exit costs,
    primarily in Singapore and Europe; and
    A reserve of $28.8 million for stock-related compensation
    expense associated with employees whose positions were
    eliminated.    
    A charge of $1.3 million for changes in assumptions for
    Singapore lease termination costs;
    A charge of $1.2 million to reflect a change in time value
    of accruals for previously recorded facility lease termination
    costs;
    A charge of $1.0 million for additional stock compensation
    charges for employees whose positions were eliminated; and
    A credit of $0.2 million for changes in estimated payments
    to employees for severance previously recorded for Thailand and
    other restructuring actions; 58




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
     Balance at


Adjustment


Changes in


Utilized


Balance atApril 2,


to Opening


Estimates During


During


December 31,2007


Balance sheet


2007


2007


2007(In thousands)Lease terminations(a)

$
14,464


$
21,931


$
2,496


$
(5,452
)

$
33,439Payments to employees for severance(b)


50,087







(167
)


(30,994
)


18,926Stock compensation charges in accordance with FAS 123R(c)


28,841







951



(8,932
)


20,860Total

$
93,392


$
21,931


$
3,280


$
(45,378
)

$
73,225     (a)
    
    The amount utilized represents cash payments. The balance
    remaining for real estate lease terminations is expected to be
    paid during the remaining terms of these contracts, which extend
    through 2013. The adjustment to the opening balance sheet
    consists of $21.9 million in termination costs for leases
    related to Ageres restructuring plans that existed prior
    to its acquisition by the Company.(b)
    
    The amount utilized represents cash severance payments to
    employees. The majority of the balance remaining for severance
    is expected to be paid by the end of 2008.(c)
    
    The amount utilized represents stock options exercised or
    expired. Amounts accrued represent the value of stock options
    and restricted units LSI expects to accelerate upon termination
    of the holders employment whose positions are to be
    eliminated. The balance is expected to be utilized by the end of
    2009.  Other
    Items:
    2006
      
    Net gains of $38.9 million from the sale of certain zero
    basis intellectual property, the sale of the Gresham, Oregon
    manufacturing facility and related manufacturing process
    intellectual property to ON Semiconductor, and from the sale of
    the Companys ZSP digital signal processor technology;
    A charge of $17.0 million for severance and termination
    benefits for employees, primarily related to the broad-based
    reorganization that was announced in August 2005;
    A charge of $6.0 million primarily for the write-off of
    some intangible assets acquired in a purchase business
    combination and other exit costs including contract termination
    costs; and
    A charge of $6.0 million primarily for changes in sublease
    assumptions for previously accrued facility lease termination
    costs and additional $1.5 million to reflect the change in
    time value of accruals for facility lease termination costs. 59




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   Sale
    of the Gresham facility:
            Balance at


Restructuring





Utilized


Balance atDecember 31,


Expense


Release of


During


December 31,2005


2006


Reserve


2006


2006(In thousands)Write-down of excess assets and decommissioning costs(a)

$
4,993


$
(34,390
)

$
(188
)

$
29,585


$
Lease terminations and maintenance contracts(b)


22,287



7,462







(6,580
)


23,169Facility closure and other exit costs(c)






1,510







(1,510
)


Payments to employees for severance(d)


5,395



16,991



(422
)


(21,622
)


342Total

$
32,675


$
(8,427
)

$
(610
)

$
(127
)

$
23,511  60




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    (a)
    
    The credit includes the gain from the sale of the Gresham
    facility described above. The remaining balance was utilized
    during the third quarter of 2006.(b)
    
    The amount utilized represents cash payments. The balance
    remaining for real estate lease terminations will be paid during
    the remaining terms of these contracts, which extend through
    2011.(c)
    
    The amounts utilized represents cash payments.(d)
    
    The amount utilized represents (i) cash severance payments
    to 190 employees during the year ended December 31,
    2006 and (ii) cash payments for one-time termination
    benefits for 512 employees associated with the sale of the
    Gresham manufacturing facility.  2005
    Restructuring
    and impairment of long-lived assets:
      
    A charge of $91.1 million directly associated with the
    decision to sell the Gresham manufacturing facility, consisting
    of the following:  
    A charge of $85.2 million for write-down of assets;
    A charge of $4.8 million for estimated selling
    costs; and
    A charge of $1.1 million for severance and termination
    benefits for employees.  
    A charge of $9.9 million primarily for changes in sublease
    assumptions for previously accrued facility lease termination
    costs and additional $1.6 million to reflect the change in
    time value of accruals for facility lease termination costs;
    A charge of $6.2 million for severance and termination
    benefits for employees, primarily related to the broad-based
    reorganization that was announced in August 2005; and
    A charge of $4.9 million primarily for the write-down of
    assets and facility closure costs as a result of consolidation
    of additional non-manufacturing facilities.  Other
    Items:
   61




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 3 
    Common
    Stock, Stock-Based Compensation and Other Employee Compensation
    Plans    Description
    of the Companys Equity Compensation Plans
  2003 Equity Incentive Plan (the 2003
    Plan):
  1991 Equity Incentive Plan (the 1991
    Plan):
  1995 Director Option Plan (the 1995 Director
    Plan):
  1999 Nonstatutory Stock Option Plan (the 1999
    Plan):
  Employee Stock Purchase Plan, as amended and restated
    (US ESPP): 12-month
 62




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    International Employee Stock Purchase Plan
    (IESPP): 12-month
    Stock-Based
    Compensation Expense under FAS 123R
    Year Ended December 31,Stock-based Compensation Expense Included In:

2007


2006


2005(In thousands)Cost of revenues

$
10,711


$
6,903


$
744Research and development


31,743



17,397



2,373Selling, general and administrative


34,813



22,749



2,332Total stock-based compensation expense

$
77,267


$
47,049


$
5,449      63




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Stock
    Options:
    Year Ended December 31,2007


2006Weighted average estimated grant date fair value per share

$
3.05


$
3.30Weighted average assumptions in calculation:Expected life (years)


4.29



4.33Risk-free interest rate


4.50
%


4.78
%Volatility


47
%


48
%            64




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    2007


2006


2005Weighted Average





Weighted Average





Weighted AverageNumber of


Exercise Price


Number of


Exercise Price


Number of


Exercise PriceShares


Per Share


Shares


Per Share


Shares


Per ShareOptions outstanding at January 1,


56,750


$
11.92



70,618


$
13.21



67,733


$
14.57Options assumed in Agere Acquisition


48,884



22.41















Options canceled


(17,295
)


(15.56
)


(16,130
)


(18.02
)


(11,555
)


(14.63
)Options granted


15,628



8.61



7,781



9.17



16,493



7.67Options exercised


(3,725
)


