##### 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, 2008ORo

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 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




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##### 





LSI
    CorporationForm 10-K
    For the Year Ended December 31, 2008
 PART 1Item 1.

Business

1Item 1A.

Risk Factors

11Item 1B.

Unresolved Staff Comments

18Item 2.

Properties

18Item 3.

Legal Proceedings

19Item 4.

Submission of Matters to a Vote of Security
    Holders

19Executive Officers of LSI

19PART IIItem 5

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

21Item 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

43Item 8.

Financial Statements and Supplementary Data

45Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure

102Item 9A.

Controls and Procedures

102Item 9B.

Other Information

102PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance

102Item 11.

Executive Compensation

103Item 12.

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

103Item 13.

Certain Relationships and Related Transactions,
    and Director Independence

103Item 14.

Principal Accounting Fees and Services

103PART IVItem 15.

Exhibits, Financial Statement Schedules

104SIGNATURES

105EXHIBIT INDEXEX-4.3EX-10.15.1EX-10.17EX-10.33EX-10.34EX-21EX-23EX-24EX-31.1EX-31.2EX-32.1EX-32.2    FORWARD-LOOKING
    STATEMENTS
  Form 10-K Item 1A-Risk




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PART I  Item 1.
    Business  General
        
    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. We believe that the Agere
    acquisition allowed our Storage semiconductor business to offer
    a broader product line and gave it 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. Ageres intellectual
    property licensing capabilities also offered us the ability to
    generate more revenue from our pre-existing patents than we had
    generated as a stand-alone company. Following the Agere
    acquisition, we discontinued a number of development projects
    and have been reducing headcount in areas with overlap in order
    to achieve significant cost synergies from the acquisition.
    Because our Consumer business, which provided semiconductors for
    consumer products such as DVD recorders, 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, which principally
    provided integrated circuits for mobile phones, 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.
    Between mid-2007 and mid-2008, we exited our semiconductor and
    storage systems assembly and test operations and transitioned
    those activities to third party contract manufacturers. We did
    this so that we can focus our resources and attention on our
    efforts to design leading-edge semiconductor and storage
    solutions, so that we will have a more variable cost structure
    and so that we will avoid the capital expenses needed for
    facility upgrades. We sold our semiconductor assembly and test
    facility in Thailand and discontinued operations at our
    Singapore semiconductor assembly and test facility and our
    Wichita, Kansas storage systems assembly and test facility.
    On October 3, 2007, we acquired Tarari, Inc., a maker of
    silicon and software that provided content and application
    awareness in packet and message processing, enabling advanced
    security and network control 1




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for service provider and enterprise networks. We believe these
    capabilities will become increasingly important as network
    operators seek additional billing and security capabilities.  
    On April 25, 2008, we acquired the assets of
    Infineons hard disk drive semiconductor business to
    enhance our competitive position in desktop and enterprise hard
    disk drives.        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,
 2




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pre-amplifiers,
  Storage Interface Products.
  
    Storage Standard Products.  Our product line
    includes SAS, SATA and
    RAID-On-Chip,
    or RoC, integrated circuits combined with our
    Fusion-MPTTM

    firmware and drivers to form intelligent storage interface
    solutions primarily for server and storage system motherboard
    applications. Additionally, our product line includes SCSI, SAS
    and SATA bus expander integrated circuits, Fibre Channel
    integrated circuits, SAS switches, and disk drive bridging or
    interposer circuits used primarily in storage systems. We sell
    our integrated circuit solutions both in an integrated circuit
    plus software form or as a complete solution including the host
    bus adapter board itself.
    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 bus 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
    combined with our customers intellectual property to form
    custom solutions that provide a connection to the network, the
    SAN, memory systems and host buses. Using these pre-verified
    interfaces, our customers can 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
       3




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Network
    Processors
    Digital
    Signal Processors
    Content
    Inspection Processors
  ®
  Network
    Traffic Aggregation and Framing Solutions
    Broadband Aggregation Devices.
  E-carrier
  SONET/SDH Network Devices.
 4




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Personal
    Connectivity Solutions
      Other
    Networking Products
      STORAGE
    SYSTEMS SEGMENT
    e-commerce,
  TM
  ® RAID-on-motherboard
 5




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Marketing
    and Distribution
  Semiconductor
    Marketing and Distribution
      Storage
    Systems Marketing and Distribution
        Customers
   6




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Manufacturing
  Semiconductor
    Manufacturing
          Storage
    Systems Manufacturing
       7




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Backlog
  Semiconductor
    Backlog
    Storage
    Systems Backlog
    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.   8




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Storage
    Systems Competitors
      
    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; 9




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
    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.          Research
    and Development
    Working
    Capital
    Environmental
    Regulation
    
    the need for additional capital improvements to comply with such
    regulations or to restrict discharges or use of restricted
    substances;
    liability to our employees
    and/or third
    parties; and/or
    business interruptions as a consequence of permit suspensions or
    revocations, the granting of injunctions requested by
    governmental agencies or private parties, or the unintentional
    presence of restricted substances in our products. 10




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Employees
      Seasonality
    Item 1A.
    Risk
    Factors    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.
     11




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We
    operate in intensely competitive markets, and our failure to
    compete effectively would harm our results of
    operations.
      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.
    A
    prolonged economic downturn could have a material negative
    impact on our results of operations and financial
    condition.
     12




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We
    depend on outside suppliers to manufacture, assemble, package
    and test our products; accordingly, any failure 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.       13




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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.
     14




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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.
   15




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We are
    exposed to legal, business, political and economic risks
    associated with our international operations.
    
    political, social and economic instability;
    fluctuations in foreign currency exchange rates;
    exposure to different legal standards, particularly with respect
    to intellectual property;
    natural disasters, civil unrest, terrorism 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.
    We may
    engage in acquisitions and strategic alliances, which may not be
    successful and could harm our business and operating
    results.
   16




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The
    semiconductor industry is highly cyclical, which may cause our
    operating results to fluctuate.
    Our
    failure to attract, retain and motivate key employees could harm
    our business.
    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.
   17




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Our
    blank check preferred stock 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           18




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

Age

PositionAbhijit Y. Talwalkar


44


President and Chief Executive OfficerPhilip W. Bullinger


44


Executive Vice President and General Manager, Engenio
    Storage GroupJon R. Gibson


62


Vice President, Human ResourcesBryon Look


55


Executive Vice President, Chief Financial Officer and Chief
    Administrative OfficerAndrew Micallef


44


Executive Vice President, Worldwide Manufacturing OperationsJean F. Rankin


50


Executive Vice President, General Counsel and SecretaryD. Jeffrey Richardson


44


Executive Vice President and General Manager, Semiconductor
    Solutions GroupFlavio Santoni


50


Executive Vice President and General Manager, Engenio
    Storage Group         21-year
   19




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20




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      2008


2007High


Low


High


LowFirst Quarter

$
5.57


$
3.79


$
10.67


$
8.78Second Quarter

$
7.53


$
4.73


$
10.68


$
7.40Third Quarter

$
7.87


$
5.12


$
8.37


$
5.99Fourth Quarter

$
5.70


$
2.36


$
7.80


$
5.06       PERFORMANCE
    GRAPH
    
 Dec 31, 2003


Dec 31, 2004


Dec 31, 2005


Dec 31, 2006


Dec 31, 2007


Dec 31, 2008LSI Corporation

$
100


$
61.78


$
90.19


$
101.47


$
59.86


$
37.09S&P 500 Index

$
100


$
110.88


$
116.33


$
134.70


$
142.10


$
89.53S&P 500 Semiconductors Index

$
100


$
79.11


$
88.73


$
80.82


$
90.50


$
49.11  21




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Five-Year
    Consolidated Summary
  Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share amounts)Revenues

$
2,677,077


$
2,603,643


$
1,982,148


$
1,919,250


$
1,700,164Cost of revenues


1,608,108



1,699,785



1,158,983



1,150,042



1,039,804Gross profit


1,068,969



903,858



823,165



769,208



660,360Research and development


672,511



655,224



413,432



399,685



427,805Selling, general and administrative


406,875



381,409



255,569



238,265



245,460Restructuring of operations and other items, net


43,717



148,121



(8,427
)


119,052



423,444Goodwill and intangible impairment charges


541,586



2,021,463











Acquired in-process research and development






188,872



4,284







(Loss)/income from operations


(595,720
)


(2,491,231
)


158,307



12,206



(436,349
)Interest expense


(34,943
)


(31,020
)


(24,263
)


(25,283
)


(25,320
)Interest income and other, net


36,110



46,762



51,277



34,000



22,170(Loss)/income before income taxes and minority interest


(594,553
)


(2,475,489
)


185,321



20,923



(439,499
)Provision for income taxes


27,700



11,326



15,682



26,540



24,000(Loss)/income before minority interest


(622,253
)


