##### 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 1934    
|           |  | For the Fiscal Year Ended December 31, 2005                                                  
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from           to          .                                   

Commission File No. 1-10317


LSI LOGIC CORPORATION


(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|DELAWARE                        |  | 94-2712976         
|(State or other jurisdiction of |  | (IRS Employer      
|incorporation or organization)  |  | 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 Registered
|                                |  |                                          
|Common Stock, $0.01 par value   |  | New York Stock Exchange                  
|Preferred Share Purchase Rights |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the
Act:


NONE


(Title of class)


þ o


o þ


þ o


S-K 10-K 10-K. þ


12b-2


þ o o


12b-2 o þ










---

TABLE OF CONTENTS



|                           |                                                                                                                      |  |  |  |  |  |  | 
|-------------------------- | -------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|FORWARD-LOOKING STATEMENTS
|PART I                    
|                           | Item 1. Business                                                                                                    
|                           | Item 1A. Risk Factors.                                                                                              
|                           | Item 1B. Unresolved Staff Comments                                                                                  
|                           | Item 2. Properties                                                                                                  
|                           | Item 3. Legal Proceedings                                                                                           
|                           | Item 4. Submission of Matters to a Vote of Security Holders                                                         
|PART II                   
|                           | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|                           | Item 6. Selected Financial Data                                                                                     
|                           | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                                 
|                           | Item 8. Financial Statements and Supplementary Data                                                                 
|                           | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                        
|                           | Item 9A. Controls and Procedures                                                                                    
|                           | Item 9B. Other Information                                                                                          
|PART III                  
|                           | Item 10. Directors and Executive Officers of the Registrant                                                         
|                           | 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                                                             
|                           | Item 14. Principal Accounting Fees and Services                                                                     
|PART IV                   
|                           | Item 15. Exhibits and Financial Statement Schedules                                                                 
|SIGNATURES                
|INDEX TO EXHIBITS         
|EXHIBIT 14.1              
|EXHIBIT 21.1              
|EXHIBIT 23.1              
|EXHIBIT 31.1              
|EXHIBIT 31.2              
|EXHIBIT 32.1              
|EXHIBIT 32.2              



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,


DOCUMENTS INCORPORATED BY REFERENCE


10-K:





FORWARD-LOOKING STATEMENTS


10-K 10-K. 10-K


2



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General








system-on






| |                    
| | -------------------
| | Recent Developments



12-inch




3



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®


433-8000. www.lsi.com 10-K. 10-Q, 8-K http://www.sec.gov


Business Strategy






| |                                
| | -------------------------------
| | Semiconductor Business Strategy





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Target Growth Markets and Customers. We concentrate our
    sales and marketing efforts on leading OEM customers in our
    information storage and consumer targeted growth markets. Our
    engineering expertise is focused on developing technologies that
    will meet the product and service needs of our customers in
    order to succeed in these market areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Promote Highly Integrated Design Technology. We use
    proprietary and leading third-party electronic design
    automation, or EDA, software design tools. We continually
    evaluate and, as appropriate, develop expertise with third-party
    EDA tools from leading and emerging suppliers of such products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Provide Flexibility in Design Engineering. We engage with
    customers of our semiconductor products under various
    arrangements whereby the extent of the engineering support we
    provide will be determined in accordance with the
    customers requirements. For example, a customer may
    primarily use its own engineers for substantial development of
    its product design and retain our support for silicon-specific
    engineering work. We also enter into engineering design
    projects, including those on a turn-key basis.                                                                                                                                                                                                                                                                                                                    
|
| |  | Deploy a Fabless Semiconductor Manufacturing Model. On
    September 13, 2005, we announced our intention to sell our
    Gresham, Oregon manufacturing facility as part of our strategy
    to transition to a fabless semiconductor manufacturing model.
    Our new wafer manufacturing strategy includes the expansion of
    our working relationships with major foundry partners and the
    adoption of a roadmap leading to the production of advanced
    semiconductors utilizing 65-nanometer and below process
    technology on 300-mm or
    12-inch wafers. This
    model enables us to focus on developing innovative intellectual
    property and products, while reducing capital and operating
    infrastructure requirements. We perform substantially all of our
    packaging, assembly and final test operations through
    subcontractors in Asia.
|
| |  | Leverage Alliances with Key Partners. We are continually
    seeking to establish relationships with key partners in a
    diverse range of technologies to promote new products, services,
    operating standards and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | manufacturing capabilities and to avail ourselves of cost
    efficiencies that may be obtained through collaborative
    development.                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Forge Successful Partnerships with Leading Distribution
    Partners. Our partner program is designed to effectively
    market the Companys host bus adapter product families and
    integrated circuit products utilizing distribution and reseller
    partnerships. Such partnerships help us to provide an extended
    range of customers with the full spectrum of product offerings,
    services and support needed to enable their success.                                                                                           
|
| |  | Develop and Drive Industry Standards to Achieve Market
    Advantage. We are a leader in developing and promoting
    important industry standard architectures, functions, protocols
    and interfaces. We believe that this leadership will enable us
    to quickly launch new standard-based products, allowing our
    customers to achieve
    time-to-market and
    other competitive advantages.                                                                                                                                        
|
| |  | Operate Worldwide. We market our products and engage with
    our customers on a worldwide basis through direct sales,
    marketing and field technical staff and through independent
    sales representatives and distributors. Our network of design
    centers located in major markets allows us to provide customers
    with highly experienced engineers, to interact with customer
    engineering management and system architects, to develop designs
    for new products and to provide continuing after-sale customer
    support.



| |                                  
| | ---------------------------------
| | Storage Systems Business Strategy





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continuing to Innovate and Extend Our Product Offering.
    We intend to adopt and implement innovative storage system
    technologies, interfaces, features and customer requirements. In
    addition, we intend to define, design and develop products that
    enable our channel customers to offer a broad storage system
    product line, which incorporates their own intellectual
    property, to address multiple markets. In this manner, we intend
    to continue to expand our product offerings in the mid-range
    markets and further into the entry-level markets.                                                                                                                                                                                                                              
|
| |  | Adding Feature Functionality to Meet Expanding Enterprise
    Requirements. Implementation and management of storage
    systems within the enterprise is increasingly complex. To
    address this increasing complexity, we plan to develop
    additional premium software management and hardware system
    features to enhance reliability, data availability and
    serviceability of our products. We also intend to expand our
    Engenio Solutions program, which is designed to help our
    customers rapidly implement our products for specific business
    applications.                                                                                                                                                                                                                            
|
| |  | Enhancing Interoperability Among Our Products, Our
    Customers Products and Other Leading Enterprise
    Products. We provide significant value to our channel
    customers and enterprises by testing and certifying our products
    with the products of other leading enterprise information
    technology vendors to ensure broad interoperability and
    compatibility. We intend to work closely with our channel
    customers and enterprises to extend and enhance the capabilities
    of our storage sub-assemblies and storage management software.
    We also seek to enhance our position in the storage industry by
    actively participating in a variety of organizations focused on
    developing standards for emerging technologies and facilitating
    industry-wide interoperability.
|
| |  | Obtaining New Channel Customers. Our channel customers
    sell storage solutions based on or incorporating our products
    and technology through their direct sales forces and other
    channels. We will continue to seek new customers in domestic and
    international markets in order to expand the total marketing and
    sales resources that are focused on our products. In this
    manner, we intend to increase the market addressable by our
    products.                                                                                                                                                                                                                                                                                                                                         
|
| |  | Expanding Our Joint Marketing and Sales Efforts With Existing
    and New Channel Customers. We seek to add value to our
    customers sales, marketing and support initiatives through
    the provision of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

5



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | extensive training, customized
    go-to-market campaigns,
    product positioning, marketing materials, competitive analysis
    and product support infrastructure. We maintain 15 Experience
    Centers worldwide, which allow our channel customers to
    demonstrate to enterprise users the performance and benefits of
    storage deployments incorporating our products. We plan to open
    additional centers to reach a broader customer base in the
    future.                                                                                                                                                                                                                                                           
|
| |  | Promoting Our Brand. We believe that a strong association
    of our brand with innovation and integrity is valuable in
    achieving increased scale, market leadership and OEM acceptance
    within our industry. Furthermore, we believe that brand
    recognition and reputation will become more important as OEMs
    increasingly outsource their storage system offerings and their
    customers focus on the performance and reliability of the
    storage systems or sub-assemblies integrated into OEM storage
    solutions. We intend to continue to promote our brand and build
    brand equity to establish and bolster our position in the disk
    storage systems and related storage management software markets.

Products and Services




| |                       
| | ----------------------
| | Semiconductor Products





Storage Components.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Storage Standard Products. Our standard product solutions
    offer Fibre Channel, Serial-Attached SCSI (SAS) and
    SCSI standard products, including host adapter ICs for
    motherboard and adapter applications, SCSI and SAS expander ICs,
    storage adapter boards and our own
    Fusion-MPTtm
    software drivers for these product families. We are an industry
    leader in the on-going development of new storage interface
    standards and products, including SAS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Storage Custom Solutions. We also offer custom solutions
    to customers who develop Fibre Channel storage area network
    (SAN) switches and host adapters, storage systems,
    hard disk drives and tape peripherals. Through leveraging our
    extensive experience in providing solutions for these
    applications, LSI Logic has developed a full portfolio of
    high-speed interface CoreWare that is employed for custom
    solution platforms that provide a connection to the network, the
    SAN, memory and host buses. Using these pre-verified interfaces,
    our customers reduce development risk and achieve quicker time
    to market. Our CoreWare offerings include the
    GigaBlaze®
    high performance SerDes Core supporting Fibre Channel, SATA,
    Gigabit Ethernet, Infiniband, SAS, Serial RapidIO and
    PCI-Express industry standards and a family of high-performance
    Fibre Channel, RapidIO, PCI-E, SAS and SATA protocol controllers.

Consumer Products.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consumer Standard Products. We design, develop,
    manufacture and market semiconductor devices, along with
    enabling software and reference system designs to enable a
    variety of digital video and audio applications utilizing our
    core competency in media processing. We are focused on providing
    solutions for high-growth applications such as DVD recorders,
    digital set-top boxes, and a variety of combination products
    such as DVD recorder / VCR, DVD recorder/ PVR and DVD
    recorder/digital set-top box as well as broadcast encoders. At
    the center of our standard product strategy is our industry
    leading

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | DoMiNo®
    architecture. Products based on this flexible architecture
    provide software programmable, cost effective solutions to our
    customers in our target markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Consumer Custom Solutions. We offer
    system-on-a-chip
    solutions for consumer applications. We focus on consumer market
    segments employing our intellectual property portfolio, media
    processing expertise, system level knowledge, design methodology
    and turn-key product offerings to provide customized solutions
    to our customers. We are focused on providing solutions to
    portable consumer appliances such as digital audio players,
    portable media players, global positioning systems, edutainment
    and electronic toys and other emerging multimedia applications
    utilizing in many cases our newly announced
    Zeviotmarchitecture.