(5.91
)


(5,519
)


(6.71
)


(2,053
)


(5.68
)Options outstanding at December 31,


100,242


$
16.12



56,750


$
11.92



70,618


$
13.21Options exercisable at December 31,


67,124


$
20.12



35,638


$
14.29



44,489


$
16.52         Employee
    Stock Purchase Plans:
    Year Ended December 31,2007


2006Weighted average estimated grant date fair value per share

$
2.09


$
2.92Weighted average assumptions in calculation:Expected life (years)


0.7



0.7Risk-free interest rate


4
%


5
%Volatility


42
%


35
%  65




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Restricted
    Stock Awards:
      2007


2006Number of Shares(In thousands)Non-vested shares at January 1


1,910



2,375Assumed in Agere Acquisition


9,141



Granted


4,337



733Vested


(5,555
)


(928
)Forfeited


(656
)


(270
)Non-vested shares at December 31


9,177



1,910     2007


2006


2005Weighted Average





Weighted Average





Weighted AverageNumber of


Grant Date Fair


Number of


Grant Date Fair


Number of


Grant Date FairShares


Value per Share


Shares


Value per Share


Shares


Value per ShareRestricted stock awards granted


4,337


$
8.20



733


$
9.45



2,125


$
6.32       Income
    Taxes:
  No. FAS 123R-3, No. FAS 123R-3.
   66




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Pro
    Forma Information under FAS 123 for Periods Prior to
    January 1, 2006
    Year EndedDecember 31.2005Net loss, as reported

$
(5,623
)Add: Amortization of non-cash deferred stock compensation
    determined under the intrinsic value method as reported in net
    loss, net of related tax effects*


638Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards, net of
    related tax effects*


(70,028
)Pro forma net loss

$
(75,013
)Loss per share:Basic and diluted as reported

$
(0.01
)Basic and diluted pro forma

$
(0.19
)     *
    
    This amount excludes amortization of stock-based compensation on
    restricted stock awards.    Year EndedDecember 31.2005Weighted average estimated grant date fair value per share

$
3.98Weighted average assumptions in calculation:Expected life (years)


3.88Risk-free interest rate


3.30
%Volatility


67.75
%Dividend yield


   Forfeitures of stock options and restricted stock awards
    prior to vesting:
  Common
    Stock
  Stock repurchase program:
 67




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Stock purchase rights:
  Note 4 
    Business
    Combinations      2007
  Fair Value ofTangible NetEntity Name;




Total





Assets/





Amortizable


In-ProcessSegment Included in;

Acquisition


Purchase


Type of


(Liabilities)





Intangible


Research andDescription of Acquired Business

Date


Price


Consideration


Acquired


Goodwill


Assets


DevelopmentTarari, Inc.; Semiconductor segment; Silicon and software
    solutions for security and network control


October 3, 2007


$
93.0


$
93.0 cash


$
6.3


$
57.4


$
23.3


$
6.0Agere Systems Inc.; Semiconductor segment; Integrated circuit
    solutions for communications and computing applications


April 2, 2007


$
3,720.1



368 million
    shares of LSI
    common
    stock


$
231.8


$
1,584.2


$
1,727.7


$
176.4SiliconStor, Inc.; Semiconductor segment; Silicon solutions for
    enterprise storage network based on SAS and FC-SATA


March 13, 2007


$
56.4


$
56.4 cash


$
1.5


$
37.8


$
10.6


$
6.5  68




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  2006
  Fair Value ofTangible NetEntity Name;




Total





Assets/





Amortizable


In-ProcessSegment Included in;

Acquisition


Purchase


Type of


(Liabilities)





Intangible


Research andDescription of Acquired Business

Date


Price


Consideration


Acquired


Goodwill


Assets


DevelopmentStoreAge Networking Technologies, Ltd.; Storage segment; SAN
    storage management and multi-tiered data protection software
    applications


November 21, 2006


$
47.4


$
47.4 cash


$
(4.6
)


$6.1


$
43.5


$
2.4Metta Technology; Semiconductor segment; Next generation digital
    video


November 10, 2006


$
6.7


$
6.7 cash


$
(0.6
)


Not applicable 
    asset purchase


$
5.4


$
1.9   Merger with Agere.
        Fair value of LSI common shares issued

$
3,647,021(a) Fair value of stock awards assumed


218,713(b) Fair value of unvested stock awards assumed


(168,555
)(a)  (b) Fair value of the vested options assumed


50,158Direct transaction costs


22,970Total estimated purchase price

$
3,720,149  69




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Purchase
    Price Allocation:
    Cash

$
540,140Accounts receivable


222,169Inventory


120,848Assets held for sale


122,756Property and equipment


162,047Accounts payable


(167,947
)Pension and post-retirement liabilities


(214,607
)Convertible notes


(370,249
)Other liabilities


(183,359
)Net assets acquired


231,798Identifiable intangible assets


1,727,700In-process research and development


176,400Goodwill


1,584,251Total estimated purchase price

$
3,720,149       Weighted AverageIdentifiable Intangible Assets

Fair Value


Useful Life(In thousands)


(In years)Current technology

$
844,500



8.5Customer base


513,000



10Patent licensing


317,200



10Order backlog


53,000



0.5Total acquired identifiable intangible assets

$
1,727,700   Acquired In-Process Research and
    Development.
 70




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  2007
  Estimated Cost To





Revenue ProjectionsEntity Name

IPR&D


Complete


Discount Rate


Extended ThroughTarari, Inc.

$
6.0


$
2.9



22.7
%


2013Agere Systems Inc.:Storage  read channel and preamps

$
36.2


$
17.8



13.8
%


2016Mobility  HSPDA for 3G

$
31.2




*


13.8
%Networking  modems, Firewire, serdes, media gateway,
    VoIP, network processors, Ethernet, mappers and framers

$
109.0


$
68.0



13.8
%


2021SiliconStor, Inc.