(2,486,815
)


169,639



(5,617
)


(463,499
)Minority interest in net income of subsidiary






4



1



6



32Net (loss)/income

$
(622,253
)

$
(2,486,819
)

$
169,638


$
(5,623
)

$
(463,531
)Basic net (loss)/income per share

$
(0.96
)

$
(3.87
)

$
0.43


$
(0.01
)

$
(1.21
)Diluted net (loss)/income per share

$
(0.96
)

$
(3.87
)

$
0.42


$
(0.01
)

$
(1.21
)Year-end status:Total assets

$
3,344,194


$
4,396,390


$
2,852,144


$
2,796,066


$
2,874,001Long-term obligations

$
1,105,739


$
1,148,689


$
429,400


$
699,050


$
859,545Stockholders equity

$
1,440,922


$
2,484,996


$
1,895,738


$
1,627,950


$
1,618,046          22




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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 1A: Risk Factors;
    Part II, Item 6: Selected Financial Data;
    and Part II, Item 8: Financial Statements and
    Supplementary Data.
    OVERVIEW
            
    The acquisition of SiliconStor, Inc., a provider of
    semiconductor solutions for enterprise storage networks, in
    March 2007;
    The acquisition of Agere in April 2007 through the merger of
    Agere and a subsidiary of ours. Agere was a provider of
    integrated circuit solutions for a variety of communications and
    computing applications; 23




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
    The sale of our Consumer Products Group in July 2007;
    The sale of our Mobility Products Group in October 2007;
    The sale of, or discontinuation of operations at, our
    semiconductor and storage systems assembly and test facilities,
    and the transition of the work performed at those facilities to
    contract manufacturers between mid-2007 and mid-2008;
    The acquisition of Tarari, Inc., a maker of silicon and software
    that provides content and application awareness in packet and
    message processing, in October 2007; and
    The acquisition of the hard disk drive semiconductor business of
    Infineon Technologies AG in April 2008.          RESULTS
    OF OPERATIONS
  Revenues
    Year Ended December 31,2008


2007


2006(In millions)Semiconductor segment

$
1,795.1


$
1,778.9


$
1,223.1Storage Systems segment


882.0



824.7



759.0Consolidated

$
2,677.1


$
2,603.6


$
1,982.1   2008
    compared to 2007:
   24




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Semiconductor
    Segment:
    
    Increased demand for semiconductors used in storage and
    networking product applications, primarily the result of a full
    year of revenues from Agere in 2008; and
    Revenues from the HDD semiconductor business acquired from
    Infineon in April 2008.    Storage
    Systems Segment:
      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 due to 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 storage systems.   25




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Revenues
    by Geography
    Year Ended December 31,2008


2007


2006(In millions)North America*

$
737.2


$
858.7


$
956.7Asia**


1,359.8



1,401.3



797.1Europe and the Middle East


580.1



343.6



228.3Total

$
2,677.1


$
2,603.6


$
1,982.1     *
    
    Primarily the United States.**
    
    Including Japan.  2008
    compared to 2007:
    2007
    compared to 2006:
    Gross
    Profit Margin
    Year Ended December 31,2008


2007


2006(Dollars in millions)Semiconductor segment

$
736.9


$
603.7


$
561.7Percentage of segment revenues


41.1
%


33.9
%


45.9
%Storage Systems segment

$
332.1


$
300.2


$
261.5Percentage of segment revenues


37.7
%


36.4
%


34.5
%Consolidated

$
1,069.0


$
903.9


$
823.2Percentage of total revenues


39.9
%


34.7
%


41.5
%  26




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##### Table of Contents



2008
    compared to 2007:
    Semiconductor
    Segment:
    
    Increased sales of products with higher gross profit margins in
    2008;
    An inventory charge of $47.9 million recorded in the second
    quarter of 2007 related to fair valuing the inventory in the
    acquisition of Agere;
    A decrease in inventory provisions from 2007 to 2008 primarily
    as a result of improvements in supply chain management; and
    $19.0 million in charges recorded in 2007 for a wafer
    supply agreement with ON Semiconductor resulting from a decline
    in demand.  Storage
    Systems Segment:
    2007
    compared to 2006:
    Semiconductor
    Segment:
    
    An increase of $143.2 million in the amortization of
    intangible assets in 2007 primarily related to the acquisition
    of Agere;
    An inventory charge of $47.9 million in 2007 related to
    fair valuing the inventory in the acquisition of Agere; and
    $19.0 million in charges recorded in 2007 for a wafer
    supply agreement with ON Semiconductor resulting from a decline
    in demand.  Storage
    Systems Segment:
   27




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##### Table of Contents



Research
    and Development
    Year Ended December 31,2008


2007


2006(Dollars in millions)Semiconductor segment

$
534.0


$
525.4


$
315.9Percentage of segment revenues


29.7
%


29.5
%


25.8
%Storage Systems segment

$
138.5


$
129.8


$
97.5Percentage of segment revenues


15.7
%


15.7
%


12.8
%Consolidated

$
672.5


$
655.2


$
413.4Percentage of total revenues


25.1
%


25.2
%


20.9
%   2008
    compared to 2007:
    Semiconductor
    Segment:
      Storage
    Systems Segment:
      2007
    compared to 2006:
    Semiconductor
    Segment:
   28




---



##### Table of Contents



Storage
    Systems Segment:
    Selling,
    General and Administrative
    Year Ended December 31,2008


2007


2006(Dollars in millions)Semiconductor segment

$
278.6


$
264.1


$
157.4Percentage of segment revenues


15.5
%


14.8
%


12.9
%Storage Systems segment

$
128.3


$
117.3


$
98.2Percentage of segment revenues


14.5
%


14.2
%


12.9
%Consolidated

$
406.9


$
381.4


$
255.6Percentage of total revenues


15.2
%


14.6
%


12.9
%   2008
    compared to 2007:
    Semiconductor
    Segment:
    Storage
    Systems Segment:
    2007
    compared to 2006:
    Semiconductor
    Segment:
   29




---



##### Table of Contents



Storage
    Systems Segment:
    Restructuring
    of Operations and Other Items
    2008:
      2007:
    2006:
    Goodwill
    and Other Intangible Asset Impairment Charges
   30




---



##### Table of Contents



Acquired
    In-Process Research and Development
      2008:
    2007:
      Estimated Cost



Revenue ProjectionsCompany

Acquisition Date

Projects

IPR&D

to Complete

Discount Rate

Extend Through(Dollars 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. 31




---



##### Table of Contents



2006:
      Revenue ProjectionsCompany

Acquisition Date

Projects

IPR&D

Discount Rate

Extend Through(Dollars in millions)StoreAge

November 21, 2006

Storage systems software

$
2.4


28%

2013Metta

November 10, 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   Interest
    (Expense) or Income and Other, net
    Year Ended December 31,2008


2007


2006(In millions)Interest expense

$
(34.9
)

$
(31.0
)

$
(24.3
)Interest income


46.2



58.6



47.3Other income/(expense), net


(10.1
)


(11.8
)


4.0Total

$
1.2


$
15.8


$
27.0   Interest
    Expense:
      Interest
    Income and Other, net:
         32




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##### Table of Contents



Provision
    for Income Taxes
  non-U.S. net non-U.S. jurisdictions.
  non-U.S. net
      FINANCIAL
    CONDITION, CAPITAL RESOURCES AND LIQUIDITY
    Working
    Capital
    
    Cash, cash equivalents and short-term investments decreased by
    $278.5 million;
    The current portion of our long-term debt increased by
    $245.1 million as we reclassified the convertible notes due
    on December 15, 2009 from long-term debt to short-term debt;
    Accounts receivable decreased by $102.4 million as a result
    of lower revenues in the fourth quarter of 2008 compared to the
    same period in 2007; and 33




---



##### Table of Contents




    Inventories declined by $20.3 million primarily as the
    result of a shift to progress billing for one of our customers
    and a reduction in buffer stocks established to facilitate our
    transition to contract manufacturers, offset in part by
    increases in inventory that we will sell to customers later than
    expected.    
    Accounts payable decreased by $128.4 million primarily
    attributable to a reduction in purchases as a result of the
    global economic downturn and the timing of invoice receipts and
    payments;
    Other accrued liabilities decreased by $65.2 million
    primarily as a result of the utilization of restructuring
    reserves, a decrease in the retiree medical liability and a
    decrease in liabilities with third party manufacturers,
    partially offset by an increase in tax reserves;
    Income taxes payable decreased by $12.2 million as a result
    of a decrease in the tax provision payable and an increase in
    tax payments in 2008 compared to 2007;
    Prepaid expenses and other current assets increased by
    $8.1 million primarily attributable to an increase in
    deferred tax assets, prepaid taxes, and software additions, net
    of amortization, offset in part by decreases in assets held for
    sale and a reduction in notes receivables; and
    Accrued salaries, wages and benefits decreased by
    $4.2 million primarily attributable to timing of payments
    offset in part by the establishment of a sabbatical reserve.    
    Cash, cash equivalents and short-term investments increased by
    $388.7 million;
    Accounts receivable increased by $57.7 million primarily
    due to the merger with Agere, offset in part by improved
    collections;
    Inventories increased by $31.4 million primarily due to the
    merger with Agere, offset in part by decreases relating to the
    sale of the Consumer Products Group;
    Prepaid expenses and other current assets increased by
    $79.1 million, primarily attributable to the merger with
    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; and
    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 payable increased by $129.3 million primarily due
    to the merger with Agere, offset in part by a decrease due to
    the timing of invoice receipts and payments;
    Accrued salaries, wages and benefits increased by
    $36.7 million primarily attributable to the merger with
    Agere, slightly offset by the timing of payment of salaries,
    benefits and performance-based compensation; and
    Other accrued liabilities increased by $142.4 million
    primarily due to the merger with 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. 34