Communications Products. system-on




| |                                    
| | -----------------------------------
| | Storage Systems or Engenio Products



e-commerce,


®




| |                              
| | -----------------------------
| | Semiconductor Design Services





7



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Marketing and Distribution




| |                                         
| | ----------------------------------------
| | Semiconductor Marketing and Distribution









| |                                           
| | ------------------------------------------
| | Storage Systems Marketing and Distribution



go-to


8



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Customers






| |                        
| | -----------------------
| | Semiconductor Customers





| |                          
| | -------------------------
| | Storage Systems Customers





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | OEM Partners. These channel customers independently
    resell or distribute OEM-branded or Engenio co-branded products,
    which may be integrated with value-added services, hardware and
    software and delivered as differentiated complete storage
    solutions to enterprises. OEM Partners receive basic training
    services to enhance their abilities to sell and support our
    products. After receiving our basic training services, OEM
    Partners independently market, sell and support our products,
    requiring limited ongoing product support from us.
|
| |  | OEM+ Partners. In addition to providing our OEM+ Partners
    with products and basic services as described above, we also
    assist our OEM+ Partners with additional resources that may
    provide tailored, account-specific education, training and sales
    and marketing assistance, allowing our OEM+ Partners to leverage
    our storage products and industry expertise.                                                                                                                                                                                               

Manufacturing




| |                            
| | ---------------------------
| | Semiconductor Manufacturing





9



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12-inch


system-on




| |                              
| | -----------------------------
| | Storage Systems Manufacturing



build-to configure-to




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | United States Assembly. Our wholly-owned United States
    manufacturing facility in Wichita, Kansas, assembles and tests
    complete storage systems and sub-assemblies configured from
    modular components, such as our storage controller modules and
    disk drive enclosure modules. ISO-9001 certification at our
    Kansas manufacturing facility has been maintained since April
    1992. This facility has been certified as ISO-9001:2000
    compliant since October of 2001. Product quality is achieved
    through extensive employee training, exhaustive and automated
    testing and sample auditing. Quality control and measurement is
    extended through the subcomponent supplier and component
    manufacturer base with continuous reporting and ongoing
    qualification programs.
|
| |  | European Assembly. We outsource manufacturing in Cork,
    Ireland, to a Flextronics International Ltd. facility.
    ISO-9001:2000 certification at the Cork assembly facility has
    been maintained since December 2001. This facility is capable of
    the assembly and testing of complete storage systems and
    sub-assemblies configured from modular components, such as our
    storage controller modules and disk drive enclosure modules. The
    site in Ireland was established to provide operational
    flexibility in meeting surges in demand, to address growing
    European demand and to serve as a backup site in the event of
    natural or human-made disasters that could disrupt the
    operations of our Wichita facility.                                                         

Backlog




| |                      
| | ---------------------
| | Semiconductor Backlog



10



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| |                        
| | -----------------------
| | Storage Systems Backlog



Competition




| |                          
| | -------------------------
| | Semiconductor Competitors









| |   |                                            
| | - | -------------------------------------------
| |  | design capabilities;                       
|
| |  | differentiating product features;          
|
| |  | product performance characteristics;       
|
| |  | time to market;                            
|
| |  | price; and                                 
|
| |  | utilization of emerging industry standards.





11



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| |                            
| | ---------------------------
| | Storage Systems Competitors





| |   |                                                      
| | - | -----------------------------------------------------
| |  | features and functionality;                          
|
| |  | product performance and price;                       
|
| |  | reliability, scalability and data availability;      
|
| |  | interoperability with other networking devices;      
|
| |  | 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






12



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Research and Development








|     |  |        |         |            |  |  |     | 
|---- |  | ------ | ------- | ---------- |  |  | --- | 
|     |  |        |         | Percent of
|Year |  | Amount |         | Revenue   
|     |  |        |         |           
|2005 |  | $      | 397,312 |            |  |  | 21% | 
|2004 |  | $      | 421,516 |            |  |  | 25% | 
|2003 |  | $      | 432,695 |            |  |  | 26% | 



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Working Capital




Financial Information about Segments and Geographic Areas






Environmental Regulation






| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the need for additional capital improvements to comply with such
    regulations or to restrict discharges;                                                                                   
|
| |  | liability to our employees and/or third parties; and/or                                                                                                                                       
|
| |  | business interruptions as a consequence of permit suspensions or
    revocations or as a consequence of the granting of injunctions
    requested by governmental agencies or private parties.

Employees






Seasonality




14



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|         |              
|-------- | -------------
|Item 1A. | Risk Factors.

We are subject to a number of risks. Some of these risks are
endemic to the semiconductor industry and are the same or
similar to those disclosed in our previous SEC filings, and some
new risks may arise in the future. The reader should carefully
consider all of these risks and other information in this
Form 10-K before
investing in us. The fact that certain risks are endemic to the
high-technology industry does not lessen the significance of
these risks.


As a result of theses risks, our business, financial
conditions or results of operations could be materially and
adversely affected. This could cause the trading price of our
common stock to decline, and stockholders might lose some or all
of their investment.


Please consider these risk factors when you read
forward-looking statements elsewhere in this
Form 10-K and in
the documents incorporated herein by reference. Forward-looking
statements are statements that relate to our expectations for
future events and time periods. Generally, the words,
anticipate, expect, intend
and similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties, and
actual results could differ materially from those anticipated in
the forward-looking statements.


General economic weakness and geopolitical factors may harm
our operating results and financial condition.


Our target markets are characterized by rapid technological
change.


We operate in highly competitive markets.


We are dependent on a limited number of customers.


15



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| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | we do not win new product designs from major existing customers;                 
|
| |  | major customers reduce or cancel their existing business with us;                
|
| |  | major customers make significant changes in scheduled
    deliveries; or         
|
| |  | there are declines in the prices of products that we sell to
    these customers.

Our new products may not achieve market acceptance.


The manufacturing facilities we operate are highly complex
and require high fixed costs.




| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | maintain a competitive manufacturing cost structure;                                                          
|
| |  | implement the latest process technologies required to
    manufacture new products;                           
|
| |  | exercise stringent quality control measures to ensure high
    yields;                                        
|
| |  | effectively manage the subcontractors engaged in the wafer
    fabrication, test and assembly of products; and
|
| |  | update equipment and facilities as required for leading edge
    production capabilities.                     

We procure parts and raw materials from a limited number of
domestic and foreign sources.


We utilize indirect channels of distribution over which we
have limited control.


We engage in acquisitions and alliances giving rise to
financial and technological risks.


16



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300-mm 12-inch


The price of our securities may be subject to wide
fluctuations.


We may rely on capital and bank markets to provide
liquidity. time-to


We design and develop highly complex semiconductors and
storage systems.


17



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##### Table of Contents



The high technology industry in which we operate is prone to
intellectual property litigation.






We may not be able to adequately protect or enforce our
intellectual property rights, which could harm our competitive
position.




Our manufacturing facilities are subject to disruption.


18



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##### Table of Contents



We have announced our intention to sell our semiconductor
fabrication facility and to become entirely dependent on
independent foundry subcontractors to manufacture a portion of
our current product; accordingly, any failure to secure and
maintain sufficient foundry capacity could materially and
adversely affect our business.








| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | a lack of guaranteed wafer supply and potential wafer shortages
    and higher wafer prices;                  
|
| |  | limited control over delivery schedules, quality assurance,
    manufacturing yields and production costs; and
|
| |  | the unavailability of, or potential delays in obtaining access
    to, key process technologies.              

start-up


state-of


19



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##### Table of Contents







We depend on third-party subcontractors to assemble, obtain
packaging materials for, and test substantially all of our
current semiconductor products. If we lose the services of any
of our subcontractors or if these subcontractors are unable to
attain sufficient packaging materials, shipments of our products
may be disrupted, which could harm our customer relationships
and adversely affect our revenues.




We depend on third-party subcontractors to manufacture all of
our current board products.




We are increasingly exposed to various legal, business,
political and economic risks associated with our international
operations.


20



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##### Table of Contents







| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | political, social and economic instability;                                                                                 
|
| |  | exposure to different legal standards, particularly with respect
    to intellectual property;                              
|
| |  | natural disasters and public health emergencies;                                                                            
|
| |  | nationalization of business and blocking of cash flows;                                                                     
|
| |  | trade and travel restrictions;                                                                                              
|
| |  | the imposition of governmental controls and restrictions;                                                                   
|
| |  | burdens of complying with a variety of foreign laws;                                                                        
|
| |  | import and export license requirements and restrictions of the
    United States and each other country in which we operate;
|
| |  | unexpected changes in regulatory requirements;                                                                              
|
| |  | foreign technical standards;                                                                                                
|
| |  | changes in tariffs;                                                                                                         
|
| |  | difficulties in staffing and managing international operations;                                                             
|
| |  | fluctuations in currency exchange rates;                                                                                    
|
| |  | difficulties in collecting receivables from foreign entities or
    delayed revenue recognition; and                        
|
| |  | potentially adverse tax consequences.                                                                                       





We are exposed to fluctuations in foreign currency exchange
rates.


We must attract and retain key employees in a highly
competitive environment.




21



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##### Table of Contents



Future changes in financial accounting standards or practices
or existing taxation rules or practices may cause adverse
unexpected fluctuations and affect our reported results of
operations.




We face uncertainties related to the effectiveness of
internal controls.




Internal control deficiencies or weaknesses that are not yet
identified could emerge.







|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








|        |           
|------- | ----------
|Item 2. | Properties





22



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



Executive Officers of the Company




|                      |  |     |    |  |          |                                                        
|--------------------- |  | --- | -- |  | -------- | -------------------------------------------------------
|Name                  |  | Age |    |  | Position
|                      |  |     |    |  |         
|Abhijit Y. Talwalkar  |  |     | 41 |  |          | President and Chief Executive Officer                  
|Philip G. Brace       |  |     | 35 |  |          | Senior Vice President, Corporate Planning and Marketing
|Philip W. Bullinger   |  |     | 41 |  |          | Senior Vice President, Engenio Storage Group           
|Donald J. Esses       |  |     | 54 |  |          | Executive Vice President, Worldwide Operations         
|Jon R. Gibson         |  |     | 58 |  |          | Vice President, Human Resources                        
|Bryon Look            |  |     | 51 |  |          | Executive Vice President and Chief Financial Officer   
|Umesh Padval          |  |     | 48 |  |          | Executive Vice President, Consumer Products Group      
|David G. Pursel       |  |     | 60 |  |          | Vice President, General Counsel and Corporate Secretary
|D. Jeffrey Richardson |  |     | 40 |  |          | Executive Vice President, Custom Solutions Group       
|Flavio Santoni        |  |     | 47 |  |          | Senior Vice President, Worldwide Sales                 
|Frank A. Tornaghi     |  |     | 51 |  |          | Executive Vice President, Worldwide Sales              
|William J. Wuertz     |  |     | 48 |  |          | Senior Vice President, Storage Components Group        
|Joseph M. Zelayeta    |  |     | 59 |  |          | Executive Vice President, Corporate Initiatives        