$
6.5


$
4.4



27.0
%


2017     *
    During the fourth quarter of 2007, the Company sold the Mobility
    Products Group and therefore no costs will be incurred to
    complete the acquired Mobility-HSPDA for 3G project.  2006
  Revenue ProjectionsEntity Name

IPR&D


Discount Rate

Extended ThroughStoreAge Networking Technologies, Ltd

$
2.4


28%

2013Metta Technology

$
1.9


Not applicable,
    used Cost Approach

Not applicable,
    used Cost Approach         and/or
   71




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Pro
    Forma Results (Unaudited)
      Year Ended December 31,2007


2006(In thousands except per share amounts)Revenues

$
2,938,487


$
3,412,151Net loss

$
(2,307,572
)

$
(118,904
)Basic loss per share

$
(2.29
)

$
(0.16
)Diluted loss per share

$
(2.29
)

$
(0.16
)   Note 5 
    Benefit
    Obligations     72




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Net
    Periodic Benefit Cost /(Credit)
  Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Service cost

$
5,523


$
118Interest cost


55,361



2,776Expected return on plan assets


(62,804
)


(3,669
)Amortization of prior service cost






Recognized net actuarial gain






(12
)Net periodic benefit credit


(1,920
)


(787
)Curtailment gain


(414
)


(281
)Settlement charges






Total benefit credit

$
(2,334
)

$
(1,068
)     Benefit
    Obligation
    Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Benefit obligation at April 2, 2007

$
1,269,441


$
72,987Service cost


5,523



118Interest cost


55,361



2,776Employee contributions






6,924Amendments


170



Actuarial gain


(68,861
)


(6,037
)Benefits paid


(73,942
)


(20,364
)Curtailments


1,944



(281
)Benefit obligation at December 31, 2007

$
1,189,636


$
56,123    73




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Fair
    Value of Plan Assets
    Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Fair value of plan assets as at April 2, 2007

$
1,073,580


$
63,206Actual gain on plan assets


58,595



3,514Employer contributions


2,113



12,474Employee contributions






6,924Benefits paid


(73,928
)


(20,364
)Settlements


(84
)


Fair value of plan assets as at December 31, 2007

$
1,060,276


$
65,754     Funded
    Status of the Plans
    Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Funded status of the plans as at December 31, 2007

$
(129,360
)

$
9,631     Plans
    with Projected Benefit Obligation and Accumulated Benefit
    Obligation in excess of Plan Assets:
  Pension Benefits(In thousands)Projected benefit obligation

$
1,189,636Accumulated benefit obligation

$
1,174,492Fair value of plan assets

$
1,060,276   Plans
    with Accumulated Benefit Obligation in excess of Plan
    Assets:
  Health Benefits(In thousands)Accumulated benefit obligation

$
18,963Fair value of plan assets

$
  74




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Plans
    with Accumulated Benefit Obligation less than Plan
    Assets:
  Group Life Benefits(In thousands)Accumulated benefit obligation

$
37,160Fair value of plan assets

$
65,754     Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Non-current assets

$



$
28,594Current liabilities


(789
)


(16,771
)Non-current liabilities


(128,571
)


(2,192
)Net (liability)/asset

$
(129,360
)

$
9,631     Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Net prior service cost

$
170


$
Net actuarial gain


(62,219
)


(5,871
)Accumulated other comprehensive income

$
(62,049
)

$
(5,871
)Tax


23,813



2,309Accumulated other comprehensive income, net of tax

$
(38,236
)

$
(3,562
)     Year EndedDecember 31, 2007Pension


Post-retirementBenefits


Benefits(In thousands)Accumulated other comprehensive income as at April 2, 2007

$



$
Recognized during period  Actuarial gains






12Occurring during period  Prior service cost


170



Occurring during period  Actuarial gains


(64,662
)


(5,883
)Other adjustments


2,443



Accumulated other comprehensive income at December 31, 2007

$
(62,049
)

$
(5,871
)Tax


23,813



2,309Accumulated other comprehensive income at December 31,
    2007, net of tax

$
(38,236
)

$
(3,562
)    75




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Actuarial
    Assumptions
    Pension

Post-retirement

Post-retirementBenefits

Health Benefits

Life BenefitsDiscount rate to determine net periodic cost before/after
    Curtailment cost

6.00/6.25%(a)

6.00/6.25%(b)

6.00/6.25%Discount rate to determine the benefit obligation as of
    December 31, 2007

6.50%

6.50%

6.50%Rate of compensation increase

4.00%

N/A

4.00%Expected average rate of return on plan assets

8.25%/8.00%(c)

N/A

7.75%     (a)
    
    Management Plans only; Represented and Non-Qualified Plans
    rate was 6.00%.(b)
    
    Management Plans only; Represented Plan rate was 6.00%.(c)
    
    Management/ Represented Plan; Rates vary by plan.      Plan
    Asset Allocation
    Allocation as of December 31, 2007Pension


Post-retirementBenefits


BenefitsEquity Securities


53
%


40
%Debt Securities


47
%


60
%    76




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Benefit
    Payments
    Pension


Post-retirementBenefits


Benefits(In thousands)Year ended December 31, 2008

$
96,739


$
17,937Year ended December 31, 2009

$
86,313


$
1,366Year ended December 31, 2010

$
86,269


$
1,483Year ended December 31, 2011

$
86,170


$
1,602Year ended December 31, 2012

$
86,239


$
1,737Year ended December 31, 2013 through December 31, 2017

$
438,142


$
10,732     LSI 401(k) Defined Contribution Plan:
 77




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 6 
    Balance
    Sheet Detail  December 31,2007


2006(In thousands)Inventories:Raw materials

$
30,023


$
44,151Work-in-process


95,262



52,497Finished goods


115,557



112,822Total inventories

$
240,842


$
209,470Prepaid expenses and other current assets:Assets held for sale

$
26,103


$
20,120Prepaid expense and other current assets


121,648



48,572Total prepaid expenses and other current assets

$
147,751


$
68,692Property and equipment:Land

$
37,900


$
6,040Buildings and improvements


104,931



39,519Equipment


373,663



315,672Furniture and fixtures


28,648



24,391Leasehold improvements


36,058



34,700Construction in progress


8,712



8,198Property and equipment, gross


589,912



428,520Accumulated depreciation


(360,180
)


(342,475
)Property and equipment, net

$
229,732


$
86,045Other assets:Deferred tax assets

$



$
18,746Software, net


75,665



53,619Investment in equity securities (Note 8)


39,779



15,800Debt issuance costs, net


3,748



5,311Other assets


130,161



45,079$
249,353


$
138,555   78




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  December 31,2007


2006(In thousands)Other accrued liabilities:Deferred tax liabilities

$



$
12,425Accrued expenses


153,786



98,613Warranty reserve (Note 14)


14,734



11,325Restructuring reserves


109,167



23,511Sales tax payable and other


16,578



8,090Interest payable


4,078



2,022$
298,343


$
155,986Other non-current liabilities:Other long-term tax-related liabilities

$
69,231


$
77,572Restructuring reserves


12,418



Other long-term liabilities


26,494



1,828Total other non-current liabilities

$
108,143


$
79,400Accumulated other comprehensive income:Net unrealized gains/(loss) on available-for-sale securities,
    net of tax of $197 and $0

$
1,828


$
(3,854
)Actuarial gain on pension and post retirement plan, net of tax
    $26,122 and $0