---



##### Table of Contents



Cash
    Provided by Operating Activities
    
    A net loss adjusted for non-cash transactions, including
    goodwill and other intangible impairment charges and
    depreciation and amortization. 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 decrease in assets and liabilities, including changes in
    working capital components from December 31, 2007 to
    December 31, 2008, as discussed above.  Cash and
    Cash Equivalents Used in Investing Activities
    
    Proceeds from maturities and sales of available-for-sale debt
    securities and equity securities, net of purchases;
    Purchases of property, equipment and software, net of sales;
    Acquisition of businesses, net of cash acquired;
    Proceeds from maturity of notes receivable associated with sale
    of semiconductor operations in Thailand;
    An increase in non-current assets and deposits; and
    Proceeds received from the resolution of a pre-acquisition
    income tax contingency.    Cash and
    Cash Equivalents Used in Financing Activities
    paid-in-capital.
     35




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##### Table of Contents



CONTRACTUAL
    OBLIGATIONS
    Payments Due by PeriodLess Than 1 Year


1-3 Years


4-5 Years


After 5 Years


Other


Total(In millions)Convertible Subordinated Notes

$
243.0


$
350.0


$



$



$



$
593.0Estimated interest payments on Convertible Subordinated Notes


29.8



7.0















36.8Operating lease obligations


88.9



87.9



18.4



3.6







198.8Purchase commitments


208.7



302.1















510.8FIN 48 liabilities


36.5















193.6
**


230.1Pension and post-retirement contributions


23.2 to 62.2



*



*



*



*



23.2 to 62.2Total

$
630.1 to $669.1


$
747.0


$
18.4


$
3.6


$
193.6


$
1,592.7 to $1,631.7     *
    
    We have pension plans covering substantially all former Agere
    U.S. employees, excluding management employees hired after
    June 30, 2003. We also have pension plans covering certain
    international employees. Although additional future
    contributions will be required, the amount and timing of these
    contributions will be impacted by actuarial assumptions, the
    actual rate of return on plan assets, the level of market
    interest rates, and the amount of voluntary contributions to the
    plans. If current macroeconomic conditions continue, the
    additional contributions in the future years would likely be
    higher than those projected for 2009. Effective April 6,
    2009, the Company will freeze the U.S. management pension plan.
    As of December 31, 2008, our pension benefit obligation
    exceeded the fair value of our plan assets by
    $449.5 million. See Note 5 to our consolidated
    financial statements in Item 8.**
    
    Represents the non-current tax payable obligation under
    FIN 48. We are unable to make a reasonably reliable
    estimate as to when cash settlement with a taxing authority may
    occur.  Convertible
    Subordinated Notes
   36




---



##### Table of Contents



Operating
    Lease Obligations
    Purchase
    Commitments
    FIN 48
    Tax Liabilities
    Standby
    Letters of Credit
    CRITICAL
    ACCOUNTING ESTIMATES
     37




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##### Table of Contents



Stock-Based
    Compensation
    Stock
    Options:
    Year Ended December 31,2008


2007


2006Weighted average estimated grant date fair value per share

$
2.04


$
3.05


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


4.36



4.29



4.33Risk-free interest rate


2.51
%


4.50
%


4.78
%Volatility


52
%


47
%


48
%            38




---



##### Table of Contents



Employee
    Stock Purchase Plan:
  12-month
  Year Ended December 31,2008


2007


2006Weighted average estimated grant date fair value per share

$
1.37


$
2.09


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


0.8



0.7



0.7Risk-free interest rate


1
%


4
%


5
%Volatility


84
%


42
%


35
%   Restricted
    Stock Awards:
      Inventory
    Valuation Methodology
  first-in,
      Valuation
    of Long-Lived Assets, Intangible Assets and Goodwill
   39




---



##### Table of Contents



40




---



##### Table of Contents



Restructuring
    Reserves
    Income
    Taxes
      Retirement
    Benefits
       41




---



##### Table of Contents



RECENT
    ACCOUNTING PRONOUNCEMENTS
   42




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Interest
    Rate Sensitivity
      Foreign
    Currency Exchange Risk
      Equity
    Price Risk
      Credit
    and Market Liquidity Risks
       43




---



##### Table of Contents



44




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data LSI
    Corporation



Consolidated
    Balance Sheets  December 31,2008


2007(In thousands, exceptper share amounts)ASSETSCash and cash equivalents

$
829,301


$
1,021,569Short-term investments


289,841



376,028Accounts receivable, less allowances of $9,627 and $10,192


303,971



406,368Inventories


220,535



240,842Prepaid expenses and other current assets


155,814



147,751Total current assets


1,799,462



2,192,558Property and equipment, net


235,963



229,732Other intangible assets, net


889,995



1,225,196Goodwill


175,624



499,551Other assets


243,150



249,353Total assets

$
3,344,194


$
4,396,390LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
201,035


$
329,444Accrued salaries, wages and benefits


114,730



118,990Other accrued liabilities


233,157



298,343Income taxes payable


3,504



15,679Current portion of long-term debt


245,107



Total current liabilities


797,533



762,456Long-term debt


350,000



717,967Pension, post-retirement and other benefits


451,079



137,543Income taxes payable  non-current


193,590



185,036Other non-current liabilities


111,070



108,143Total long-term obligations and other liabilities


1,105,739



1,148,689Commitments and contingencies (Note 15)Minority interest in subsidiary






249Stockholders equity:Preferred shares; $.01 par value; 2,000 shares
    authorized; none outstanding






Common stock; $.01 par value; 1,300,000 shares
    authorized; 648,132 and 680,595 shares outstanding


6,481



6,806Additional paid-in capital


6,058,786



6,152,421Accumulated deficit


(4,360,775
)


(3,738,522
)Accumulated other comprehensive income


(263,570
)


64,291Total stockholders equity


1,440,922



2,484,996Total liabilities and stockholders equity

$
3,344,194


$
4,396,390    45




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##### Table of Contents



LSI
    Corporation



Consolidated
    Statements of Operations  Year Ended December 31,2008


2007


2006(In thousands, except per share amounts)Revenues

$
2,677,077


$
2,603,643


$
1,982,148Cost of revenues


1,608,108



1,699,785



1,158,983Gross profit


1,068,969



903,858



823,165Research and development


672,511



655,224



413,432Selling, general and administrative


406,875



381,409



255,569Restructuring of operations and other items, net


43,717



148,121



(8,427
)Goodwill and intangible asset impairment charges


541,586



2,021,463



Acquired in-process research and development






188,872



4,284(Loss)/income from operations


(595,720
)


(2,491,231
)


158,307Interest expense


(34,943
)


(31,020
)


(24,263
)Interest income and other, net


36,110



46,762



51,277(Loss)/income before income taxes and minority interest


(594,553
)


(2,475,489
)


185,321Provision for income taxes


27,700



11,326



15,682(Loss)/income before minority interest


(622,253
)


(2,486,815
)


169,639Minority interest in net income of subsidiary






4



1Net (loss)/income

$
(622,253
)

$
(2,486,819
)

$
169,638Net (loss)/income per share:Basic

$
(0.96
)

$
(3.87
)

$
0.43Diluted

$
(0.96
)

$
(3.87
)

$
0.42Shares used in computing per share amounts:Basic


647,953



641,823



398,551Diluted


647,953



641,823



405,163    46




---



##### Table of Contents



LSI
    Corporation



Consolidated
    Statements of Stockholders Equity  AccumulatedAdditional








OtherCommon Stock


Paid-in


Deferred Stock


Accumulated


ComprehensiveShares


Amount


Capital


Compensation


Deficit


Income/(Loss)


Total(In thousands)Balances 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
)Stock-based compensation related to employee stock options










31,338















31,338Stock-based compensation related to employee stock purchases










10,842















10,842Stock-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
)Stock-based compensation related to employee stock options