23



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##### Table of Contents













21-year










24



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##### Table of Contents
















PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|               |  |                 |              |  |                 |   |              | 
|-------------- |  | --------------- | ------------ |  | --------------- | - | ------------ | 
|               |  | 2005 High  Low |              |  | 2004 High  Low |  
|               |  |                 |              |  |                 |  
|First Quarter  |  | $               | 6.47  5.02  |  |                 | $ | 11.45  8.64 | 
|Second Quarter |  | $               | 8.69  5.11  |  |                 | $ | 9.91  7.15  | 
|Third Quarter  |  | $               | 10.48  9.12 |  |                 | $ | 6.80  4.03  | 
|Fourth Quarter |  | $               | 9.91  7.70  |  |                 | $ | 5.81  4.27  | 
|               |  |                 |              |  |                 |  
|Year           |  | $               | 10.48  5.02 |  |                 | $ | 11.45  4.03 | 
|               |  |                 |              |  |                 |  





25



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##### Table of Contents



Equity Compensation Plan Information


As of December 31, 2005


|                                                              |  |                   |            |                |  |                      |       |  |  |  |            | 
|------------------------------------------------------------- |  | ----------------- | ---------- | -------------- |  | -------------------- | ----- |  |  |  | ---------- | 
|                                                              |  |                   |            |                |  | (c)                 
|                                                              |  | (a)               |            | (b)            |  | Number of           
|                                                              |  | Number of         |            | Weighted-      |  | Securities Remaining
|                                                              |  | Securities to be  |            | Average        |  | Available for Future
|                                                              |  | Issued upon       |            | Exercise Price |  | Issuance Under      
|                                                              |  | Exercise of       |            | of Outstanding |  | Equity Compensation 
|                                                              |  | Outstanding       |            | Options,       |  | Plans (Excluding    
|                                                              |  | Options, Warrants |            | Warrants       |  | Securities Reflected
|Plan Category                                                 |  | and Rights        |            | and Rights     |  | in Column (a))      
|                                                              |  |                   |            |                |  |                     
|Equity compensation plans approved by security holders(1)     |  |                   | 33,346,241 |                |  | $                    | 14.24 |  |  |  | 49,467,728 | 
|Equity compensation plans not approved by security holders(2) |  |                   | 39,647,411 |                |  | $                    | 11.55 |  |  |  | 14,400,734 | 
|                                                              |  |                   |            |                |  |                      |       |  |  |  |            | 
|Total                                                         |  |                   | 72,993,652 |                |  | $                    | 12.78 |  |  |  | 63,868,462 | 
|                                                              |  |                   |            |                |  |                      |       |  |  |  |            | 






|    |                                                                              
|--- | -----------------------------------------------------------------------------
|(1) | Equity compensation plans approved by security holders are the
    following:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | The Employee Stock Purchase Plan, amended and restated
    (US ESPP), under which rights are granted to
    LSI Logic employees in the United States to purchase shares of
    common stock at 85% of the lesser of the fair market value of
    such shares at the beginning of a
    12-month offering
    period or the end of each six-month purchase period within such
    an offering period. There are 10,906,846 shares remaining
    available for future issuance under this plan. The US ESPP
    includes an annual replenishment calculated at 1.15% of the
    Companys common stock issued and outstanding at the fiscal
    year end less the number of shares available for future grants
    under the US ESPP. No shares have been added to the US ESPP
    from the annual replenishment since January 2001.                                                                                                                                                                       
|
| | (ii)  | The 2003 Equity Incentive Plan was approved by stockholders in
    May 2003. Under this plan, the Company may grant stock options
    or restricted stock to employees, officers and consultants.
    There are 6,154,516 shares remaining available for future
    issuance under this plan, including 2,375,185 shares
    reserved for restricted stock awards that have been granted, but
    will not be issued until the awards have vested. Stock options
    will have an exercise price that is no less than the fair market
    value of the stock on the date of grant. The term of each option
    or restricted stock award is determined by the Board of
    Directors and for option grants on or after February 12,
    2004, will generally be seven years. Options generally vest in
    annual increments of 25% per year commencing one year from
    the date of grant. Restricted stock awards may be granted with
    the vesting requirements determined by the Board of Directors.
|
| | (iii) | Under the 1991 Equity Incentive Plan the Company may grant stock
    options to employees, officers and consultants, with an exercise
    price that is no less than the fair market value of the stock on
    the date of grant. The term of each option is determined by the
    Board of Directors and has generally been ten years. For options
    granted on or after February 12, 2004, the term of the
    options will generally be seven years. Options generally vest in
    annual increments of 25% per year commencing one year from
    the date of grant. With respect to shares previously approved by
    stockholders, no incentive stock options may be granted under
    this plan after March 2001.                                                                                                                                                                                                                                                                                  
|
| | (iv)  | Under the 1995 Director Option Plan new directors receive
    an initial grant of 30,000 options to purchase shares of common
    stock and directors receive subsequent automatic grants of
    30,000 options to purchase shares of common stock each year
    thereafter. The initial grants vest in annual increments of
    25% per year, commencing one year from the date of grant.
    Subsequent option grants become exercisable in full six months
    after the grant date. The term of each option is ten years. The
    exercise price of the options granted is equal to the fair
    market value of the stock on the date of grant.                                                                                                                                                                                                                                                                                                                                                       

26



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##### Table of Contents





|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(2) | Equity compensation plans not previously approved by security
    holders are the following:



| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | An aggregate of 5,678,908 options with a weighted-average
    exercise price of $11.81 per share are outstanding that
    were assumed in acquisitions. No further options may be granted
    under these assumed plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (ii)  | A total of 316,042 shares of common stock were reserved
    under the 2001 Supplemental Stock Issuance Plan, of which
    14,830 shares remain available for future issuance. Shares
    of common stock may be issued under this plan pursuant to share
    right awards, which entitle the recipients to receive those
    shares upon the satisfaction of the following service
    requirements: 20% of the shares subject to an award will be
    issued upon completion of three months of continuous service
    measured from the award date, an additional 30% of the shares
    will be issued upon completion of 12 months of continuous
    service measured from the award date and the remaining 50% of
    the shares will be issued upon completion of 24 months of
    continuous service measured from the award date.
|
| | (iii) | Under the 1999 Nonstatutory Stock Option Plan the Company may
    grant stock options to its employees, excluding officers, with
    an exercise price that is no less than the fair market value of
    the stock on the date of grant. The term of each option is
    determined by the Board of Directors and has generally been ten
    years. For options granted on or after February 12, 2004,
    the term of the options will be seven years. Options generally
    vest in annual increments of 25% per year commencing one
    year from the date of grant.                                                                                                                                                                                                                                                                  
|
| | (iv)  | Under the International Employee Stock Purchase Plan rights are
    granted to LSI Logic employees (excluding executive officers)
    outside of the United States to purchase shares of common stock
    at 85% of the lesser of the fair market value of such shares at
    the beginning of a
    12-month offering
    period or the end of each six-month purchase period within such
    an offering period. There are 1,134,789 shares remaining
    available for future issuance under this plan, of which
    1,000,000 shares were added to the plan by stockholder
    approval in 2004.                                                                                                                                                                                                                                    



27



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

Five-Year Consolidated Summary


|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |           |           |  |   |            |           | 
|------------------------------------------------------- | ---------------------- | ---------------------------------------- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- |  | ---- | --------- | --------- |  | - | ---------- | --------- | 
|                                                        |                        | Year Ended December 31,                  |          
|                                                        |                        |                                          |          
|                                                        |                        | 2005                                     |           |           | 2004 |   |           | 2003      |  |   | 2002      |           |  | 2001 |          
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|                                                        |                        | (In thousands, except per share amounts) |          
|Revenues                                                |                        | $                                        | 1,919,250 |           |      | $ | 1,700,164 |           |  | $ | 1,693,070 |           |  | $    | 1,816,938 |           |  | $ | 1,784,923  |          
|Cost of revenues                                        |                        |                                          | 1,086,814 |           |      |   | 964,556   |           |  |   | 1,015,865 |           |  |      | 1,122,696 |           |  |   | 1,160,432  |          
|Additional excess inventory and related charges         |                        |                                          |          |           |      |   |          |           |  |   |          |           |  |      | 45,526    |           |  |   | 210,564    |          
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|                                                        | Total cost of revenues |                                          |           | 1,086,814 |      |   |           | 964,556   |  |   |           | 1,015,865 |  |      |           | 1,168,222 |  |   |            | 1,370,996 | 
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Gross profit                                            |                        |                                          | 832,436   |           |      |   | 735,608   |           |  |   | 677,205   |           |  |      | 648,716   |           |  |   | 413,927    |          
|Research and development                                |                        |                                          | 397,312   |           |      |   | 421,516   |           |  |   | 432,695   |           |  |      | 457,351   |           |  |   | 503,108    |          
|Selling, general and administrative                     |                        |                                          | 235,933   |           |      |   | 243,498   |           |  |   | 234,156   |           |  |      | 230,202   |           |  |   | 307,310    |          
|Acquired in-process research and development            |                        |                                          |          |           |      |   |          |           |  |   |          |           |  |      | 2,920     |           |  |   | 96,600     |          
|Restructuring of operations and other items, net        |                        |                                          | 119,052   |           |      |   | 423,444   |           |  |   | 180,597   |           |  |      | 67,136    |           |  |   | 219,639    |          
|Amortization of non-cash deferred stock compensation    |                        |                                          | 5,449     |           |      |   | 8,449     |           |  |   | 26,021    |           |  |      | 77,303    |           |  |   | 104,627    |          
|Amortization of intangibles                             |                        |                                          | 62,484    |           |      |   | 75,050    |           |  |   | 76,352    |           |  |      | 78,617    |           |  |   | 188,251    |          
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Income/(loss) from operations                           |                        |                                          | 12,206    |           |      |   | (436,349  | )         |  |   | (272,616  | )         |  |      | (264,813  | )         |  |   | (1,005,608 | )        
|Interest expense                                        |                        |                                          | (25,283   | )         |      |   | (25,320   | )         |  |   | (30,703   | )         |  |      | (51,977   | )         |  |   | (44,578    | )        
|Interest income and other, net                          |                        |                                          | 34,000    |           |      |   | 22,170    |           |  |   | 18,933    |           |  |      | 26,386    |           |  |   | 19,831     |          
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Income/(loss) before income taxes and minority interest |                        |                                          | 20,923    |           |      |   | (439,499  | )         |  |   | (284,386  | )         |  |      | (290,404  | )         |  |   | (1,030,355 | )        
|Provision for/ (benefit from) income taxes              |                        |                                          | 26,540    |           |      |   | 24,000    |           |  |   | 24,000    |           |  |      | 1,750     |           |  |   | (39,198    | )        
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Loss before minority interest                           |                        |                                          | (5,617    | )         |      |   | (463,499  | )         |  |   | (308,386  | )         |  |      | (292,154  | )         |  |   | (991,157   | )        
|Minority interest in net income of subsidiary           |                        |                                          | 6         |           |      |   | 32        |           |  |   | 161       |           |  |      | 286       |           |  |   | 798        |          
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Net loss                                                |                        | $                                        | (5,623    | )         |      | $ | (463,531  | )         |  | $ | (308,547  | )         |  | $    | (292,440  | )         |  | $ | (991,955   | )        
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Basic net loss per share                                |                        | $                                        | (0.01     | )         |      | $ | (1.21     | )         |  | $ | (0.82     | )         |  | $    | (0.79     | )         |  | $ | (2.84      | )        
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Diluted net loss per share                              |                        | $                                        | (0.01     | )         |      | $ | (1.21     | )         |  | $ | (0.82     | )         |  | $    | (0.79     | )         |  | $ | (2.84      | )        
|                                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |          
|Year-end status:                                        |                        |                                          |           |           |      |   |           |           |  |   |           |           |  |      |           |           |  |   |            |          
|                                                        | Total assets           |                                          | $         | 2,796,066 |      |   | $         | 2,874,001 |  |   | $         | 3,447,901 |  |      | $         | 4,012,736 |  |   | $          | 4,525,077 | 
|                                                        | Long-term obligations* |                                          | $         | 699,050   |      |   | $         | 859,545   |  |   | $         | 1,007,079 |  |      | $         | 1,315,557 |  |   | $          | 1,547,197 | 
|                                                        | Stockholders equity   |                                          | $         | 1,627,950 |      |   | $         | 1,618,046 |  |   | $         | 2,042,450 |  |      | $         | 2,300,355 |  |   | $          | 2,479,885 | 