41,798



Foreign currency translation adjustments


20,665



13,683Total accumulated other comprehensive income

$
64,291


$
9,829    79




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 7 
    Intangible
    Assets And Goodwill    December 31, 2007


December 31, 2006Gross


Accumulated


Gross


AccumulatedCarrying Amount


Amortization


Carrying Amount


Amortization(In thousands)Semiconductor:Current technology

$
848,656


$
(298,525
)

$
240,458


$
(232,716
)Trademarks


26,730



(26,272
)


26,285



(25,446
)Customer base


367,808



(20,761
)


8,788



(4,394
)Non-compete agreements


1,949



(1,165
)


849



(625
)Existing purchase orders


200



(200
)


200



(200
)Supply agreement


100



(100
)






Patent licensing


313,800



(27,183
)






Order backlog


41,300



(41,300
)






Workforce


3,567



(661
)


3,567



(65
)Trade names


2,248



(94
)






Subtotal


1,606,358



(416,261
)


280,147



(263,446
)Storage Systems:Current technology


164,339



(130,361
)


164,339



(124,618
)Trademarks


7,150



(7,149
)


7,150



(7,120
)Customer base


5,010



(5,010
)


5,010



(5,010
)Non-compete agreements


1,600



(1,156
)


1,600



(33
)Supply agreement


8,147



(8,147
)


8,147



(7,472
)Trade names


800



(124
)


800



(10
)Subtotal


187,046



(151,947
)


187,046



(144,263
)Total intangible assets

$
1,793,404


$
(568,208
)

$
467,193


$
(407,709
)    80




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    WeightedAverage Lives


Year Ended December 31,(In Months)


2007


2006


2005(In thousands)Current technology


58


$
88,579


$
25,129


$
53,185Trademarks


83



855



4,119



5,001Customer base


44



19,253



2,359



2,427Non-compete agreements


27



1,662



182



281Supply agreement


32



775



225



1,590Patent licensing


36



27,510







Order backlog


2



53,000







Workforce


72



596



65



Trade names


75



208



10



Total


50


$
192,438


$
32,089


$
62,484     Amount(In thousands)Fiscal Year:2008

$
222,1352009


214,0252010


172,9652011


135,1372012 and thereafter


480,934Total

$
1,225,196    81




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Semiconductor


Storage SystemsSegment


Segment


Total(In thousands)Balance as of December 31, 2005

$
758,981


$
169,561


$
928,542Goodwill acquired during the year*






6,063



6,063Adjustment to goodwill recorded in a prior year for cash
    received from the resolution of a pre-acquisition income tax
    contingency


(2,282
)






(2,282
)Balance as of December 31, 2006

$
756,699


$
175,624


$
932,323Goodwill acquired during the year**


1,679,437







1,679,437Adjustment to goodwill acquired in a prior year for the
    resolution of a pre-acquisition income tax contingency


(3,230
)






(3,230
)Reduction in goodwill associated with the sale of MPG


(53,300
)






(53,300
)Goodwill impairment***


(2,019,900
)






(2,019,900
)Adjustment to goodwill related to changes in estimates of
    Emerging Issues Task Force
    No. 95-3
    liabilities initially recorded as of April 2, 2007 and fair
    value adjustments


(1,012
)






(1,012
)Adjustment to goodwill related to Financial Accounting Standards
    Board Interpretation No. 48


(34,767
)






(34,767
)Balance as of December 31, 2007

$
323,927


$
175,624


$
499,551     *
    
    During the year ended December 31, 2006, the Company
    recorded $6.1 million of goodwill in connection with the
    acquisition of StoreAge in the Storage Systems segment. See
    Note 4.**
    
    During the year ended December 31, 2007, the Company
    recorded $37.8 million, $1,584.2 million and
    $57.4 million of goodwill in connection with the
    acquisition of SiliconStor, Agere and Tarari, respectively, in
    the Semiconductor segment. See Note 4.***
    
    The Company monitors the recoverability of goodwill recorded in
    connection with acquisitions, by reporting unit, annually or
    sooner if events or changes in circumstances indicate that the
    carrying amount may not be recoverable. On December 31,
    2007, the Company determined that, based on the current market
    conditions in the semiconductor industry, the carrying amount of
    goodwill for our Semiconductor reporting unit was no longer
    recoverable under the first step of the test for impairment, as
    described in Note 1. The Company recognized a goodwill
    impairment charge of $2,019.9 million in the Semiconductor
    segment as of December 31, 2007 under the second step of
    the test for impairment. The fair value of the Semiconductor
    segment was estimated using the present value of estimated
    future cash flows and market multiple analysis.   82




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 8 
    Cash,
    Cash Equivalents And Investments  December 31,2007


2006(In thousands)Cash and cash equivalentsCash in financial institutions

$
117,464


$
50,478Cash equivalents:Overnight deposits and money market funds


892,332



234,287Commercial paper


11,770



39,809Asset-backed and mortgage-backed securities


3



3,226Total cash equivalents


904,105



277,322Total cash and cash equivalents

$
1,021,569


$
327,800Available-for-sale debt securitiesAsset-backed and mortgage-backed securities

$
207,290


$
363,723U.S. government and agency securities


121,350



272,287Corporate and municipal debt securities


47,388



45,127Total short-term investments

$
376,028


$
681,137Long-term investments in equity securitiesMarketable available-for-sale equity securities

$
1,888


$
2,827Non-marketable equity securities


37,891



12,973Total long-term investments in equity securities

$
39,779


$
15,800   Investments
    in available-for-sale securities
    December 31, 2007


December 31, 2006Long-Term





Long-TermShort-Term


Marketable


Short-Term


MarketableDebt Securities


Equity Securities


Debt Securities


Equity Securities(In thousands)Adjusted cost

$
374,774


$
1,117


$
686,705


$
1,117Gross unrealized gains


2,622



1,243



640



1,710Gross unrealized losses


(1,368
)


(472
)


(6,208
)


Estimated fair value

$
376,028


$
1,888


$
681,137


$
2,827  83




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Less than 12 Months


Greater than 12 MonthsFair Value


Unrealized Losses


Fair Value


Unrealized Losses(In thousands)Asset-backed and mortgage-backed securities

$
43,863


$
760


$
25,820


$
453U.S. government and agency securities


35,407



71



3,290



7Corporate and municipal debt securities


8,012



6



17,427



71Total

$
87,282


$
837


$
46,537


$
531       Due within one year

$
79,561Due in 1-5 years


152,847Due in 5-10 years


63,109Due after 10 years


80,511Total

$
376,028         Note 9 
    Segment
    And Geographic Information   84




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Information about profit or loss.
  Year Ended December 31,2007