47,127















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










11,757















11,757Stock-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



2,484,996Net loss


















(622,253
)Change in foreign currency translation adjustments






















20,824Change in unrealized gain on available-for-sale securities, net
    of tax $1,288






















852Unrealized loss on cash-flow hedges, net of tax $0






















(905
)Actuarial loss on pension and post-retirement plan, net of tax $0






















(357,957
)Amortization of prior service cost and net actuarial gain or
    (loss) included in net periodic benefit credit






















9,325Total comprehensive loss


























(950,114
)Repurchase of shares


(44,611
)


(446
)


(228,978
)














(229,424
)Issuance to employees under stock option and purchase plans


9,403



94



42,834















42,928Issuance of common stock pursuant to restricted stock awards, net


2,745



27



(6,022
)














(5,995
)Stock-based compensation related to employee stock options










55,037















55,037Stock-based compensation related to employee stock purchase plan










8,473















8,473Stock-based compensation related to restricted shares










35,021















35,021Balances at December 31, 2008


648,132


$
6,481


$
6,058,786


$



$
(4,360,775
)

$
(263,570
)

$
1,440,922    47




---



##### Table of Contents



LSI
    Corporation



Consolidated
    Statements of Cash Flows  Year Ended December 31,2008


2007


2006(In thousands)Operating activities:Net (loss)/income

$
(622,253
)

$
(2,486,819
)

$
169,638Adjustments:Depreciation and amortization


324,223



278,542



82,263Stock-based compensation expense


72,283



77,267



47,049Non-cash restructuring and other items


(4,215
)


98,909



(713
)Goodwill and intangible impairment charges


541,586



2,021,463



Acquired in-process research and development






188,872



4,284Gain on repurchase of convertible subordinated notes


(3,178
)






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










3,325Write-down of debt and equity securities/(gain) on sale of
    equity securities


15,273



2,396



(6,727
)Gain on sale of property and equipment, including assets
    held-for-sale


(123
)


(9,399
)


(252
)Non-cash foreign exchange loss/(gain)


25,469



4,207



(1,089
)Changes in deferred tax assets and liabilities


10,027



(3,619
)


(98
)Changes in assets and liabilities, net of assets acquired and
    liabilities assumed in business combinations:Accounts receivable, net


102,386



174,962



(24,617
)Inventories


20,307



74,708



(18,062
)Prepaid expenses and other assets


52,024



21,557



(24,858
)Accounts payable


(130,129
)


(39,162
)


23,338Accrued and other liabilities


(125,628
)


(108,885
)


21,223Net cash provided by operating activities


278,052



294,999



247,151Investing activities:Purchase of debt securities available-for-sale


(190,548
)


(303,407
)


(603,624
)Proceeds from maturities and sales of debt securities
    available-for-sale


240,157



616,224



595,135Purchases of equity securities


(8,500
)


(10,500
)


(8,150
)Proceeds from sales of equity securities










11,876Purchases of property, equipment and software


(134,589
)


(102,823
)


(58,671
)Proceeds from sale of property and equipment


13,674



16,166



118Cash acquired from acquisition of Agere, net of acquisition costs






517,712



Acquisitions of other businesses and companies, net of cash
    acquired


(95,137
)


(132,830
)


(55,328
)Proceeds from sale of Consumer Products 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










22,670Proceeds from sale of Fort Collins facility










10,998Proceeds from sale of Colorado Springs facility










7,029Proceeds from sale of Gresham manufacturing facility










96,426Proceeds from sale of intellectual property associated with the
    Gresham manufacturing facility










5,100Proceeds from maturity of notes receivable associated with sale
    of semiconductor operations in Thailand


20,000







Increase in non-current assets and deposits


(13,300
)






Proceeds received from the resolution of a pre-acquisition
    income tax contingency


4,821



3,230



2,282Net cash (used in)/provided by investing activities


(163,422
)


1,121,427



25,861Financing activities:Repurchase of convertible subordinated notes


(116,636
)






Repayment of debt obligations










(271,848
)Issuances of common stock


42,928



46,280



61,014Purchase of minority interest in subsidiary


(70
)






Purchase of common stock under repurchase programs


(229,231
)


(770,752
)


Net cash used in financing activities


(303,009
)


(724,472
)


(210,834
)Effect of exchange rate changes on cash and cash equivalents


(3,889
)


1,815



973(Decrease)/increase in cash and cash equivalents


(192,268
)


693,769



63,151Cash and cash equivalents at beginning of year


1,021,569



327,800



264,649Cash and cash equivalents at end of year

$
829,301


$
1,021,569


$
327,800    48




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##### 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:
 49




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Revenue Recognition:
  No. 03-05, 97-2
  and/or
  Income/(Loss) per Share:
    Year Ended December 31,2008


2007


2006Per-Share








Per-Share








Per-Share(Loss)*


Shares+


Amount


(Loss)*


Shares+


Amount


Income*


Shares+


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

$
(622,253
)


647,953


$
(0.96
)

$
(2,486,819
)


641,823


$
(3.87
)

$
169,638



398,551


$
0.43Stock options, employee stock purchase rights and restricted
    stock unit awards






























6,612



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

$
(622,253
)


647,953


$
(0.96
)

$
(2,486,819
)


641,823


$
(3.87
)

$
169,638



405,163


$
0.42  50




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    *
    
    Numerator  +
    
    Denominator      Stock-Based Compensation Expense:
  Advertising:
  Sales and Value-Added Taxes:
  Cash Equivalents:
  Accounts Receivable and Allowance for Doubtful Accounts:
  Investments:
   51




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Inventories: first-in, work-in-process
  Property and Equipment:
  Buildings and improvements


20-40 yearsEquipment


3-5 yearsFurniture and fixtures


5 years     Software: and/or 36-month
  Impairment of Long-Lived Assets:
  Goodwill:
 52




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Fair Value Disclosures of Financial
    Instruments: and/or
  Derivative Instruments:
       53




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Concentration of Credit Risk of Financial
    Instruments:
  Product Warranties:
  Litigation and Settlement Costs:
  Income Taxes:
    Recent
    Accounting Pronouncements
  157-2,
 54




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  FSP 157-3, FSP 157-3 FSP 157-3,
        No. 08-6 (EITF 08-06), EITF 08-6 EITF 08-6
  Note 2 
    Restructuring
    and Other Items  2008
    Restructuring
    and Impairment of Long-lived Assets:
      
    A charge of $22.6 million for severance and termination
    benefits for employees, primarily related to a reduction in
    force and broad-based reorganization that was announced in
    January 2009; 55




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   
    A charge of $9.0 million for lease termination costs, which
    included $7.0 million primarily for U.S. lease
    termination costs and a $2.0 million charge primarily for
    the change in time value of accruals for previously accrued
    facility lease exit costs; and
    A gain of $2.0 million for the sale of land in Gresham,
    Oregon.    Balance at


Restructuring


Utilized


Balance atDecember 31,


(Income)/Expense


During


December 31,2007


2008


2008


2008(In thousands)Write-down of excess assets and other liabilities(a)

$
225


$
(1,740
)

$
1,598


$
83Lease terminations(b)


23,318



8,946



(13,997
)


18,267Payments to employees for severance(c)


24,817



22,645



(21,781
)


25,681Total

$
48,360


$
29,851


$
(34,180
)

$
44,031     (a)
    
    The amount utilized includes a gain from the sale of land in
    Gresham, Oregon.(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 includes $6.6 million related to stock
    grants exercised or expired. The majority of the balance
    remaining for severance is expected to be paid by the end of
    2009.  Restructuring
    Actions Associated with the Agere Merger:
  No. 95-3,
    
    A net charge of $5.4 million for lease termination costs,
    which included $2.3 million for the change in time value of
    accruals for previously accrued facility lease exit costs and
    $3.1 million for changes in sublease assumptions for
    previously accrued lease exit costs;
    A charge of $2.8 million for severance and termination
    benefits for employees primarily related to a change in
    severance estimates; and
    A credit of $2.6 million primarily related to a gain from
    the sale of assets held for sale in Singapore. 56




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##### Table of Contents



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


Changes in


Utilized


Balance atDecember 31,


Estimates During


During


December 31,2007


2008


2008


2008(In thousands)Lease terminations(a)

$
33,439


$
5,436


$
(12,587
)

$
26,288Payments to employees for severance(b)


18,926



2,756



(20,974
)


708Stock compensation charges in accordance with FAS 123R(c)


20,860







(19,218
)


1,642Write-down of excess assets and other liabilities(d)






(2,569
)


2,569



Total

$
73,225


$
5,623


$
(50,210
)

$
28,638   (a)
    
    The amount utilized includes $0.8 million for write-off of
    leasehold improvements and the remaining utilized amount
    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.(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 2009.(c)
    
    The amount utilized represents stock grants exercised or
    expired. The balance is expected to be utilized by the end of
    2009.(d)
    