|  |                                                                                    
|- | -----------------------------------------------------------------------------------
|* | includes current portion of long-term debt of $273,940 as of
    December 31, 2005.







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C-Cube




|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Statements in this discussion and analysis include
forward-looking information within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. All forward-looking statements included in this
discussion and analysis are based on information available to us
on the date of filing of this Annual Report on
Form 10-K, and we
assume no obligation to update any such forward-looking
statements. These statements involve known and unknown risks and
uncertainties. Our actual results in future periods may be
significantly different from any future performance suggested in
this report. In some cases, you can identify forward-looking
statements by terminology such as may,
will, expects, plans,
anticipates, believes,
estimates, intends,
projects, predicts, or similar
expressions. For such statements, we claim the protection under
the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. Although we
believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. For a detailed
discussion of risk factors, refer to the Risk
Factors section set forth in Part I, Item 1A of
this Annual Report on
Form 10-K, which
is incorporated by reference into this Part II,
Item 7.


While management believes that the discussion and analysis in
this report is adequate for a fair presentation of the
information, we recommend that you read this discussion and
analysis in conjunction with the remainder of this Annual Report
on Form 10-K.


OVERVIEW






29



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##### Table of Contents





300-mm 12-inch








Separation and stock option exchange program of our Storage
Systems business. S-1


Significant acquisitions and other major transactions.


30



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##### Table of Contents





|                                                                                                                                            |  |               |  |          |      |               |  |                                                          |  |          |     |             |  |              |     |  |  |   |      |  |  |   |     | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -------- | ---- | ------------- |  | -------------------------------------------------------- |  | -------- | --- | ----------- |  | ------------ | --- |  |  | - | ---- |  |  | - | --- | 
|                                                                                                                                            |  |               |  |          |      |               |  | Fair Value                                               |  |          |     |             |  |             
|                                                                                                                                            |  |               |  |          |      |               |  | of Tangible                                              |  |          |     |             |  |             
|Entity Name;                                                                                                                                |  |               |  | Total    |      |               |  | Net Assets/                                              |  |          |     | Amortizable |  | Deferred    
|Segment Included in;                                                                                                                        |  | Acquisition   |  | Purchase |      | Type of       |  | (Liabilities)                                            |  |          |     | Intangible  |  | Stock       
|Description of Acquired Business                                                                                                            |  | Date          |  | Price    |      | Consideration |  | Acquired                                                 |  | Goodwill |     | Assets      |  | Compensation
|                                                                                                                                            |  |               |  |          |      |               |  |                                                          |  |          |     |             |  |             
|Velio Communications, Inc.; Semiconductor segment; High-speed
    interconnect and switch fabric application specific standard
    products |  | April 2, 2004 |  | $        | 20.8 |               |  | $19.8 cash; and
    0.1 million restricted common shares |  | $        | 1.5 |             |  | $            |    |  |  | $ | 18.3 |  |  | $ | 1.0 | 
|Accerant, Inc.;
    Semiconductor segment;
    Consumer product applications                                                                |  | May 11, 2004  |  | $        | 15.9 |               |  | $14.1 cash; and
    0.2 million restricted common shares |  | $        |    |             |  | $            | 8.0 |  |  | $ | 6.1  |  |  | $ | 1.8 | 



RESULTS OF OPERATIONS






| |          
| | ---------
| | Revenues:

|                        |  |                         |         |  |      |   |         |      |  |   |         | 
|----------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                        |  | Year Ended December 31, |        
|                        |  |                         |        
|                        |  | 2005                    |         |  | 2004 |   |         | 2003 | 
|                        |  |                         |         |  |      |   |         |      | 
|                        |  | (In millions)           |        
|Semiconductor segment   |  | $                       | 1,244.3 |  |      | $ | 1,095.1 |      |  | $ | 1,124.1 | 
|Storage Systems segment |  |                         | 675.0   |  |      |   | 605.1   |      |  |   | 569.0   | 
|                        |  |                         |         |  |      |   |         |      | 
|Consolidated            |  | $                       | 1,919.3 |  |      | $ | 1,700.2 |      |  | $ | 1,693.1 | 
|                        |  |                         |         |  |      |   |         |      | 



2005
compared to 2004




Semiconductor
segment:






| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An increase in revenues for semiconductors used in consumer
    product applications as a result of increased demand for digital
    audio players, DVD-recorders and cable set-top box solutions,
    offset in part by decreases in demand for semiconductors used in
    video game products; and
|
| |  | An increase in revenues for semiconductors used in storage
    product applications primarily attributable to higher demand for
    custom silicon used in hard disk drives.                                                                                                                        



31



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##### Table of Contents





| |                         
| | ------------------------
| | Storage Systems segment:







| |                      
| | ---------------------
| | 2004 compared to 2003





| |                       
| | ----------------------
| | Semiconductor segment:





| |   |                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increases in demand for semiconductors used in storage product
    applications such as our Ultra320 SCSI and custom silicon used
    in hard disk drives and host adapter boards. The Ultra320
    product line was introduced in the latter part of 2003;
|
| |  | An increase in demand for semiconductors used in consumer
    product applications such as
    DVD-recorders. We
    introduced our DVD-recorder semiconductor product in the latter
    part of 2003 and early 2004; and                                  
|
| |  | An increase in demand for semiconductors used in communication
    product applications such as wireless solutions.                                                                                                                                        



| |                         
| | ------------------------
| | Storage Systems segment:



32



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Significant Customers.


|                         |                                     |                         |  |          |  |      |  |               |  |  |  |               | 
|------------------------ | ----------------------------------- | ----------------------- |  | -------- |  | ---- |  | ------------- |  |  |  | ------------- | 
|                         |                                     | Year Ended December 31,
|                         |                                     |                        
|                         |                                     | 2005                    |  | 2004     |  | 2003
|                         |                                     |                         |  |          |  |     
|Semiconductor segment:   |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 1        |  |      |  | 1             |  |  |  | 2             | 
|                         | Percentage of segment revenues      |                         |  | 17%      |  |      |  | 11%           |  |  |  | 20%, 10%      | 
|Storage Systems segment: |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 2        |  |      |  | 3             |  |  |  | 3             | 
|                         | Percentage of segment revenues      |                         |  | 44%, 12% |  |      |  | 41%, 15%, 11% |  |  |  | 39%, 17%, 10% | 
|Consolidated:            |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 2        |  |      |  | 1             |  |  |  | 2             | 
|                         | Percentage of consolidated revenues |                         |  | 16%, 11% |  |      |  | 16%           |  |  |  | 15%, 13%      | 

Revenues by geography.


|                      |       |                         |       |         |  |      |       |         |  |   |       |         | 
|--------------------- | ----- | ----------------------- | ----- | ------- |  | ---- | ----- | ------- |  | - | ----- | ------- | 
|                      |       | Year Ended December 31,
|                      |       |                        
|                      |       | 2005                    |       | 2004    |  | 2003
|                      |       |                         |       |         |  |     
|                      |       | (In millions)          
|Revenues:             |       |                         |       |         |  |      |       |         |  |   |       |        
|North America*        |       | $                       | 932.2 |         |  | $    | 852.5 |         |  | $ | 863.6 |        
|Asia, including Japan |       |                         | 756.0 |         |  |      | 655.1 |         |  |   | 677.3 |        
|Europe*               |       |                         | 231.1 |         |  |      | 192.6 |         |  |   | 152.2 |        
|                      |       |                         |       |         |  |      |       |         |  |   |       |        
|                      | Total |                         | $     | 1,919.3 |  |      | $     | 1,700.2 |  |   | $     | 1,693.1 | 
|                      |       |                         |       |         |  |      |       |         |  |   |       |        






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Revenues by geography are accumulated based on the revenues
    generated by our subsidiaries located within the three
    geographic areas noted in the above table. In the second half of
    2004, Engenio formed new subsidiaries within Europe. As a
    result, the amounts in the table reflect that change as of
    June 21, 2004 and prior to that all revenues generated by
    Engenio Europe were previously reported in North America.



| |                      
| | ---------------------
| | 2005 compared to 2004





| |                      
| | ---------------------
| | 2004 compared to 2003



33



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Operating costs and expenses.