2006


2005(In thousands)Revenues:Semiconductor

$
1,778,959


$
1,223,130


$
1,244,248Storage Systems


824,684



759,018



675,002Total

$
2,603,643


$
1,982,148


$
1,919,250(Loss)/income from operations:Semiconductor

$
(2,539,601
)

$
96,162


$
(25,721
)Storage Systems


48,370



62,145



37,927Total

$
(2,491,231
)

$
158,307


$
12,206     Significant Customers.
  Year Ended December 31,2007


2006


2005Semiconductor segment:Number of significant customers


2



1



1Percentage of segment revenues


28%, 12
%


19
%


17
%Storage Systems segment:Number of significant customers


3



2



2Percentage of segment revenues


47%, 16%, 11
%


47%, 15
%


44%, 12
%Consolidated:Number of significant customers


2



2



2Percentage of consolidated revenues


19%, 15
%


19%, 12
%


16%, 11
%  85




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Information about geographic areas.
  Year Ended December 31,2007


2006


2005(In thousands)Revenues:North America*

$
858,694


$
956,696


$
932,190Asia, including Japan


1,401,322



797,174



755,960EMEA**


343,627



228,278



231,100Total***

$
2,603,643


$
1,982,148


$
1,919,250   December 31,2007


2006(In thousands)Long-lived assets:North America

$
320,722


$
166,034Asia, including Japan


145,600



36,990EMEA


12,763



2,831Total

$
479,085


$
205,855     *
    
    Primarily the United States.**
    
    EMEA refers to Europe, Middle East and Africa. Our business is
    in Europe and the Middle East.***
    
    Revenues by geography are accumulated based on the revenues
    generated by our subsidiaries located within the three
    geographic areas noted in the above table. In the second half of
    2005, our Storage Systems business formed new subsidiaries
    within EMEA. As a result, the amounts in the table reflect that
    change as of June 21, 2005. Prior to that, all revenues
    generated by our Storage Systems business in EMEA were reported
    in North America.    Note 10 
    Derivative
    Instruments  Foreign
    currency risk
     86




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Note 11 
    Debt  Interest


Conversion


December 31,Maturity


Rate


Price


2007


2006(In thousands)Long-term debt:2003 Convertible Subordinated Notes


2010



4.00
%

$
13.4200


$
350,000


$
350,0002002 Convertible Subordinated Notes


2009



6.50
%

$
15.3125



361,660



Accrued debt premium*














8,589



720,249



350,000Amortization of accrued debt premium














(2,282
)


Total long-term debt













$
717,967


$
350,000     *
    
    Upon the completion of merger with Agere, the Company guaranteed
    Ageres 2002 Convertible Subordinated Notes. The carrying
    value of these Notes was adjusted to the fair value of
    approximately $370.2 million as of April 2, 2007, the
    purchase date. The accrued debt premium will be fully amortized
    by December 2009.       87




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
          Note 12 
    Income
    Taxes    Year Ended December 31,2007


2006


2005(In thousands)Current:Federal

$
(25,887
)

$
220


$
(70
)State


5,500



551



451Foreign


31,430



16,765



14,861Total current taxes


11,043



17,536



15,242Deferred:Federal


595







4,369State


74







985Foreign


(386
)


(1,854
)


5,944Total deferred taxes


283



(1,854
)


11,298Total

$
11,326


$
15,682


$
26,540  88




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Year Ended December 31,2007


2006


2005(In thousands)Domestic

$
(2,450,376
)

$
61,382


$
(55,140
)Foreign


(25,113
)


123,939



76,063(Loss)/income before income taxes and minority interest

$
(2,475,489
)

$
185,321


$
20,923     December 31,2007


2006(In thousands)Deferred tax assets:Tax credit carryovers

$
408,698


$
335,152Net operating loss carryforwards


1,408,068



109,395Future deductions for purchased intangible assets


268,007



45,660Depreciation and amortization


86,993



18,975Future deductions for reserves and other


311,202



75,701Future deductions for inventory reserves


16,341



13,623Total deferred tax assets


2,499,309



598,506Valuation allowance


(2,025,387
)


(592,185
)Net deferred tax assets


473,922



6,321Deferred tax liabilities:Gain on unrealized investments


(797
)


Tax deductible goodwill


(24,469
)


Purchased intangible assets


(462,594
)


Total deferred tax liabilities


(487,860
)


Total net deferred tax (liabilities)/assets

$
(13,938
)

$
6,321        89




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
        Year Ended December 31,2007


2006


2005(In thousands)Federal statutory rate

$
(866,421
)


35
%

$
64,864



35
%

$
7,324



35
%State taxes, net of federal benefit


3,575



0
%


358



0
%


294



1
%Foreign earnings taxed in the U.S.


28,504



(1
)%


31,069



17
%


29,904



143
%Benefit of net operating losses and deferred tax assets not
    previously recognized










(56,708
)


(31
)%


(11,067
)


(53
)%Change in valuation allowance*


77,953



(3
)%






0
%


5,354



26
%Difference between U.S. and foreign tax rates


24,310



(1
)%


(25,993
)


(14
)%


(3,206
)


(15
)%State tax refund, net of federal effect














(0
)%


(2,837
)


(14
)%Release of domestic/foreign income taxes previously accrued


(5,447
)


0
%


(3,593
)


(2
)%


(2,500
)


(12
)%Net impact of federal income tax audit not previously accrued














0
%


2,345



11
%Alternative minimum tax














0
%


302



1
%Nondeductible expenses


84,760



(3
)%










(14
)


Goodwill Impairment


689,901



(28
)%














Pension Liability Adjustment


(26,122
)


1
%














Others


313



0
%


5,685



3
%


641



4
%Effective tax rate

$
11,326



0
%

$
15,682



8
%

$
26,540



127
%     *
    
    In 2005, the provision for income taxes was increased by a
    $5.4 million charge related to the correction of an error
    in a prior period associated with the carrying value of
    $8.3 million in deferred tax liabilities that should have
    been reclassified to goodwill upon adoption of
    SFAS No. 142 Goodwill and Intangible
    Assets in 2002. The deferred tax liabilities were instead
    used as a reduction of the Companys required valuation
    allowance in 2002. This was offset by tax-related liabilities of
    $2.9 million originally recorded in connection with these
    deferred tax balances which are no longer required. The Company
    believes that this amount is not material to previously reported
    financial statements and has concluded that correcting such
    amounts in the fourth quarter of 2005 and the 2005 fiscal year,
    as opposed to restating prior periods, is appropriate in the
    circumstances. 90




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
             Uncertain
    income tax positions
      non-U.S. income
   91




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  12-month
  Balance at January 1, 2007