    The amount includes a gain on the sale of assets in Singapore.  Other
    Items:
    Assets
    held for sale:
      2007
   57




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  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 $450.0 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 was
    expected to receive from the Company on purchases of finished
    goods inventory;
    A charge of $21.8 million for post-closing inventory
    pricing benefits the buyer was expected to 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 were
    to 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 the buyer, 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 the buyer.  Sale of
    Thailand Semiconductor Assembly and Test Operations:
   58




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      
    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.  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 were to
    be eliminated as a result of 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  59




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    (a)
    
    The amount utilized includes reclassification of
    $53.8 million to other liability accounts recorded during
    the 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 majority of the balance remaining for severance
    was paid by the end of 2008.  Restructuring
    Actions Associated with the Agere Merger:
    
    A reserve of $14.5 million for facility lease exit costs,
    primarily in Singapore and Europe;
    A reserve of $50.1 million for severance and termination
    benefits for employees as a result of the restructuring actions
    related to the Agere merger and the sale of the Thailand and
    Singapore assembly and test facilities; 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
    previously accrued facility lease termination costs;
    A charge of $1.2 million to reflect a change in time value
    of accruals previously recorded for 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.    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. 60




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   (b)
    
    The amount utilized represents cash severance payments to
    employees. The majority of the balance remaining for severance
    was paid by the end of 2008.(c)
    
    The amount utilized represents stock options exercised or
    expired. The amounts accrued represent the value of stock
    options and restricted units LSI expected to accelerate upon
    termination of the holders employment. 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 sale of the
    Companys ZSP digital signal processor technology;
    A charge of $6.0 million primarily for the write-off of
    intangible assets acquired in a purchase business combination
    and other exit costs including contract termination costs;
    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; and
    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.  Sale
    of the Gresham Facility:
       61




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      Note 3 
    Stock-Based
    Compensation and Common Stock    Description
    of the Companys Equity Compensation Plans
    
    Making a total of 45 million shares available for future
    grants under the 2003 Plan after May 14, 2008. Of that
    amount, 15 million shares are available for grants of
    restricted stock and restricted stock units;
    Allowing non-employee directors to be eligible to participate in
    the 2003 Plan;
    Including stock appreciation rights as a permitted type of award
    under the 2003 Plan;
    Increasing the limits on the size of awards that can be granted
    under the 2003 Plan to any person in one year from two million
    to four million shares for stock options and from
    0.5 million to one million shares for restricted stock and
    restricted stock units; and
    Allowing incentive stock options to be granted under the 2003
    Plan until May 14, 2018.      
    Making a total of 25 million shares available for purchase
    under the US ESPP after May 14, 2008;
    Consolidating the Companys International Employee Stock
    Purchase Plan (IESPP, and together with the US ESPP,
    the ESPP) into the US ESPP; and
    Extending the term of the US ESPP through May 14, 2018.  2003
    Plan:
   62




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Employee
    Stock Purchase Plan:
  12-month
    Stock-Based
    Compensation Expense
    Year Ended December 31,Stock-based Compensation Expense Included In:

2008


2007


2006(In thousands)Cost of revenues

$
9,269


$
10,711


$
6,903Research and development


29,214



31,743



17,397Selling, general and administrative


33,800



34,813



22,749Total stock-based compensation expense

$
72,283


$
77,267


$
47,049     Stock
    Options:
    Year Ended December 31,2008


2007


2006Weighted average estimated grant date fair value per share

$
2.04


$
3.05


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


4.36



4.29



4.33Risk-free interest rate


2.51
%


4.50
%


4.78
%Volatility


52
%


47
%


48
%    63




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
            Year Ended December 31,2008


2007


2006Weighted 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


100,242


$
16.12



56,750


$
11.92



70,618


$
13.21Options assumed in Agere Acquisition










48,884



22.41







Options canceled


(29,074
)


(21.41
)


(17,295
)


(15.56
)


(16,130
)


(18.02
)Options granted


18,627



5.68



15,628



8.61



7,781



9.17Options exercised


(4,682
)


(5.41
)


(3,725
)


(5.91
)


(5,519
)


(6.71
)Options outstanding at December 31


85,113


$
12.62



100,242


$
16.12



56,750


$
11.92Options exercisable at December 31


49,446


$
16.72



67,124


$
20.12



35,638


$
14.29        64




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Employee
    Stock Purchase Plan:
    Year Ended December 31,2008


2007


2006Weighted average estimated grant date fair value per share

$
1.37


$
2.09


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


0.8



0.7



0.7Risk-free interest rate


1
%


4
%


5
%Volatility


84
%


42
%


35
%     Restricted
    Stock Awards:
      Year Ended December 31,2008


2007


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


9,177



1,910



2,375Assumed in Agere Acquisition






9,141



Granted


1,779



4,337



733Vested


(4,026
)


(5,555
)


(928
)Forfeited


(539
)


(656
)


(270
)Non-vested shares at December 31


6,391



9,177



1,910     Year Ended December 31,2008


2007


2006Weighted 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 units granted


1,779


$
5.02



4,337


$
8.20



733


$
9.45  65




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      Income
    Taxes:
  No. FAS 123R-3
    Common
    Stock
  Stock
    Repurchase Programs:
  paid-in-capital.
  Stock
    Purchase Rights:
   66




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 4 
    Business
    Combinations    2008
  Entity Name or Type of Technology;




Total





Fair Value of





Amortizable


In-ProcessSegment Included in;

Acquisition


Purchase


Type of


Other Assets





Intangible


Research andDescription of Acquired Business

Date


Price


Consideration


Acquired


Goodwill


Assets


Development(Dollars in millions)HDD semiconductor business of Infineon; Semiconductor segment;
    Silicon solutions for hard disk drive makers


April 25, 2008


$
95.1



Cash


$
10.3


$
6.6


$
78.2



None   2007
  Fair Value ofEntity Name;




Total





Tangible Net





Amortizable


In-ProcessSegment Included in;

Acquisition


Purchase


Type of


Assets





Intangible


Research andDescription of Acquired Business

Date


Price


Consideration


Acquired


Goodwill


Assets


Development(Dollars in millions)Tarari, Inc.; Semiconductor segment; Silicon and software
    solutions for security and network control


October 3, 2007


$
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



Cash


$
1.5


$
37.8


$
10.6


$
6.5   2006
  Fair Value ofEntity Name;




Total





Tangible Net





Amortizable


In-ProcessSegment Included in;

Acquisition


Purchase


Type of


(Liabilities)





Intangible


Research andDescription of Acquired Business

Date


Price


Consideration


Acquired


Goodwill


Assets


Development(Dollars in millions)StoreAge Networking Technologies, Ltd.; Storage segment; SAN
    storage management and multi-tiered data protection software
    applications


November 21, 2006


$
47.4



Cash


$
(4.6
)

$
6.1


$
43.5


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


November 10, 2006


$
6.7



Cash


$
(0.6
)


Not applicable 
    asset purchase


$
5.4


$
1.9   Acquisition
    of Hard Disk Drive Semiconductor Business of Infineon
   67




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
        WeightedFair Value


Average Life(In millions)


(In years)Current technology

$
46.5



4Customer base


31.7



5Total acquired identifiable intangible assets

$
78.2   Merger
    with Agere
       68




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    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   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       WeightedIdentifiable Intangible Assets

Fair Value


Average 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  69




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Acquired
    In-Process Research and Development
    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      70




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    and/or
    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  Pension
    and Post-Retirement Benefit Plans
   71




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      Net
    Periodic Benefit Cost/(Credit):
    Year Ended December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Service cost

$
5,694


$
101


$
5,523


$
118Interest cost


75,016



3,024



55,361



2,776Expected return on plan assets


(82,575
)


(5,033
)


(62,804
)


(3,669
)Amortization of prior service cost


39











Net actuarial gain recognized


(5
)


(119
)






(12
)Net periodic benefit credit


(1,831
)


(2,027
)


(1,920
)


(787
)Curtailment gain*


(771
)


(2,652
)


(414
)


(281
)Settlement credit


(32
)










Total benefit cost/(credit)

$
(2,634
)

$
(4,679
)

$
(2,334
)

$
(1,068
)     *
    The curtailments in 2008 reflect a pension plan freeze effective
    April 6, 2009, and the termination of the post-retirement
    medical plan effective January 1, 2009. The settlement in
    2008 reflects accelerated recognition of gains resulting from
    lump sum distributions from the supplemental pension plan. The
    curtailments in 2007 reflect accelerated recognition of gains
    resulting from the sale of the Mobility Products Group. 72




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
   Benefit
    Obligation:
    Year Ended December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Benefit obligation at January 1

$
1,194,302


$
56,123


$
4,666


$
Benefit obligation assumed at
    April 2, 2007 (Agere merger date)