Gross profit margin:


|                        |                                |                         |       |    |      |   |       |      |   |   |       |    |  
|----------------------- | ------------------------------ | ----------------------- | ----- | -- | ---- | - | ----- | ---- | - | - | ----- | -- | -
|                        |                                | Year Ended December 31, |      
|                        |                                |                         |      
|                        |                                | 2005                    |       |    | 2004 |   |       | 2003 |  
|                        |                                |                         |       |    |      |   |       |      |  
|                        |                                | (In millions)           |      
|Semiconductor segment   |                                | $                       | 590.2 |    |      | $ | 512.0 |      |   | $ | 464.8 |   
|                        | Percentage of segment revenues |                         |       | 47 | %    |   |       | 47   | % |   |       | 41 | %
|Storage Systems segment |                                | $                       | 242.2 |    |      | $ | 223.6 |      |   | $ | 212.4 |   
|                        | Percentage of segment revenues |                         |       | 36 | %    |   |       | 37   | % |   |       | 37 | %
|                        |                                |                         |       |    |      |   |       |      |  
|Consolidated            |                                | $                       | 832.4 |    |      | $ | 735.6 |      |   | $ | 677.2 |   
|                        |                                |                         |       |    |      |   |       |      |  
|                        | Percentage of revenues         |                         |       | 43 | %    |   |       | 43   | % |   |       | 40 | %



| |                      
| | ---------------------
| | 2005 compared to 2004











| |                      
| | ---------------------
| | 2004 compared to 2003







| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A favorable shift in the overall mix of products sold to
    products with higher margins, including the introduction of new
    products such as semiconductors used in consumer product
    applications such as

34



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| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | DVD-recorders and semiconductors used in storage product
    applications such as our Ultra320 product line and custom
    silicon used in hard disk drives, offset in part by lower
    average selling prices for semiconductors used in video game
    products for the year ended December 31, 2004, as compared
    to the same period of 2003;
|
| |  | Lower manufacturing variances for the Gresham manufacturing
    facility associated with yield improvements and better factory
    utilization;                                                                                                                                                                                                     
|
| |  | A reduction in cost of revenues as a result of the sale of our
    Japan manufacturing facility in the fourth quarter of 2003;                                                                                                                                                                                                                      
|
| |  | Lower period costs in 2004 as compared to 2003, as a result of
    the implementation of our 130 nanometer manufacturing process
    technology during 2003; and                                                                                                                                                                                    
|
| |  | A reduction in compensation-related costs and equipment-related
    depreciation and rent expense primarily as a result of the
    restructuring actions and lease refinancing initiatives during
    2004.                                                                                                                                         





| |                          
| | -------------------------
| | Research and development:

|                        |                                |                         |       |    |      |   |       |      |   |   |       |    |  
|----------------------- | ------------------------------ | ----------------------- | ----- | -- | ---- | - | ----- | ---- | - | - | ----- | -- | -
|                        |                                | Year Ended December 31, |      
|                        |                                |                         |      
|                        |                                | 2005                    |       |    | 2004 |   |       | 2003 |  
|                        |                                |                         |       |    |      |   |       |      |  
|                        |                                | (In millions)           |      
|Semiconductor segment   |                                | $                       | 305.3 |    |      | $ | 339.7 |      |   | $ | 365.8 |   
|                        | Percentage of segment revenues |                         |       | 25 | %    |   |       | 31   | % |   |       | 33 | %
|Storage Systems segment |                                | $                       | 92.0  |    |      | $ | 81.8  |      |   | $ | 66.9  |   
|                        | Percentage of segment revenues |                         |       | 14 | %    |   |       | 14   | % |   |       | 12 | %
|                        |                                |                         |       |    |      |   |       |      |  
|Consolidated            |                                | $                       | 397.3 |    |      | $ | 421.5 |      |   | $ | 432.7 |   
|                        |                                |                         |       |    |      |   |       |      |  
|                        | Percentage of revenues         |                         |       | 21 | %    |   |       | 25   | % |   |       | 26 | %



| |                      
| | ---------------------
| | 2005 compared to 2004





| |                       
| | ----------------------
| | Semiconductor segment:







| |                         
| | ------------------------
| | Storage Systems segment:



35



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| |                      
| | ---------------------
| | 2004 compared to 2003





| |                       
| | ----------------------
| | Semiconductor segment:





| |                         
| | ------------------------
| | Storage Systems segment:





| |                                     
| | ------------------------------------
| | Selling, general and administrative:

|                        |                                |                         |       |    |      |   |       |      |   |   |       |    |  
|----------------------- | ------------------------------ | ----------------------- | ----- | -- | ---- | - | ----- | ---- | - | - | ----- | -- | -
|                        |                                | Year Ended December 31, |      
|                        |                                |                         |      
|                        |                                | 2005                    |       |    | 2004 |   |       | 2003 |  
|                        |                                |                         |       |    |      |   |       |      |  
|                        |                                | (In millions)           |      
|Semiconductor segment   |                                | $                       | 148.3 |    |      | $ | 148.7 |      |   | $ | 154.2 |   
|                        | Percentage of segment revenues |                         |       | 12 | %    |   |       | 14   | % |   |       | 14 | %
|Storage Systems segment |                                | $                       | 87.6  |    |      | $ | 94.8  |      |   | $ | 80.0  |   
|                        | Percentage of segment revenues |                         |       | 13 | %    |   |       | 16   | % |   |       | 14 | %
|                        |                                |                         |       |    |      |   |       |      |  
|Consolidated            |                                | $                       | 235.9 |    |      | $ | 243.5 |      |   | $ | 234.2 |   
|                        |                                |                         |       |    |      |   |       |      |  
|                        | Percentage of revenues         |                         |       | 12 | %    |   |       | 14   | % |   |       | 14 | %



| |                      
| | ---------------------
| | 2005 compared to 2004





| |                       
| | ----------------------
| | Semiconductor segment:





| |                         
| | ------------------------
| | Storage Systems segment:

set-up


36



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| |                      
| | ---------------------
| | 2004 compared to 2003









| |                                                  
| | -------------------------------------------------
| | Restructuring of operations and other items, net:



| |     
| | ----
| | 2005











| |     
| | ----
| | 2004



37



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| |     
| | ----
| | 2003





| |                                                          
| | ---------------------------------------------------------
| | Amortization of non-cash deferred stock
    compensation:









38



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| |                             
| | ----------------------------
| | Amortization of intangibles:







| |                  
| | -----------------
| | Interest expense:









| |                                
| | -------------------------------
| | Interest income and other, net:







| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | A pre-tax gain of $8.0 million on sale of certain
    marketable available-for-sale equity securities (see Note 5
    of the Notes);

39



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| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A pre-tax gain of $1.4 million associated with marketable
    available-for-sale equity securities of a certain technology
    company that was acquired by another technology company (see
    Note 5 of the Notes);  
|
| |  | A pre-tax gain of $4.1 million on the repurchase of the
    2001 Convertible Notes (see Note 9 of the Notes);                                                                                                          
|
| |  | A pre-tax loss of $2.4 million on impairment of certain
    non-marketable available-for-sale equity securities. Management
    considered the impairment to be other than temporary (see
    Note 5 of the Notes); and
|
| |  | A $3.0 million expense for points on foreign currency
    forward contracts, which was offset in part by other
    miscellaneous items.                                                                                







| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A pre-tax gain of $3.0 million associated with our
    investment in marketable available-for-sale equity securities of
    a certain technology company that was acquired by another
    publicly traded technology company;                                                          
|
| |  | A pre-tax gain of $5.1 million on sales of certain
    marketable available-for-sale equity securities;                                                                                                                                                                                
|
| |  | A pre-tax gain of $1.8 million on repurchase of 2001
    Convertible Notes (see Note 9 of the Notes); and                                                                                                                                                                              
|
| |  | A pre-tax loss of $6.2 million on impairment of our
    investment in certain marketable and non-marketable
    available-for-sale equity securities and other miscellaneous
    items. Management considered the impairments to be other than
    temporary (See Note 5 of the Notes).







| |                            
| | ---------------------------
| | Provision for income taxes:



40



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| |                                               
| | ----------------------------------------------
| | Minority interest in net income of subsidiary:



FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY




Working capital.




| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Current portion of long-term debt increased by
    $273.8 million primarily due to the reclassification of the
    Convertible Subordinated Notes that are due in November 2006
    from long-term debt to current portion of long-term debt.
|
| |  | Accounts payable increased by $49.2 million due to the
    timing of payments.                                                                                                                                                               
|
| |  | Inventories decreased by $24.1 million to
    $194.8 million as of December 31, 2005, from
    $218.9 million as of December 31, 2004. The decline in
    inventory levels reflects our continued focus on supply chain
    management.      

41



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| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Accrued salaries, wages and benefits increased by
    $19.2 million primarily due to timing differences in
    payment of salaries, benefits and performance-based compensation.         
|
| |  | Income taxes payable increased by $6.4 million due to the
    timing of income tax payments made and the income tax provision
    recorded during 2005.                                  
|
| |  | Current deferred tax assets, net of current deferred tax
    liabilities decreased by $1.5 million due to net changes in
    underlying temporary differences (see Note 11 of the Notes).





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash, cash equivalents and short-term investments increased by
    $124.3 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Prepaid expenses and other current assets increased by
    $104.8 million. Assets held for sale increased by
    $94.8 million during 2005, primarily as a result of the
    reclassification of the Gresham, Oregon manufacturing facility
    and excess land from property and equipment to other current
    assets. We announced our intention to sell the Gresham, Oregon
    manufacturing facility on September 13, 2005 (see
    Note 3 of the Notes). In addition, prepaid insurance, debt
    issuance costs, prepaid software maintenance and other
    miscellaneous items also increased.
|
| |  | Accounts receivable increased by $51.2 million to
    $323.3 million as of December 31, 2005 from
    $272.1 million at December 31, 2004. The increase is
    mainly attributable to higher revenues in the fourth quarter of
    2005 as compared to the fourth quarter of 2004.                                                                                                                                                                                                                                                                                                                     
|
| |  | Other accrued liabilities decreased by $2.1 million due to
    decreases in sales and other tax liabilities and deferred
    revenues, offset in part by increases in other miscellaneous
    items.                                                                                                                                                                                                                                                                                                                                                                                                   

Cash and cash equivalents generated from operating
activities.




| |   |                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net loss adjusted for non-cash transactions. The non-cash items
    and other non-operating adjustments are quantified in our
    Consolidated Statements of Cash Flows included in this Annual
    Report on
    Form 10-K; and               
|
| |  | A net increase in assets and liabilities, net of assets acquired
    and liabilities assumed in business combinations, including
    changes in working capital components from December 31,
    2005 to December 31, 2004, as discussed above.

Cash and cash equivalents used in investing activities.




| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | Purchases of debt and equity securities available for sale, net
    of sales and maturities;                   
|
| |  | Purchases of property, equipment and software;                                                                 
|
| |  | Proceeds from the sale of property and equipment; and                                                          
|
| |  | The receipt of an income tax refund for pre-acquisition tax
    matters associated with an acquisition in 2001.



42



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Cash and cash equivalents used in financing activities.




| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | The repurchase of a portion of the Convertible Notes due in 2006;                       
|
| |  | The issuance of common stock under our employee stock option and
    purchase plans; and
|
| |  | The repayment of debt obligations.                                                      





CONTRACTUAL OBLIGATIONS




|                               |       |                        |       |       |       |   |      |       |  |   |         |       |  |       |      |      |  |   |       |         | 
|------------------------------ | ----- | ---------------------- | ----- | ----- | ----- | - | ---- | ----- |  | - | ------- | ----- |  | ----- | ---- | ---- |  | - | ----- | ------- | 
|                               |       | Payments Due by Period |      
|                               |       |                        |      
|                               |       | Less Than              |       |       | 1-3   |   |      | 4-5   |  |   | After   |       |  |      
|Contractual Obligations        |       | 1 Year                 |       |       | Years |   |      | Years |  |   | 5 Years |       |  | Total |     
|                               |       |                        |       |       |       |   |      |       |  |   |         |       |  |       |     
|                               |       | (In millions)          |      
|Convertible Subordinated Notes |       | $                      | 271.8 |       |       | $ |     |       |  | $ | 350.0   |       |  | $     |     |      |  | $ | 621.8 |        
|Operating lease obligations    |       |                        | 61.9  |       |       |   | 58.4 |       |  |   | 34.1    |       |  |       | 22.7 |      |  |   | 177.1 |        
|Purchase commitments           |       |                        | 261.9 |       |       |   | 7.9  |       |  |   |        |       |  |       |     |      |  |   | 269.8 |        
|                               |       |                        |       |       |       |   |      |       |  |   |         |       |  |       |     
|                               | Total |                        | $     | 595.6 |       |   | $    | 66.3  |  |   | $       | 384.1 |  |       | $    | 22.7 |  |   | $     | 1,068.7 | 
|                               |       |                        |       |       |       |   |      |       |  |   |         |       |  |       |     



| |                               
| | ------------------------------
| | Convertible Subordinated Notes





43



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| |                            
| | ---------------------------
| | Operating Lease Obligations





| |                     
| | --------------------
| | Purchase Commitments





| |                          
| | -------------------------
| | Standby letters of credit



CRITICAL ACCOUNTING ESTIMATES






Inventory Valuation Methodology. first-in,






Valuation of long-lived assets, intangible assets and
goodwill.