$
132,947Addition for Agere merger at April 2, 2007


65,241Tax positions related to current year:Additions


12,741Reductions


Tax positions related to prior years:Additions


Reductions


(1,551
)Lapses in statute of limitations


(3,615
)Foreign exchange loss


886Balance at December 31, 2007

$
206,649   Note 13 
    Related
    Party Transactions        Note 14 
    Commitments,
    Contingencies And Legal Matters  Operating
    Leases
   92




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Purchase
    Commitments
        Guarantees
  Product
    Warranties:
      Year Ended December 31,2007


2006(In thousands)Balance at the beginning of the period

$
11,325


$
11,074Accruals for warranties issued during the period


14,920



12,750Accruals related to pre-existing warranties (including changes
    in estimates)


(217
)


Accruals assumed in Agere merger


1,819



Settlements made during the period (in cash or in kind)


(13,113
)


(12,499
)Balance at the end of the period

$
14,734


$
11,325   Convertible subordinated notes:
  Standby letters of credit:
 93




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Other
    commitments
    Indemnifications
  and/or
  Legal
    Matters
         94




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   95




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  
   Internal Control 
    Integrated Framework
          
  
  96




---



##### Table of Contents



Supplementary
    Financial Data
  Interim
    Financial Information (Unaudited)
  QuarterFirst


Second


Third


Fourth(In thousands, except per share amounts)Year Ended December 31, 2007Revenues

$
465,415


$
669,939


$
727,415


$
740,874Gross profit


194,516



151,970



247,865



309,507Net income/(loss)


29,824



(377,845
)


(140,600
)


(1,998,198
)Basic income/(loss) per share:

$
0.07


$
(0.50
)

$
(0.20
)

$
(2.87
)Diluted income/(loss) per share:

$
0.07


$
(0.50
)

$
(0.20
)

$
(2.87
)Year Ended December 31, 2006Revenues

$
475,884


$
489,635


$
492,978


$
523,651Gross profit


193,273



198,406



208,098



223,388Net income


13,168



53,847



43,610



59,013Basic income per share:

$
0.03


$
0.14


$
0.11


$
0.15Diluted income per share:

$
0.03


$
0.13


$
0.11


$
0.14              97




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation of Disclosure Controls and
    Procedures:
  Managements Report on Internal Control Over Financial
    Reporting: Rule 13a-15(f)
  Internal Control  Integrated
    Framework
    Changes in Internal Controls:
  Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  http://www.lsi.com/governance
 98




---



##### Table of Contents



Room 10A-301C
   1-800-372-2447
    Item 11.
    Executive
    Compensation.      Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services.   99




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Form 10-K:
  PAGE INTHE FORM10-KConsolidated Balance Sheets  As of December 31,
    2007 and 2006


44Consolidated Statements of Operations  For the Three
    Years Ended December 31, 2007, 2006 and 2005


45Consolidated Statements of Stockholders Equity 
    For the Three Years Ended December 31, 2007, 2006 and 2005


46Consolidated Statements of Cash Flows  For the Three
    Years Ended December 31, 2007, 2006 and 2005


47Notes to Consolidated Financial Statements


48Report of Independent Registered Public Accounting Firm


96       SCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS
    (In millions)
  Column A

Column B

Column C

Column D

Column EBalance at

Additions Charged to



Balance atBeginning of

Costs, Expenses



End ofDescription

Period

or Other Accounts

Deductions*

Period2007Allowances

$
14


$
6


$
(10
)

$
102006Allowances

$
15


$
13


$
(14
)

$
142005Allowances

$
10


$
9


$
(4
)

$
15     *
    
    Deductions include write-offs of uncollectible accounts and
    collections of amounts previously reserved.  Exhibits
    Exhibits
    Financial statement schedule
   100




---



##### Table of Contents



SIGNATURES      By:
    /s/  Abhijit
    Y. Talwalkar        Signature

Title

Date/s/  Abhijit
    Y. TalwalkarAbhijit
    Y. Talwalkar

President and Chief Executive Officer and Director (Principal
    Executive Officer)

February 28, 2008/s/  Bryon
    LookBryon
    Look

Executive Vice President and Chief Financial Officer (Principal
    Financial Officer and Principal Accounting Officer)

February 28, 2008*Timothy
    Y. Chen

Director

February 28, 2008*Charles
    A. Haggerty

Director

February 28, 2008*Richard
    S. Hill

Director

February 28, 20086*James
    H. Keyes

Director

February 28, 2008*Michael
    J. Mancuso

Director

February 28, 2008*John
    H.F. Miner

Director

February 28, 2008*Arun
    Netravali

Director

February 28, 2008*Matthew
    J. ORourke

Director

February 28, 2008 101




---



##### Table of Contents



Signature

Title

Date*Gregorio
    Reyes

Director

February 28, 2008*By:

/s/  Bryon
    LookBryon
    Look
    Attorney-in-fact
    February 28, 2008  102




---



##### Table of Contents



EXHIBIT INDEX  2
.1

Asset Purchase Agreement between LSI Logic Corporation and
    Semiconductor Components Industries, LLC, dated as of
    April 5, 2006. Incorporated by reference to
    Exhibit 2.1 to the Quarterly Report on
    Form 10-Q
    filed by ON Semiconductor Corporation on April 27, 2006
    (File
    no. 000-30419).+2
.2

Agreement and Plan of Merger, dated as of December 3, 2006,
    by and among LSI Logic Corporation, Atlas Acquisition Corp. and
    Agere Systems Inc. Incorporated by reference to Exhibit 2.1
    to our Current Report on
    Form 8-K
    filed on December 4, 2006.2
.3.1

Asset Purchase Agreement, dated as of July 25, 2007, among
    STATS ChipPAC (Thailand) Limited and STATS ChipPAC Ltd. and LSI
    (Thai) Ltd. and LSI Corporation. Incorporated by reference to
    Exhibit 2.1 to our Current Report on
    Form 8-K
    filed on October 9, 2007.2
.3.2

Amendment No. 1 to Asset Purchase Agreement, dated as of
    July 25, 2007, among STATS ChipPAC (Thailand) Limited and
    STATS ChipPAC Ltd. and LSI (Thai) Ltd. and LSI Corporation.
    Incorporated by reference to Exhibit 2.2 to our Current
    Report on
    Form 8-K
    filed on October 9, 2007.2
.4

Asset Purchase Agreement, dated as of August 20, 2007, by
    and between LSI Corporation and Infineon Technologies AG.
    Incorporated by reference to Exhibit 2.1 to our Current
    Report on
    Form 8-K
    filed on October 30, 2007.3
.1