1,269,441



72,987Service cost


5,694



101



5,523



118Interest cost


75,016



3,024



55,361



2,776Employee contributions






9,375







6,924Amendments


(13,683
)


322



170



Actuarial (gain)/loss


8,569



(265
)


(68,861
)


(6,037
)Benefits paid


(99,439
)


(27,597
)


(73,942
)


(20,364
)Curtailments










1,944



(281
)Benefit obligation at December 31

$
1,170,459


$
41,083


$
1,194,302


$
56,123     Fair
    Value of Plan Assets:
    Year Ended December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Fair value of plan assets at January 1

$
1,061,420


$
65,754


$
1,144


$
Fair value of plan assets obtained at April 2, 2007 (Agere
    merger date)










1,073,580



63,206Actual gain/(loss) on plan assets


(252,088
)


(9,583
)


58,595



3,514Employer contributions


10,968



16,832



2,113



12,474Employee contributions






9,375







6,924Benefits paid


(99,385
)


(27,597
)


(73,928
)


(20,364
)Settlements










(84
)


Fair value of plan assets at December 31

$
720,915


$
54,781


$
1,061,420


$
65,754    73




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Funded
    Status of the Plans:
    December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Funded status of the plans

$
(449,544
)

$
13,698


$
(132,882
)

$
9,631     Plans
    with Projected Benefit Obligation and Accumulated Benefit
    Obligation in excess of Plan Assets:
  December 31,2008


2007Pension Benefits(In thousands)Projected benefit obligation

$
1,170,459


$
1,194,302Accumulated benefit obligation

$
1,164,291


$
1,174,492Fair value of plan assets

$
720,915


$
1,061,420   Plans
    with Accumulated Benefit Obligation in excess of Plan
    Assets:
  December 31,2008


2007Health Benefits(In thousands)Accumulated benefit obligation

$
3,200


$
18,963Fair value of plan assets

$
N/A


$
   Plans
    with Accumulated Benefit Obligation less than Plan
    Assets:
  December 31,2008


2007Group Life Benefits(In thousands)Accumulated benefit obligation

$
37,883


$
37,160Fair value of plan assets

$
54,781


$
65,754  74




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Non-current assets

$



$
16,898


$



$
28,594Current liabilities


(1,040
)


(3,200
)


(789
)


(16,771
)Non-current liabilities


(448,504
)






(132,093
)


(2,192
)Net (liability)/asset

$
(449,544
)

$
13,698


$
(132,882
)

$
9,631   Accumulated
    Other Comprehensive (Income)/Loss:
    December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Net prior service cost

$
405


$



$
170


$
Net actuarial (gain)/loss


268,733



11,574



(62,219
)


(5,871
)Accumulated other comprehensive (income)/loss


269,138



11,574



(62,049
)


(5,871
)Tax


23,813



2,309



23,813



2,309Accumulated other comprehensive (income)/loss, net of tax

$
292,951


$
13,883


$
(38,236
)

$
(3,562
)  75




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Year Ended December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


Benefits(In thousands)Accumulated other comprehensive (income)/loss at January 1

$
(38,236
)

$
(3,562
)

$



$
Recognized during period  Prior service cost


(170
)










Recognized during period  Actuarial (gain)/loss


(12,709
)


3,093







12Occurring during period  Prior service cost


405







170



Occurring during period  Actuarial (gain)/loss


343,605



14,352



(64,662
)


(5,883
)Other adjustments


56







2,443



Accumulated other comprehensive (income)/loss at December 31


292,951



13,883



(62,049
)


(5,871
)Tax










23,813



2,309Accumulated other comprehensive (income)/loss at
    December 31, net of tax

$
292,951


$
13,883


$
(38,236
)

$
(3,562
)     Actuarial
    Assumptions:
    Year Ended December 31,2008

2007Pension

Post-retirement

Post-retirement

Pension

Post-retirement

Post-retirementBenefits

Health Benefits

Life Benefits

Benefits

Health Benefits

Life BenefitsDiscount rate to determine net periodic cost (before/after
    curtailment cost)

6.50%

6.50%

6.50%

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

6.50%

6.50%

6.50%

6.50%

6.50%

6.50%Rate of compensation increase

4.00%

N/A

4.00%

4.00%

N/A

4.00%Expected average rate of return on plan assets

8.25/8.00%(c)

N/A

7.75%

8.25%/8.00%(c)

N/A

7.75%  76




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    (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:
    December 31,2008


2007Pension


Post-retirement


Pension


Post-retirementBenefits


Benefits


Benefits


BenefitsEquity Securities


48
%


40
%


53
%


40
%Debt Securities


52
%


60
%


47
%


60
%          77




---



##### Table of Contents



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


Post-retirementBenefits


Benefits(In thousands)Year ending December 31, 2009

$
87,777


$
4,464Year ending December 31, 2010

$
86,299


$
1,366Year ending December 31, 2011

$
85,837


$
1,470Year ending December 31, 2012

$
85,834


$
1,576Year ending December 31, 2013

$
85,792


$
1,686Year ending December 31, 2014 through December 31, 2018

$
428,991


$
10,226     LSI
    401(k) Defined Contribution Plan:
   78




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 6 
    Balance
    Sheet Detail    December 31,2008


2007(In thousands)Inventories:Raw materials

$
44,208


$
30,023Work-in-process


52,242



95,262Finished goods


124,085



115,557Total inventories

$
220,535


$
240,842Prepaid expenses and other current assets:Assets held for sale

$
17,278


$
26,103Prepaid expenses and other current assets


138,536



121,648Total prepaid expenses and other current assets

$
155,814


$
147,751Property and equipment:Land

$
38,101


$
37,900Buildings and improvements


107,309



104,931Equipment


381,826



373,663Furniture and fixtures


24,857



28,648Leasehold improvements


38,055



36,058Construction in progress


12,329



8,712Property and equipment, gross


602,477



589,912Accumulated depreciation


(366,514
)


(360,180
)Property and equipment, net

$
235,963


$
229,732Other assets:Software, net

$
93,170


$
75,665Investment in equity securities (Note 8)


46,707



39,779Debt issuance costs, net


2,185



3,748Other assets


101,088



130,161Total other assets

$
243,150


$
249,353   79




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  December 31,2008


2007(In thousands)Other accrued liabilities:Accrued expenses

$
151,446


$
153,786Warranty reserve


12,238



14,734Restructuring reserves


42,662



109,167Sales tax payable and other


24,099



16,578Interest payable


2,712



4,078Total other accrued liabilities

$
233,157


$
298,343Other non-current liabilities:Other long-term tax-related liabilities

$
64,538


$
69,231Restructuring reserves


30,007



12,418Other long-term liabilities


16,525



26,494Total other non-current liabilities

$
111,070


$
108,143Accumulated other comprehensive income:Net unrealized gain on available-for-sale securities, net of tax

$
2,680


$
1,828Net unrealized loss on cash flow hedges, net of tax


(905
)


Actuarial gain/(loss) on pension and post retirement plans, net
    of tax


(306,834
)


41,798Foreign currency translation adjustments


41,489



20,665Total accumulated other comprehensive income/(loss)

$
(263,570
)

$
64,291    80




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 7 
    Intangible
    Assets And Goodwill  Intangible
    Assets
    December 31,2008


2007Gross


Accumulated


Gross


AccumulatedCarrying Amount


Amortization


Carrying Amount


Amortization(In thousands)Semiconductor:Current technology

$
894,808


$
(524,120
)

$
848,656


$
(298,525
)Trademarks


26,657



(26,657
)


26,730



(26,272
)Customer base


399,508



(160,925
)


367,808



(20,761
)Non-compete agreements


1,949



(1,888
)


1,949



(1,165
)Existing purchase orders


200



(200
)


200



(200
)Supply agreement


100



(100
)


100



(100
)Patent licensing


312,800



(63,243
)


313,800



(27,183
)Order backlog


41,300



(41,300
)


41,300



(41,300
)Workforce


3,567



(1,258
)


3,567



(661
)Trade names


2,248



(2,248
)


2,248



(94
)Subtotal


1,683,137



(821,939
)


1,606,358



(416,261
)Storage Systems:Current technology


164,339



(136,104
)


164,339



(130,361
)Trademarks


7,150



(7,150
)


7,150



(7,149
)Customer base


5,010



(5,010
)


5,010



(5,010
)Non-compete agreements


1,600



(1,600
)


1,600



(1,156
)Supply agreement


8,147



(8,147
)


8,147



(8,147
)Trade names


800



(238
)


800



(124
)Subtotal


187,046



(158,249
)


187,046



(151,947
)Total intangible assets

$
1,870,183


$
(980,188
)

$
1,793,404


$
(568,208
)  81




---



##### Table of Contents



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


Year Ended December 31,Average Lives


2008


2007


2006(In months)