44



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Restructuring reserves.


Income taxes.


45



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Recent Accounting Pronouncements









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk

Interest rate sensitivity












Foreign currency exchange risk.


46



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Equity price risk.




47



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

LSI Logic Corporation


Consolidated Balance Sheets


|                                                                                                      |                                                   |                       |            |           |      |   |            |           | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------- | ---------- | --------- | ---- | - | ---------- | --------- | 
|                                                                                                      |                                                   | December 31,          |           
|                                                                                                      |                                                   |                       |           
|                                                                                                      |                                                   | 2005                  |            |           | 2004 |  
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      |                                                   | (In thousands, except |           
|                                                                                                      |                                                   | per-share amounts)    |           
|ASSETS                                                                                               
|Cash and cash equivalents                                                                             |                                                   | $                     | 264,649    |           |      | $ | 218,723    |          
|Short-term investments                                                                                |                                                   |                       | 674,260    |           |      |   | 595,862    |          
|Accounts receivable, less allowances of $15,328 and $10,144                                           |                                                   |                       | 323,310    |           |      |   | 272,065    |          
|Inventories                                                                                           |                                                   |                       | 194,814    |           |      |   | 218,900    |          
|Prepaid expenses and other current assets                                                             |                                                   |                       | 163,086    |           |      |   | 59,737     |          
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total current assets                              |                       |            | 1,620,119 |      |   |            | 1,365,287 | 
|Property and equipment, net                                                                           |                                                   |                       | 98,285     |           |      |   | 311,916    |          
|Other intangible assets, net                                                                          |                                                   |                       | 45,974     |           |      |   | 108,457    |          
|Goodwill                                                                                              |                                                   |                       | 928,542    |           |      |   | 973,130    |          
|Other assets                                                                                          |                                                   |                       | 103,146    |           |      |   | 115,211    |          
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total assets                                      |                       | $          | 2,796,066 |      |   | $          | 2,874,001 | 
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                     
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 
|Accounts payable                                                                                      |                                                   | $                     | 171,632    |           |      | $ | 122,422    |          
|Accrued salaries, wages and benefits                                                                  |                                                   |                       | 77,713     |           |      |   | 58,516     |          
|Other accrued liabilities                                                                             |                                                   |                       | 140,194    |           |      |   | 142,278    |          
|Income taxes payable                                                                                  |                                                   |                       | 79,290     |           |      |   | 72,935     |          
|Current portion of long-term debt                                                                     |                                                   |                       | 273,940    |           |      |   | 129        |          
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total current liabilities                         |                       |            | 742,769   |      |   |            | 396,280   | 
|                                                                                                      |                                                   |                       |            |           |      |  
|Long-term debt                                                                                        |                                                   |                       | 350,000    |           |      |   | 781,846    |          
|Tax- related liabilities and other                                                                    |                                                   |                       | 75,110     |           |      |   | 77,570     |          
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total long-term obligations and other liabilities |                       |            | 425,110   |      |   |            | 859,416   | 
|                                                                                                      |                                                   |                       |            |           |      |  
|Commitments and contingencies (Note 12)                                                               |                                                   |                       |            |           |      |   |            |          
|Minority interest in subsidiary                                                                       |                                                   |                       | 237        |           |      |   | 259        |          
|                                                                                                      |                                                   |                       |            |           |      |  
|Stockholders equity:                                                                                 |                                                   |                       |            |           |      |   |            |          
|Preferred shares; $.01 par value; 2,000 shares
    authorized; none outstanding                       |                                                   |                       |           |           |      |   |           |          
|Common stock; $.01 par value; 1,300,000 shares
    authorized; 394,015 and 387,490 shares outstanding |                                                   |                       | 3,940      |           |      |   | 3,875      |          
|Additional paid-in capital                                                                            |                                                   |                       | 3,010,166  |           |      |   | 2,969,478  |          
|Deferred stock compensation                                                                           |                                                   |                       | (14,064    | )         |      |   | (8,936     | )        
|Accumulated deficit                                                                                   |                                                   |                       | (1,389,944 | )         |      |   | (1,384,321 | )        
|Accumulated other comprehensive income                                                                |                                                   |                       | 17,852     |           |      |   | 37,950     |          
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total stockholders equity                        |                       |            | 1,627,950 |      |   |            | 1,618,046 | 
|                                                                                                      |                                                   |                       |            |           |      |  
|                                                                                                      | Total liabilities and stockholders equity        |                       | $          | 2,796,066 |      |   | $          | 2,874,001 | 
|                                                                                                      |                                                   |                       |            |           |      |  



48



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LSI Logic Corporation


Consolidated Statements of Operations


|                                                        |                                                         |                                          |           |         |      |   |           |          |   |   |           |          |  
|------------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------- | --------- | ------- | ---- | - | --------- | -------- | - | - | --------- | -------- | -
|                                                        |                                                         | Year Ended December 31,                  |          
|                                                        |                                                         |                                          |          
|                                                        |                                                         | 2005                                     |           |         | 2004 |   |           | 2003     |  
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|                                                        |                                                         | (In thousands, except per share amounts) |          
|Revenues                                                |                                                         | $                                        | 1,919,250 |         |      | $ | 1,700,164 |          |   | $ | 1,693,070 |         
|Cost of revenues                                        |                                                         |                                          | 1,086,814 |         |      |   | 964,556   |          |   |   | 1,015,865 |         
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|                                                        | Gross profit                                            |                                          |           | 832,436 |      |   |           | 735,608  |   |   |           | 677,205  |  
|Research and development                                |                                                         |                                          | 397,312   |         |      |   | 421,516   |          |   |   | 432,695   |         
|Selling, general and administrative                     |                                                         |                                          | 235,933   |         |      |   | 243,498   |          |   |   | 234,156   |         
|Restructuring of operations and other items, net        |                                                         |                                          | 119,052   |         |      |   | 423,444   |          |   |   | 180,597   |         
|Amortization of non-cash deferred stock compensation(*) |                                                         |                                          | 5,449     |         |      |   | 8,449     |          |   |   | 26,021    |         
|Amortization of intangibles                             |                                                         |                                          | 62,484    |         |      |   | 75,050    |          |   |   | 76,352    |         
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|                                                        | Income/(loss) from operations                           |                                          |           | 12,206  |      |   |           | (436,349 | ) |   |           | (272,616 | )
|Interest expense                                        |                                                         |                                          | (25,283   | )       |      |   | (25,320   | )        |   |   | (30,703   | )       
|Interest income and other, net                          |                                                         |                                          | 34,000    |         |      |   | 22,170    |          |   |   | 18,933    |         
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|                                                        | Income/(loss) before income taxes and minority interest |                                          |           | 20,923  |      |   |           | (439,499 | ) |   |           | (284,386 | )
|Provision for income taxes                              |                                                         |                                          | 26,540    |         |      |   | 24,000    |          |   |   | 24,000    |         
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|                                                        | Loss before minority interest                           |                                          |           | (5,617  | )    |   |           | (463,499 | ) |   |           | (308,386 | )
|Minority interest in net income of subsidiary           |                                                         |                                          | 6         |         |      |   | 32        |          |   |   | 161       |         
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|Net loss                                                |                                                         | $                                        | (5,623    | )       |      | $ | (463,531  | )        |   | $ | (308,547  | )       
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|Net loss per share:                                     |                                                         |                                          |           |         |      |   |           |          |   |   |           |         
|                                                        | Basic and diluted                                       |                                          | $         | (0.01   | )    |   | $         | (1.21    | ) |   | $         | (0.82    | )
|                                                        |                                                         |                                          |           |         |      |   |           |          |  
|Shares used in computing per share amounts:             |                                                         |                                          |           |         |      |   |           |          |   |   |           |         
|                                                        | Basic and diluted                                       |                                          |           | 390,135 |      |   |           | 384,070  |   |   |           | 377,781  |  
|                                                        |                                                         |                                          |           |         |      |   |           |          |  






|    |                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | Amortization of non-cash deferred stock compensation, if not
    shown separately, would have been included in cost of revenues,
    research and development, and selling, general and
    administrative expenses, as shown below:

|                                    |  |                         |       |  |      |   |       |      |  |   |        | 
|----------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------ | 
|                                    |  | Year Ended December 31, |      
|                                    |  |                         |      
|                                    |  | 2005                    |       |  | 2004 |   |       | 2003 | 
|                                    |  |                         |       |  |      |   |       |      | 
|                                    |  | (In thousands)          |      
|Cost of revenues                    |  | $                       | 744   |  |      | $ | 198   |      |  | $ | 446    | 
|Research and development            |  |                         | 2,373 |  |      |   | 6,289 |      |  |   | 20,412 | 
|Selling, general and administrative |  |                         | 2,332 |  |      |   | 1,962 |      |  |   | 5,163  | 
|                                    |  |                         |       |  |      |   |       |      | 
|Total                               |  | $                       | 5,449 |  |      | $ | 8,449 |      |  | $ | 26,021 | 
|                                    |  |                         |       |  |      |   |       |      | 