Certificate of Incorporation. Incorporated by reference to
    Exhibit 4.1 to our Quarterly Report on
    Form 10-Q
    filed on August 10, 2007.3
.2

By-laws. Incorporated by reference to Exhibit 3.1 to our
    Current Report on
    Form 8-K
    filed on November 15, 2007.4
.1

Indenture relating to our 4% Convertible Subordinated Notes
    due 2010. Incorporated by reference to Exhibit 4.5 to our
    Quarterly Report on
    Form 10-Q
    filed on August 13, 2003.4
.2.1

Indenture for Agere Systems Inc.s 6.5% Convertible
    Subordinated Notes due 2009. Incorporated by reference to
    Exhibit 10.1 to Ageres Quarterly Report on
    Form 10-Q
    filed on August 9, 2002.4
.2.2

Supplemental Indenture No. 1 to the Indenture for
    Ageres 6.5% Convertible Subordinated Notes due 2009.
    Incorporated by reference to Exhibit 4.5 to Ageres
    Current Report on
    Form 8-K
    filed on June 1, 2005.4
.2.3

Supplemental Indenture No. 2 to the Indenture for
    Ageres 6.5% Convertible Subordinated Notes due 2009.
    Incorporated by reference to Exhibit 10.1 to our Current
    Report on
    Form 8-K
    filed on April 6, 2007.4
.3.1

Amended and Restated Preferred Shares Rights Agreement,
    dated as of November 20, 1998, between LSI Logic
    Corporation and BankBoston N.A. Incorporated by reference to
    Exhibit 1 to our
    Form 8-A/A
    filed on December 8, 1998.4
.3.2

Amendment No. 1 to Amended and Restated Preferred
    Shares Rights Agreement, dated as of February 19,
    1999, between LSI Logic Corporation and BankBoston N.A.
    Incorporated by reference to Exhibit 2 to our Report on
    Form 8-A/A
    filed on June 17, 2003.4
.3.3

Amendment to Amended and Restated Preferred Shares Rights
    Agreement, dated as of August 16, 2001, by and among LSI
    Logic Corporation, Fleet Bank f/k/a BankBoston N.A. and
    EquiServe Trust Company, N.A. Incorporated by reference to
    Exhibit 3 to our Report on
    Form 8-A/A
    filed on June 17, 2003.4
.4

Specimen Common Stock Certificate. Incorporated by reference to
    Exhibit 4.1 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.10
.1.1

Joint Venture Agreement with Chartered Semiconductor
    Manufacturing Ltd. Incorporated by reference to
    Exhibit 10.19 to Ageres Registration Statement on
    Form S-1/A,
    File
    No. 333-51594,
    filed February 7, 2001.10
.1.2

Amendment to Joint Venture Agreement with Chartered
    Semiconductor Manufacturing Ltd. Incorporated by reference to
    Exhibit 10.1 to Ageres Current Report on
    Form 8-K,
    filed September 23, 2004.10
.2

Patent and Technology License Agreement. Incorporated by
    reference to Exhibit 10.13 to Agere System Inc.s
    Registration Statement on
    Form S-1/A,
    File
    No. 333-51594,
    filed February 7, 2001.10
.3

Form of Indemnification Agreement. Incorporated by reference to
    exhibit 10.1 to our Current Report on
    Form 8-K
    filed on February 22, 2008.10
.4

Form of Change of Control Severance Agreement. Incorporated by
    reference to Exhibit 10.9 to our Annual Report on
    Form 10-K
    filed March 15, 2004.*10
.5

Agere Systems Inc. Officer Severance Policy. Incorporated by
    reference to Exhibit 10.26 to Ageres Registration
    Statement on
    Form S-1/A
    filed March 7, 2001.*




---



##### Table of Contents



10
.6.1

1991 Equity Incentive Plan. Incorporated by reference to
    Exhibit 4.5 to our Registration Statement on
    Form S-8
    (No. 333-96543)
    filed on July 16, 2002.*10
.6.2

1991 Equity Incentive Plan Nonqualified Stock Option Agreement.
    Incorporated by reference to Exhibit 10.1 to our Quarterly
    Report on
    Form 10-Q
    filed on November 12, 2004.*10
.6.3

1991 Equity Incentive Plan Form of Notice of Grant of Stock
    Options and Option Agreement. Incorporated by reference to
    Exhibit 10.2 to our Quarterly Report on
    Form 10-Q
    filed on November 12, 2004.*10
.7.1

1995 Director Option Plan. Incorporated by reference to
    Exhibit 4.4 to our Registration Statement on
    Form S-8
    (No. 333-106205)
    filed on June 17, 2003.*10
.7.2

Form of Annual Director Option Agreement. Incorporated by
    reference to Exhibit 1.3 to our Current Report on
    Form 8-K
    filed on April 7, 2005.*10
.7.3

Form of Notice of Grant of Stock Options and Option Agreement.
    Incorporated by reference to Exhibit 1.4 to our Current
    Report on
    Form 8-K
    filed on April 7, 2005.*10
.8

1999 Nonstatutory Stock Option Plan. Incorporated by reference
    to Exhibit 4.2 to our Registration Statement on
    Form S-8
    (No. 333-96549)
    filed on July 16, 2002.*10
.9.1

2003 Equity Incentive Plan. Incorporated by reference to
    Exhibit 10.19 to our Quarterly Report on
    Form 10-Q
    filed on November 13, 2006.*10
.9.2

2003 Equity Incentive Plan Nonqualified Stock Option Agreement.
    Incorporated by reference to Exhibit 10.47 to our Quarterly
    Report on
    Form 10-Q
    filed on August 12, 2005.*10
.9.3

2003 Equity Incentive Plan Form of Notice of Grant of Stock
    Option. Incorporated by reference to Exhibit 10.48 to our
    Quarterly Report on
    Form 10-Q
    filed on August 12, 2005.*10
.9.4

2003 Equity Incentive Plan Restricted Stock Unit Agreement.
    Incorporated by reference to Exhibit 10.3 to our Quarterly
    Report on
    Form 10-Q
    filed on November 12, 2004.*10
.9.5

2003 Equity Incentive Plan Form of Notice of Grant of Restricted
    Stock Units. Incorporated by reference to Exhibit 10.37 to
    our Annual Report on
    Form 10-K
    filed on March 16, 2005.*10
.9.6

Abhijit Y. Talwalkar 2003 Equity Incentive Plan Nonqualified
    Stock Option Agreement, effective as of June 1, 2005.
    Incorporated by reference to Exhibit 10.49 to our Quarterly
    Report on
    Form 10-Q
    filed on August 12, 2005.*10
.9.7