(In thousands)Current technology


57


$
135,897


$
88,579


$
25,129Trademarks


83



50



855



4,119Customer base


45



60,731



19,253



2,359Non-compete agreements


27



1,076



1,662



182Supply agreement


32







775



225Patent licensing


36



37,059



27,510



Order backlog


2







53,000



Workforce


72



596



596



65Trade names


75



488



208



10Total


50


$
235,897


$
192,438


$
32,089     Amount(In thousands)Fiscal Year:2009

$
170,1122010


155,4482011


120,6992012


103,9972013 and thereafter


339,739Total

$
889,995  82




---



##### Table of Contents



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


Storage SystemsSegment


Segment


Total(In thousands)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 EITF
    No. 95-3
    liabilities initially recorded as of April 2, 2007 and fair
    value adjustments


(1,012
)






(1,012
)Adjustment to goodwill related to FASB Interpretation No. 48


(34,767
)






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

$
323,927


$
175,624


$
499,551Goodwill acquired during the year**


6,624







6,624Adjustment to goodwill acquired in a prior year for a
    pre-acquisition income tax contingency, net***


33,535







33,535Goodwill impairment


(364,086
)






(364,086
)Balance as of December 31, 2008

$



$
175,624


$
175,624     *
    
    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
    acquisitions of SiliconStor, Agere and Tarari, respectively, in
    the Semiconductor segment.**
    
    During the year ended December 31, 2008, the Company
    recorded $6.6 million of goodwill in connection with the
    acquisition of Infineons HDD semiconductor business.***
    
    During the year ended December 31, 2008, the Company
    recorded $39.3 million of goodwill primarily relating to a
    re-measurement of uncertain tax positions based on new
    information received during 2008, offset by $5.8 million of
    income tax refunds.   83




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
               84




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Note 8 
    Cash,
    Cash Equivalents And Investments    December 31,2008


2007(In thousands)Cash and cash equivalents:Cash in financial institutions

$
77,372


$
117,464Cash equivalents:Overnight deposits and money market funds


744,430



892,332Commercial paper


1,085



11,770U.S. government and agency securities


6,414



Asset-backed and mortgage-backed securities






3Total cash equivalents


751,929



904,105Total cash and cash equivalents

$
829,301


$
1,021,569Available-for-sale
    debt securities:Asset-backed and mortgage-backed securities

$
184,511


$
207,290U.S. government and agency securities


88,504



121,350Corporate and municipal debt securities


16,826



47,388Total short-term investments

$
289,841


$
376,028Long-term investments in equity securities:Marketable
    available-for-sale
    equity securities

$
566


$
1,888Non-marketable equity securities


46,141



37,891Total long-term investments in equity securities

$
46,707


$
39,779   Investments
    in
    Available-for-Sale
    Securities
  available-for-sale
  Due within one year

$
59,301Due in 1-5 years


51,469Due in 5-10 years


20,681Due after 10 years


158,390Total

$
289,841    85




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  available-for-sale
  December 31, 2008


December 31, 2007Long-Term





Long-TermShort-Term


Marketable


Short-Term


MarketableDebt Securities


Equity Securities


Debt Securities


Equity Securities(In thousands)Adjusted cost

$
285,994


$
155


$
374,774


$
1,117Gross unrealized gain


4,961



413



2,622



1,243Gross unrealized loss


(1,114
)


(2
)


(1,368
)


(472
)Estimated fair value

$
289,841


$
566


$
376,028


$
1,888     Less than 12 Months


Greater than 12 MonthsFair Value


Unrealized Losses


Fair Value


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

$
51,502


$
544


$
9,334


$
160Corporate and municipal debt securities


11,490



410



331



Total

$
62,992


$
954


$
9,665


$
160     available-for-sale available-for-sale
  available-for-sale available-for-sale
  available-for-sale
  available-for-sale available-for-sale
 86




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 9 
    Segment
    And Geographic Information    Summary
    of Operations by Segment
    Year Ended December 31,2008


2007


2006(In thousands)Revenues:Semiconductor

$
1,795,054


$
1,778,959


$
1,223,130Storage Systems


882,023



824,684



759,018Total

$
2,677,077


$
2,603,643


$
1,982,148Income/(loss) from operations:Semiconductor

$
(658,442
)

$
(2,539,601
)

$
96,162Storage Systems


62,722



48,370



62,145Total

$
(595,720
)

$
(2,491,231
)

$
158,307    87




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Significant
    Customers
    Year Ended December 31,2008


2007


2006Semiconductor segment:Number of significant customers


1



2



1Percentage of segment revenues


26%



28%, 12%



19%Storage Systems segment:Number of significant customers


3



3



2Percentage of segment revenues


46%, 14%, 11%



47%, 16%, 11%



47%, 15%Consolidated:Number of significant customers


2



2



2Percentage of consolidated revenues


17%, 16%



19%, 15%



19%, 12%   Information
    about Geographic Areas
    Year Ended December 31,2008


2007


2006(In thousands)Revenues:North America*

$
737,163


$
858,694


$
956,696Asia**


1,359,783



1,401,322



797,174Europe and the Middle East


580,131



343,627



228,278Total

$
2,677,077


$
2,603,643


$
1,982,148   December 31,2008


2007(In thousands)Long-lived assets:North America*

$
1,161,760


$
1,461,757Asia**


25,874



30,047Europe and the Middle East


31,524



38,832Total

$
1,219,158


$
1,530,636     *
    
    Primarily the United States.**
    
    Including Japan.   88




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 10 
    Derivative
    Instruments       89




---



##### Table of Contents



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


Conversion


December 31,Maturity


Rate


Price


2008


2007(In thousands)4% Convertible Subordinated Notes due 2010


2010



4.00
%

$
13.4200


$
350,000


$
350,0006.5% Convertible Subordinated Notes due 2009*


2009



6.50
%

$
15.3125



243,002



361,660Accrued debt premium














7,405



8,589600,407



720,249Amortization of accrued debt premium














(5,300
)


(2,282
)Total debt














595,107



717,967Current portion of long-term debt














(245,107
)


Long-term debt













$
350,000


$
717,967     *
    
    Upon the completion of merger with Agere, the Company guaranteed
    Ageres 6.5% 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.       90




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
          Note 12 
    Fair
    Value Measurements         91




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      Fair Value Measurements as of December 31, 2008Level 1


Level 2


Level 3


Total(In thousands)Short-term investments in debt securities and certain cash
    equivalents

$
664,116


$
297,336






$
961,452Long-term investments in marketable equity securities

$
566










$
566Rabbi Trust  all invested in money market funds

$
9,683










$
9,683   Note 13 
    Income
    Taxes    Year Ended December 31,2008


2007


2006(In thousands)Current:Federal

$
(4,740
)

$
(25,887
)

$
220State


935



5,500



551Foreign


19,074



31,430



16,765Total current taxes


15,269



11,043



17,536Deferred:Federal


2,365



595



State


132



74



Foreign


9,934



(386
)


(1,854
)Total deferred taxes


12,431



283



(1,854
)Total

$
27,700


$
11,326


$
15,682     Year Ended December 31,2008


2007


2006(In thousands)Domestic

$
(660,554
)

$
(2,450,376
)

$
61,382Foreign


66,001



(25,113
)


123,939Income/(loss) before income taxes and minority interest

$
(594,553
)

$
(2,475,489
)

$
185,321  92




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    December 31,2008


2007(In thousands)Deferred tax assets:Tax credit carryovers

$
364,637


$
408,698Net operating loss carryforwards


1,310,424



1,408,068Future deductions for purchased intangible assets


288,334



268,007Depreciation and amortization


127,550



86,993Future deductions for reserves and other


309,069



311,202Future deductions for inventory reserves


13,930



16,341Total deferred tax assets


2,413,944



2,499,309Valuation allowance


(2,062,718
)


(2,025,387
)Net deferred tax assets


351,226



473,922Deferred tax liabilities:Gain on unrealized investments


(1,476
)


(797
)Tax deductible goodwill


(26,966
)


(24,469
)Purchased intangible assets


(345,954
)


(462,594
)Total deferred tax liabilities


(374,396
)


(487,860
)Total net deferred tax assets/(liabilities)

$
(23,170
)

$
(13,938
)        93




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Year Ended December 31,2008


2007


2006(Dollars in thousands)Pretax income/(loss) at federal statutory rate

$
(208,094
)


35
%

$
(866,421
)


35
%

$
64,864



35
%State taxes, net of federal benefit


699



0
%


3,575



0
%


358



0
%Foreign earnings taxed in the U.S


13,209



(2
)%


28,504



(1
)%


31,069



17
%Benefit of net operating losses and deferred tax assets not
    previously recognized


















(56,708
)


(31
)%Change in valuation allowance


99,090



(17
)%


77,953



(3
)%






0
%Difference between U.S. and foreign tax rates


3,321



(1
)%


24,310



(1
)%


(25,993
)