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LSI Logic Corporation


Consolidated Statements of Stockholders Equity


|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- |  | ---------- | - | ----- | -------------- |  | ----- | ------------ | ------------- |  | ------- | ------- | - | ------ | - | ---------- | ----- |  | - | ------- | - |  | - | --------- | -
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              | Accumulated   |  |         |        
|                                                                                                             |  |                |         |  |            |   |       |                |  | Other |              |               | 
|                                                                                                             |  | Common Stock   |         |  | Additional |   |       |                |  |       |              | Comprehensive |  |         |        
|                                                                                                             |  |                |         |  | Paid-In    |   |       | Deferred Stock |  |       | Accumulated  |               |  | Income/ |         |   |       
|                                                                                                             |  | Shares         |         |  | Amount     |   |       | Capital        |  |       | Compensation |               |  | Deficit |         |   | (Loss) |   |            | Total | 
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|                                                                                                             |  | (In thousands) |        
|Balances at December 31, 2002                                                                                |  |                | 375,096 |  |            | $ | 3,751 |                |  | $     | 2,954,282    |               |  | $       | (51,161 | ) |        | $ | (612,243   | )     |  | $ | 5,726   |   |  | $ | 2,300,355 |  
|Net loss                                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   | (308,547   | )     |  |   |         |   |  |   |           |  
|Change in foreign currency translation adjustments                                                           |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | 21,309  |   |  |   |           |  
|Change in unrealized gain on available-for-sale securities                                                   |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | 5,183   |   |  |   |           |  
|Change in unrealized gain on derivative instruments designated
    and qualifying as cash-flow hedges        |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | 1,995   |   |  |   |           |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Total comprehensive loss                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (280,060  | )
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Issuance to employees under stock option and purchase plans                                                  |  |                | 6,386   |  |            |   | 64    |                |  |       | 30,886       |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | 30,950    |  
|Issuance or return from escrow of common stock in conjunction
    with acquisitions (Note 2)                 |  |                | 9       |  |            |   |       |                |  |       | (6,816       | )             |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (6,816    | )
|Forfeiture of restricted shares (Note 10)                                                                    |  |                |         |  |            |   |       |                |  |       | (301         | )             |  |         | 301     |   |        |   |            |       |  |   |         |   |  |   |          |  
|Cash paid for call spread options (Note 9)                                                                   |  |                |         |  |            |   |       |                |  |       | (28,000      | )             |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (28,000   | )
|Amortization of deferred stock compensation                                                                  |  |                |         |  |            |   |       |                |  |       |              |               |  |         | 26,021  |   |        |   |            |       |  |   |         |   |  |   | 26,021    |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Balances at December 31, 2003                                                                                |  |                | 381,491 |  |            |   | 3,815 |                |  |       | 2,950,051    |               |  |         | (24,839 | ) |        |   | (920,790   | )     |  |   | 34,213  |   |  |   | 2,042,450 |  
|Net loss                                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   | (463,531   | )     |  |   |         |   |  |   |           |  
|Change in foreign currency translation adjustments                                                           |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | 1,948   |   |  |   |           |  
|Change in unrealized gain on available-for-sale securities                                                   |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | 3,784   |   |  |   |           |  
|Change in unrealized gain/(loss) on derivative instruments
    designated and qualifying as cash-flow hedges |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | (1,995  | ) |  |   |           |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Total comprehensive loss                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (459,794  | )
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Issuance to employees under stock option and purchase plans                                                  |  |                | 5,852   |  |            |   | 59    |                |  |       | 27,928       |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | 27,987    |  
|Issuance or return from escrow of common stock in conjunction
    with acquisitions (Note 2)                 |  |                | 147     |  |            |   | 1     |                |  |       | (414         | )             |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (413      | )
|Grants of restricted shares (Note 10)                                                                        |  |                |         |  |            |   |       |                |  |       | 6,401        |               |  |         | (6,401  | ) |        |   |            |       |  |   |         |   |  |   |          |  
|Forfeiture of restricted shares and stock options assumed in an
    acquisition (Note 10)                    |  |                |         |  |            |   |       |                |  |       | (14,488      | )             |  |         | 14,488  |   |        |   |            |       |  |   |         |   |  |   |          |  
|Amortization of deferred stock compensation                                                                  |  |                |         |  |            |   |       |                |  |       |              |               |  |         | 7,816   |   |        |   |            |       |  |   |         |   |  |   | 7,816     |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Balances at December 31, 2004                                                                                |  |                | 387,490 |  |            |   | 3,875 |                |  |       | 2,969,478    |               |  |         | (8,936  | ) |        |   | (1,384,321 | )     |  |   | 37,950  |   |  |   | 1,618,046 |  
|Net loss                                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   | (5,623     | )     |  |   |         |   |  |   |           |  
|Change in foreign currency translation adjustments                                                           |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | (12,976 | ) |  |   |           |  
|Change in unrealized gain/(loss) on available-for-sale securities                                            |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   | (7,122  | ) |  |   |           |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Total comprehensive loss                                                                                     |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (25,721   | )
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Issuance to employees under stock option and purchase plans                                                  |  |                | 6,369   |  |            |   | 64    |                |  |       | 30,797       |               |  |         |         |   |        |   |            |       |  |   |         |   |  |   | 30,861    |  
|Issuance or return from escrow of common stock in conjunction
    with acquisitions (Note 2)                 |  |                | 156     |  |            |   | 1     |                |  |       | (686         | )             |  |         |         |   |        |   |            |       |  |   |         |   |  |   | (685      | )
|Grants of restricted shares (Note 10)                                                                        |  |                |         |  |            |   |       |                |  |       | 13,427       |               |  |         | (13,427 | ) |        |   |            |       |  |   |         |   |  |   |          |  
|Forfeiture of restricted shares and stock options assumed in an
    acquisition (Note 10)                    |  |                |         |  |            |   |       |                |  |       | (6,739       | )             |  |         | 6,739   |   |        |   |            |       |  |   |         |   |  |   |          |  
|Engenio stock option exchange (Note 10)                                                                      |  |                |         |  |            |   |       |                |  |       | 3,889        |               |  |         | (3,889  | ) |        |   |            |       |  |   |         |   |  |   |          |  
|Amortization of deferred stock compensation                                                                  |  |                |         |  |            |   |       |                |  |       |              |               |  |         | 5,449   |   |        |   |            |       |  |   |         |   |  |   | 5,449     |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 
|Balances at December 31, 2005                                                                                |  |                | 394,015 |  |            | $ | 3,940 |                |  | $     | 3,010,166    |               |  | $       | (14,064 | ) |        | $ | (1,389,944 | )     |  | $ | 17,852  |   |  | $ | 1,627,950 |  
|                                                                                                             |  |                |         |  |            |   |       |                |  |       |              |               |  |         |         |   |        |   |            |       | 



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LSI Logic Corporation


Consolidated Statements of Cash Flows


|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |         |         |          |            |         |          |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------- | -------- | ------- | -------- | ------- | -------- | ------- | ------- | -------- | ---------- | ------- | -------- | -
|                                                             |                                                                                                                 | Year Ended December 31,                                                           |                                          
|                                                             |                                                                                                                 |                                                                                   |                                          
|                                                             |                                                                                                                 | 2005                                                                              |                                           |          | 2004    |          |         | 2003     |        
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|                                                             |                                                                                                                 | (In thousands)                                                                    |                                          
|Operating activities:                                        |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |         |         |          |           
|                                                             | Net loss                                                                                                        |                                                                                   | $                                         | (5,623   | )       |          | $       | (463,531 | )       |         | $        | (308,547   | )      
|                                                             | Adjustments:                                                                                                    |                                                                                   |                                           |          |         |          |         |          |         |         |          |            |        
|                                                             |                                                                                                                 | Depreciation and amortization                                                     |                                           |          | 146,169 |          |         |          | 176,606 |         |          |            | 262,728 |         
|                                                             |                                                                                                                 | Amortization of non-cash deferred stock compensation                              |                                           |          | 5,449   |          |         |          | 8,449   |         |          |            | 26,021  |         
|                                                             |                                                                                                                 | Non-cash restructuring and other items                                            |                                           |          | 88,224  |          |         |          | 401,058 |         |          |            | 148,252 |         
|                                                             |                                                                                                                 | Non-cash foreign exchange (gain)/loss                                             |                                           |          | (11,491 | )        |         |          | 3,322   |         |          |            | 8,917   |         
|                                                             |                                                                                                                 | (Gain) on sale of equity securities/loss on write-down                            |                                           |          | (6,475  | )        |         |          | (1,913  | )       |          |            | 8,518   |         
|                                                             |                                                                                                                 | (Gain)/loss on redemption/repurchase of Convertible Subordinated
    Notes        |                                           |          | (4,123  | )        |         |          | (1,767  | )       |          |            | 3,885   |         
|                                                             |                                                                                                                 | Loss/(gain) on sale of property and equipment, including assets
    held-for-sale |                                           |          | 27      |          |         |          | (6,348  | )       |          |            | (6,896  | )       
|                                                             |                                                                                                                 | Changes in deferred tax assets and liabilities                                    |                                           |          | 14,220  |          |         |          | 4,895   |         |          |            | (646    | )       
|                                                             | Changes in assets and liabilities, net of assets acquired and
    liabilities assumed in business combinations: |                                                                                   |                                           |          |         |          |         |          |         |         |          |            |        
|                                                             |                                                                                                                 | Accounts receivable, net                                                          |                                           |          | (51,305 | )        |         |          | (40,076 | )       |          |            | 18,220  |         
|                                                             |                                                                                                                 | Inventories                                                                       |                                           |          | 24,086  |          |         |          | (20,660 | )       |          |            | (4,232  | )       
|                                                             |                                                                                                                 | Prepaid expenses and other assets                                                 |                                           |          | (22,582 | )        |         |          | 20,055  |         |          |            | 54,408  |         
|                                                             |                                                                                                                 | Accounts payable                                                                  |                                           |          | 46,998  |          |         |          | 21,056  |         |          |            | 1,684   |         
|                                                             |                                                                                                                 | Accrued and other liabilities                                                     |                                           |          | 25,129  |          |         |          | (10,329 | )       |          |            | (22,559 | )       
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|                                                             |                                                                                                                 |                                                                                   | Net cash provided by operating activities |          |         | 248,703  |         |          |         | 90,817  |          |            |         | 189,753  |  
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|Investing activities:                                        |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |         |         |          |           
|                                                             | Purchase of debt securities available-for-sale                                                                  |                                                                                   |                                           | (550,912 | )       |          |         | (747,096 | )       |         |          | (2,219,484 | )      
|                                                             | Proceeds from maturities and sales of debt securities
    available-for-sale                                    |                                                                                   |                                           | 462,530  |         |          |         | 679,483  |         |         |          | 2,203,313  |        
|                                                             | Purchases of equity securities                                                                                  |                                                                                   |                                           | (150     | )       |          |         | (2,250   | )       |         |          | (200       | )      
|                                                             | Proceeds from sales of equity securities                                                                        |                                                                                   |                                           | 11,105   |         |          |         | 10,518   |         |         |          | 1,060      |        
|                                                             | Purchases of property, equipment and software                                                                   |                                                                                   |                                           | (48,055  | )       |          |         | (52,776  | )       |         |          | (78,189    | )      
|                                                             | Proceeds from sale of property and equipment                                                                    |                                                                                   |                                           | 4,894    |         |          |         | 10,936   |         |         |          | 24,737     |        
|                                                             | Adjustment to goodwill acquired in a prior year for resolution
    of a pre-acquisition income tax contingency  |                                                                                   |                                           | 36,307   |         |          |         |         |         |         |          |           |        
|                                                             | Buyout of equipment operating lease                                                                             |                                                                                   |                                           |         |         |          |         | (332,396 | )       |         |          |           |        
|                                                             | Increase in non-current assets and deposits                                                                     |                                                                                   |                                           |         |         |          |         | (313,013 | )       |         |          | (390,135   | )      
|                                                             | Decrease in non-current assets and deposits                                                                     |                                                                                   |                                           |         |         |          |         | 688,994  |         |         |          | 272,868    |        
|                                                             | Acquisitions of companies, net of cash acquired                                                                 |                                                                                   |                                           |         |         |          |         | (32,025  | )       |         |          |           |        
|                                                             | Proceeds from the sale-lease back of equipment                                                                  |                                                                                   |                                           |         |         |          |         |         |         |         |          | 160,000    |        
|                                                             | Proceeds from the sale of the Japan manufacturing facility                                                      |                                                                                   |                                           |         |         |          |         |         |         |         |          | 25,846     |        
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|                                                             |                                                                                                                 |                                                                                   | Net cash used in investing activities     |          |         | (84,281  | )       |          |         | (89,625 | )        |            |         | (184     | )
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|Financing activities:                                        |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |         |         |          |           
|                                                             | Redemption/repurchase of Convertible Subordinated Notes                                                         |                                                                                   |                                           | (148,126 | )       |          |         | (68,117  | )       |         |          | (715,983   | )      
|                                                             | Issuance of common stock                                                                                        |                                                                                   |                                           | 30,862   |         |          |         | 27,988   |         |         |          | 30,306     |        
|                                                             | Repayment of debt obligations                                                                                   |                                                                                   |                                           | (129     | )       |          |         | (438     | )       |         |          | (327       | )      
|                                                             | Purchase of minority interest in subsidiary                                                                     |                                                                                   |                                           |         |         |          |         | (8,020   | )       |         |          |           |        
|                                                             | Proceeds from borrowings                                                                                        |                                                                                   |                                           |         |         |          |         |         |         |         |          | 350,000    |        
|                                                             | Debt issuance costs                                                                                             |                                                                                   |                                           |         |         |          |         |         |         |         |          | (10,984    | )      
|                                                             | Cash paid for call spread options                                                                               |                                                                                   |                                           |         |         |          |         |         |         |         |          | (28,000    | )      
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|                                                             |                                                                                                                 |                                                                                   | Net cash used in financing activities     |          |         | (117,393 | )       |          |         | (48,587 | )        |            |         | (374,988 | )
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                                                 |                                                                                   | (1,103                                    | )        |         |          | (3,564  | )        |         |         | 6,254    |           
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|Increase/(decrease) in cash and cash equivalents             |                                                                                                                 |                                                                                   | 45,926                                    |          |         |          | (50,959 | )        |         |         | (179,165 | )         
|Cash and cash equivalents at beginning of year               |                                                                                                                 |                                                                                   | 218,723                                   |          |         |          | 269,682 |          |         |         | 448,847  |           
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        
|Cash and cash equivalents at end of year                     |                                                                                                                 | $                                                                                 | 264,649                                   |          |         | $        | 218,723 |          |         | $       | 269,682  |           
|                                                             |                                                                                                                 |                                                                                   |                                           |          |         |          |         |          |        