Abhijit Y. Talwalkar Notice of Grant of Stock Option, effective
    as of June 1, 2005. Incorporated by reference to
    Exhibit 10.50 to our Quarterly Report on
    Form 10-Q
    filed on August 12, 2005.*+10
.10

Standalone Stock Option Agreement issued to Abhijit Y.
    Talwalkar. Incorporated by reference to Exhibit 10.1 to our
    Registration Statement on
    Form S-8
    (No. 333-126594)
    filed on July 14, 2005.*10
.11.1

Agere Systems Inc. 2001 Long Term Incentive Plan. Incorporated
    by reference to Exhibit 10.1 to Ageres Quarterly
    Report on
    Form 10-Q
    filed on May 5, 2006.*10
.11.2

Agere Systems Inc. 2001 Long Term Incentive Plan Form of
    Nonstatutory Stock Option Agreement Incorporated by reference to
    Exhibit 10.8 to Ageres Registration Statement on
    Form S-1/A,
    File
    No. 333-
    51594, filed on February 7, 2001.*10
.11.3

Agere Systems Inc. 2001 Long Term Incentive Plan Form of
    Restricted Stock Unit Award Agreement Incorporated by reference
    to Exhibit 10.7 to Ageres Registration Statement on
    Form S-1/A,
    File
    No. 333-
    51594, filed on February 7, 2001.*10
.11.4

Form of Agere Performance-vested RSU Award Agreement 
    Total Stockholder Return. Incorporated by reference to
    Exhibit 10.2 to Ageres Current Report on
    Form 8-K/A,
    filed November 3, 2005.*10
.11.5

Form of Agere Performance-vested RSU Award Agreement 
    Earnings per share. Incorporated by reference to
    Exhibit 10.13 to Ageres Annual Report on
    Form 10-K,
    filed on December 1, 2006.*10
.12

1996 Lucent Long Term Incentive Program For Agere Employees.
    Incorporated by reference to Exhibit 10.28 to Ageres
    Annual Report on
    Form 10-K
    filed on December 12, 2002.*10
.13

1997 Lucent Long Term Incentive Plan For Agere Employees.
    Incorporated by reference to Exhibit 10.29 to Ageres
    Annual Report on
    Form 10-K,
    filed December 12, 2002.*10
.14

1998 Global Stock Option Plan For Agere Employees. Incorporated
    by reference to Exhibit 10.30 to Ageres Annual Report
    on
    Form 10-K,
    filed December 12, 2002.*10
.15.1

LSI Logic Corporation Incentive Plan. Incorporated by reference
    to Exhibit 10.54 to our Current Report on
    Form 8-K
    filed February 15, 2006.*




---



##### Table of Contents



10
.15.2

Written Description of 2007 Bonus structure for Abhijit Y.
    Talwalkar. Incorporated by reference to Item 5.02 of our
    Current Report on
    Form 8-K
    filed on April 5, 2007.*10
.16

Written Description of 2007 Incentive Plan. Incorporated by
    reference to Exhibit 10.58 to our Current Report on
    Form 8-K
    filed on March 27, 2007.*10
.17

Agere Systems Inc. Short Term Incentive Plan. Incorporated by
    reference to Exhibit 10.9 to Ageres Annual Report on
    Form 10-Q,
    filed December 1, 2006.*10
.18

LSI Employee Commuter Expense Reimbursement Policy. Incorporated
    by reference to Exhibit 10.2 to our Current Report on
    Form 8-K
    filed on May 15, 2007.*10
.19

Description of Mr. Talwalkars relocation benefits.
    Incorporated by reference to Exhibit 10.1 to our Current
    Report on
    Form 8-K
    filed on May 15, 2007.*10
.20

Agere Systems Inc. Supplemental Pension Plan. Incorporated by
    reference to Exhibit 10.10 to Ageres Registration
    Statement on
    Form S-1,
    File
    No. 333-51594,
    filed on February 7, 2001.*10
.21

Employment Agreement with Abhijit Y. Talwalkar, effective as of
    May 23, 2005. Incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on May 24, 2005.*10
.22

Employment Agreement with Claudine Simson. Incorporated by
    reference to Exhibit 10.23 to our Quarterly Report on
    Form 10-Q
    filed May 11, 2007.*10
.23

Employment Agreement with Jeffrey Hoogenboom. Incorporated by
    reference to Exhibit 10.22 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.24

Employment Agreement with Ruediger Stroh. Incorporated by
    reference to Exhibit 10.27 to Ageres Annual Report on
    Form 10-K
    filed on December 12, 2005.*10
.25

Retention Agreement with Andrew Micallef. Incorporated by
    reference to Exhibit 10.18 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.26

Retention Agreement with Jean Rankin. Incorporated by reference
    to Exhibit 10.19 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.27

Retention Agreement with Denis Regimbal. Incorporated by
    reference to Exhibit 10.20 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.28

Retention Agreement with Ruediger Stroh. Incorporated by
    reference to Exhibit 10.21 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.29

Retention Agreement with Umesh Padval. Incorporated by reference
    to Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on July 10, 2007.*10
.30

Separation Agreement with Joseph M. Zelayeta. Incorporated by
    reference to Exhibit 10.57 to our Current Report on
    Form 8-K
    filed on August 14, 2006.*10
.31

Separation Agreement with Donald Esses, Incorporated by
    reference to Exhibit 10.24 to our Quarterly Report on
    Form 10-Q
    filed on May 11, 2007.*10
.32.1

Separation Agreement with Umesh Padval. Incorporated by
    referenced to Exhibit 10.2 to our Quarterly Report on
    Form 10-Q
    filed on November 9, 2007.*10
.32.2

Amendment No. 1 to Separation Agreement with Umesh Padval.
    Incorporated by reference to Exhibit 10.3 to our Quarterly
    Report on
    Form 10-Q
    filed on November 9, 2007.*10
.33.1

Separation Agreement with Denis Regimbal.*10
.33.2

Letter relating to Separation Agreement with Denis Regimbal.*10
.34

Separation Agreement with Jeffrey Hoogenboom.*21


List of Subsidiaries.23


Consent of Independent Registered Public Accounting Firm.24


Power of Attorney.31
.1

Certification of the Chief Executive Officer pursuant to
    Securities Exchange Act Rule 13a-14(a).31
.2

Certification of the Chief Financial Officer pursuant to
    Securities Exchange Act Rule 13a-14(a).32
.1

Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350.**32
.2

Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350.**     *
    
    Denotes management contract or compensatory plan or arrangement.




---



##### Table of Contents



+
    
    Confidential treatment has been granted with respect to certain
    portions of these exhibits. Redacted versions have been filed
    with the Securities and Exchange Commission.**
    
    Furnished, not filed.