(14
)%Withholding Taxes


7,120



(1
)%


5,528



0
%


1,337



1
%Nondeductible expenses


6,437



(1
)%


84,760



(3
)%






Goodwill impairment


116,007



(20
)%


689,901



(28
)%






Pension liability adjustment










(26,122
)


1
%






Others


(10,089
)


2
%


(10,662
)


0
%


755



0
%Effective tax rate

$
27,700



(5
)%

$
11,326



0
%

$
15,682



8
%             non-U.S. subsidiaries
  Uncertain
    Income Tax Positions
   94




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
      non-U.S. income
     95




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
    Year Ended December 31,2008


2007(In thousands)Balance at January 1

$
206,649


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






65,241Tax positions related to current year:Additions


15,081



12,741Reductions






Tax positions related to prior years:Additions


43,473
*


Reductions


(7,903
)


(1,551
)Lapses in statute of limitations


(23,055
)


(3,615
)Settlements


(3,042
)


Foreign exchange loss


847



886Balance at December 31

$
232,050


$
206,649     *
    Of this amount, $39.1 million relates to pre-acquisition
    unrecognized tax benefits that were booked to goodwill.  Note 14 
    Related
    Party Transactions       96




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##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Note 15 
    Commitments,
    Contingencies And Legal Matters  Operating
    Leases
      Purchase
    Commitments
      Guarantees
  Product
    Warranties:
      Year Ended December 312008


2007(In thousands)Balance at the beginning of the period

$
14,734


$
11,325Accruals for warranties issued during the period


14,563



14,920Accruals related to pre-existing warranties (including changes
    in estimates)


(1,961
)


(217
)Accruals assumed in Agere merger






1,819Settlements made during the period (in cash or in kind)


(15,098
)


(13,113
)Balance at the end of the period

$
12,238


$
14,734  97




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
  Convertible
    Subordinated Notes:
    Standby
    Letters of Credit:
    FIN 48
    Liabilities
    Indemnifications
  and/or
  Legal
    Matters
   98




---



##### Table of Contents



LSI
    Corporation
  Notes to
    Consolidated Financial Statements 
    (continued)
             99




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  
   Internal Control 
    Integrated Framework
        
    100




---



##### Table of Contents



Supplementary
    Financial Data
  Interim
    Financial Information (Unaudited)
  QuarterFirst


Second


Third


Fourth(In thousands, except per share amounts)Year Ended December 31, 2008Revenues

$
660,747


$
692,063


$
714,308


$
609,959Gross profit


259,553



284,896



297,417



227,103Net (loss)/income


(13,628
)


(13,647
)


11,371



(606,349
)Basic (loss)/income per share:

$
(0.02
)

$
(0.02
)

$
0.02


$
(0.94
)Diluted (loss)/income per share:

$
(0.02
)

$
(0.02
)

$
0.02


$
(0.94
)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
)          101




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##### 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.
 102




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##### 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.   103




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Form 10-K:
  PAGE INTHE FORM10-KConsolidated Balance Sheets  As of
    December 31, 2008 and 2007


45Consolidated Statements of Operations 
    For the Three Years Ended December 31, 2008, 2007 and
    2006


46Consolidated Statements of Stockholders
    Equity  For the Three Years Ended December 31,
    2008, 2007 and 2006


47Consolidated Statements of Cash Flows 
    For the Three Years Ended December 31, 2008, 2007 and
    2006


48Notes to Consolidated Financial Statements


49Report of Independent Registered Public
    Accounting Firm


100       10-K:
  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*

Period2008Allowances

$
10


$
7


$
(7
)

$
102007Allowances

$
14


$
6


$
(10
)

$
102006Allowances

$
15


$
13


$
(14
)

$
14     *
    
    Deductions include write-offs of uncollectible accounts and
    collections of amounts previously reserved.  Exhibits
    Exhibits
  Form 10-K.
  Financial statement schedule
   104




---



##### Table of Contents



SIGNATURES      By:
    /s/  Abhijit
    Y. Talwalkar     Dated:
    February 27, 2009
    Signature

Title

Date/s/  Abhijit
    Y. TalwalkarAbhijit
    Y. Talwalkar

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

February 27, 2009/s/  Bryon
    LookBryon
    Look

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

February 27, 2009*Charles
    A. Haggerty

Director

February 27, 2009*Richard
    S. Hill

Director

February 27, 2009*Michael
    J. Mancuso

Director

February 27, 2009*John
    H.F. Miner

Director

February 27, 2009*Arun
    Netravali

Director

February 27, 2009*Matthew
    J. ORourke

Director

February 27, 2009*Gregorio
    Reyes

Director

February 27, 2009*Susan
    Whitney

Director

February 27, 2009*By: /s/  Bryon
    LookBryon
    Look
    Attorney-in-fact
    February 27, 2009  105




---



##### 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
    August 25, 2008.4
.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

Specimen Common Stock Certificate.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

LSI Corporation Severance Policy for Executive Officers.
    Incorporated by reference to Exhibit 10.3 to our Current
    Report on
    Form 8-K
    filed on May 20, 2008.*10
.5

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
.6

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.*10
.7.1

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
.7.2

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
.7.3

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.*




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##### Table of Contents



10
.8.1

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
.8.2

Form of Annual Director Option Agreement under
    1995 Director Option Plan. Incorporated by reference to
    Exhibit 1.3 to our Current Report on
    Form 8-K
    filed on April 7, 2005.*10
.8.3

Form of Notice of Grant of Stock Options and Option Agreement
    under 1995 Director Option Plan. Incorporated by reference
    to Exhibit 1.4 to our Current Report on
    Form 8-K
    filed on April 7, 2005.*10
.9

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
.10.1

2003 Equity Incentive Plan. Incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on May 20, 2008.*10
.10.2

2003 Equity Incentive Plan Form of Nonqualified Stock Option
    Agreement for Employees. Incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on February 13, 2009.*10
.10.3

2003 Equity Incentive Plan Form of Notice of Grant of Stock
    Option. Incorporated by reference to Exhibit 10.2 to our
    Current Report on
    Form 8-K
    filed on February 13, 2009.*10
.10.4

2003 Equity Incentive Plan Form of Restricted Stock Unit
    Agreement. Incorporated by reference to Exhibit 10.3 to our
    Current Report on
    Form 8-K
    filed on February 13, 2009.*10
.10.5

2003 Equity Incentive Plan Form of Notice of Grant of Restricted
    Stock Units. Incorporated by reference to Exhibit 10.4 to
    our Current Report on
    Form 8-K
    filed on February 13, 2009.*10
.10.6

2003 Equity Incentive Plan Form of Nonqualified Stock Option
    Agreement for Non-Employee Directors. Incorporated by reference
    to Exhibit 10.5 to our Current Report on
    Form 8-K
    filed on February 13, 2009.*10
.10.7

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
.10.8

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
.11

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
.12.1

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
.12.2

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
.12.3

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
.12.4

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
.12.5

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
.13

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
.14

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
.15.1

LSI Corporation Incentive Plan.*10
.15.2

Written Description of 2008 bonus program for named executive
    officers. Incorporated by reference to Exhibit 10.1 of our
    Current Report on
    Form 8-K
    filed on March 4, 2008.*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

Policy on Recoupment of Incentive Compensation.*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.*




---



##### Table of Contents



10
.19

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
.20

Description of Mr. Talwalkars Housing Allowance.
    Incorporated by reference to Exhibit 10.2 to our Current
    Report on
    Form 8-K
    filed on May 20, 2008.*10
.21

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
.22

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
.23

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
.24.1

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
.24.2

International Assignment Agreement with Andrew Micallef.
    Incorporated by reference to Exhibit 10.4 to our Quarterly
    Report on
    Form 10-Q
    filed on August 8, 2008.*10
.24.3

Extension of International Assignment Agreement with Andrew
    Micallef. Incorporated by reference to Exhibit 10.1 to our
    Current Report on
    Form 8-K
    filed on August 25, 2008.*10
.25

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
.26

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
.27

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
.28

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
.29

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
.30.1

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
.30.2

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
.31.1

Separation Agreement with Denis Regimbal. Incorporated by
    reference to Exhibit 10.33.1 to our Annual Report on
    Form 10-K
    filed on February 29, 2008.*10
.31.2

Letter relating to Separation Agreement with Denis Regimbal.
    Incorporated by reference to Exhibit 10.33.2 to our Annual
    Report on
    Form 10-K
    filed on February 29, 2008.*10
.32

Separation Agreement with Jeffrey Hoogenboom. Incorporated by
    reference to Exhibit 10.34 to our Annual Report on
    Form 10-K
    filed on February 29, 2008.*10
.33

Separation Agreement with Ruediger Stroh.*10
.34

Separation Agreement with Claudine Simson.*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.+
    
    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.  001-16397.