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LSI Logic Corporation


Notes to Consolidated Financial Statements


Note 1  Significant Accounting
policies


Nature of the business.








Basis of presentation.






Use of estimates.


Acquisitions.


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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




Revenue recognition.




Earnings per share.


|             |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |   |          |   |  |  |         |  |  |   |       |  
|------------ | ----------------------------------------- | --------------------------------------- | - | --------- | ------- |  |  | ------- | --------- |  | ------- | ----- | - | --------- | - | -------- | ------ |  |  | ------- |  |  | ------- | ----- | - | ------ | - | -------- | - |  |  | ------- |  |  | - | ----- | -
|             |                                           | Year Ended December 31,                 |  
|             |                                           |                                         |  
|             |                                           | 2005                                    |   |           | 2004    |  |  | 2003    |          
|             |                                           |                                         |   |           |         |  |  |         |          
|             |                                           |                                         |   | Per-Share |         |  |  |         | Per-Share |  |         |       |   | Per-Share |  
|             |                                           | (Loss)*                                 |   |           | Shares+ |  |  | Amount  |           |  | (Loss)* |       |   | Shares+   |   |          | Amount |  |  | (Loss)* |  |  | Shares+ |       |   | Amount |  
|             |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |  
|             |                                           | (In thousands except per share amounts) |  
|Basic EPS:   |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |   |          |   |  |  |         |  |  |   |      
|             | Net loss available to common stockholders |                                         | $ | (5,623    | )       |  |  | 390,135 |           |  | $       | (0.01 | ) |           | $ | (463,531 | )      |  |  | 384,070 |  |  | $       | (1.21 | ) |        | $ | (308,547 | ) |  |  | 377,781 |  |  | $ | (0.82 | )
|             |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |  
|             | Effect of dilutive securities             |                                         |   |          |         |  |  |        |           |  |         |      |   |           |   |         |        |  |  |        |  |  |         |      |   |        |   |         |   |  |  |        |  |  |   |      |  
|Diluted EPS: |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |   |          |   |  |  |         |  |  |   |      
|             | Net loss available to common stockholders |                                         | $ | (5,623    | )       |  |  | 390,135 |           |  | $       | (0.01 | ) |           | $ | (463,531 | )      |  |  | 384,070 |  |  | $       | (1.21 | ) |        | $ | (308,547 | ) |  |  | 377,781 |  |  | $ | (0.82 | )
|             |                                           |                                         |   |           |         |  |  |         |           |  |         |       |   |           |   |          |        |  |  |         |  |  |         |       |   |        |  










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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)






Advertising.


Cash equivalents.


Accounts receivable and allowance for doubtful accounts.


Investments.




Inventories. first-in, work-in


54



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Property and equipment.


|                           |  |            
|-------------------------- |  | -----------
|Buildings and improvements |  | 20-40 years
|Equipment                  |  | 3-5 years  
|Furniture and fixtures     |  | 5 years    



Software. two-to


Impairment of long-lived assets.


Goodwill.


Fair value disclosures of financial instruments.


55



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




Derivative instruments.








56



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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Concentration of credit risk of financial instruments.


Self-insurance.


Product warranties.


Litigation and Settlement Costs.


Stock-based compensation.




57



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                                                |                                 |                                          |         |       |      |   |          |       |   |   |          |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ---------------------------------------- | ------- | ----- | ---- | - | -------- | ----- | - | - | -------- | ----- | -
|                                                                                                                                                                |                                 | Year Ended December 31,                  |        
|                                                                                                                                                                |                                 |                                          |        
|                                                                                                                                                                |                                 | 2005                                     |         |       | 2004 |   |          | 2003  |  
|                                                                                                                                                                |                                 |                                          |         |       |      |   |          |       |  
|                                                                                                                                                                |                                 | (In thousands, except per share amounts) |        
|Net loss, as reported                                                                                                                                           |                                 | $                                        | (5,623  | )     |      | $ | (463,531 | )     |   | $ | (308,547 | )    
|Add: Amortization of non-cash deferred stock compensation
    expense determined under the intrinsic value method as reported,
    net of related tax effects * |                                 |                                          | 638     |       |      |   | 3,494    |       |   |   | 9,243    |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards, net of
    related tax effects                   |                                 |                                          | (70,028 | )     |      |   | (120,265 | )     |   |   | (200,470 | )    
|                                                                                                                                                                |                                 |                                          |         |       |      |   |          |       |  
|Pro forma net loss                                                                                                                                              |                                 | $                                        | (75,013 | )     |      | $ | (580,302 | )     |   | $ | (499,774 | )    
|                                                                                                                                                                |                                 |                                          |         |       |      |   |          |       |  
|Loss per share:                                                                                                                                                 |                                 |                                          |         |       |      |   |          |       |   |   |          |      
|                                                                                                                                                                | Basic and diluted  as reported |                                          | $       | (0.01 | )    |   | $        | (1.21 | ) |   | $        | (0.82 | )
|                                                                                                                                                                | Basic and diluted  pro forma   |                                          | $       | (0.19 | )    |   | $        | (1.51 | ) |   | $        | (1.32 | )






|  |                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------
|* | This amount excludes amortization of non-cash deferred stock
    compensation on restricted stock awards.





Employee Stock Options Granted


|                                                 |  |      |       |      |  |      |       |   |  |   |       |  
|------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                 |  | 2005 |       | 2004 |  | 2003
|                                                 |  |      |       |      |  |     
|Weighted average estimated grant date fair value |  | $    | 3.98  |      |  | $    | 4.39  |   |  | $ | 4.95  |  
|Assumptions in calculation:                      |  |      |       |      |  |      |       |   |  |   |       |  
|Expected life (years)                            |  |      | 3.88  |      |  |      | 3.90  |   |  |   | 3.85  |  
|Risk-free interest rate                          |  |      | 3.30  | %    |  |      | 3.03  | % |  |   | 2.73  | %
|Volatility                                       |  |      | 67.75 | %    |  |      | 79.72 | % |  |   | 81.56 | %
|Dividend yield                                   |  |      |      |      |  |      |      |   |  |   |      |  

58



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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Employee Stock Purchase Plan Right to Purchase Stock


|                                                 |  |      |       |      |  |      |       |   |  |   |       |  
|------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                 |  | 2005 |       | 2004 |  | 2003
|                                                 |  |      |       |      |  |     
|Weighted average estimated grant date fair value |  | $    | 2.78  |      |  | $    | 2.65  |   |  | $ | 3.09  |  
|Assumptions in calculation:                      |  |      |       |      |  |      |       |   |  |   |       |  
|Expected life (years)                            |  |      | 0.75  |      |  |      | 0.91  |   |  |   | 0.87  |  
|Risk-free interest rate                          |  |      | 3.71  | %    |  |      | 2.05  | % |  |   | 1.18  | %
|Volatility                                       |  |      | 75.69 | %    |  |      | 69.17 | % |  |   | 88.59 | %
|Dividend yield                                   |  |      |      |      |  |      |      |   |  |   |      |  

Income Taxes.




Related party transactions.


Recent accounting pronouncements.




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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)






115-1/124-1). 115-1/124-1 115-1/124-1


Note 2  Business Combinations






| |     
| | ----
| | 2005





| |     
| | ----
| | 2004

Acquisition of Accerant Inc.




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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                           |  |   |        | 
|---------------------------------------------------------- |  | - | ------ | 
|Fair value of tangible net assets acquired                 |  | $ | 31     | 
|Current technology                                         |  |   | 5,700  | 
|Non-compete agreements                                     |  |   | 400    | 
|Goodwill                                                   |  |   | 7,972  | 
|                                                           |  |   |       
|Total purchase price excluding deferred stock compensation |  |   | 14,103 | 
|Deferred stock compensation                                |  |   | 1,765  | 
|                                                           |  |   |       
|Total purchase price                                       |  | $ | 15,868 | 
|                                                           |  |   |       

Useful life of intangible assets.


Acquisition of Velio Communications.




|                                                           |  |   |        | 
|---------------------------------------------------------- |  | - | ------ | 
|Fair value of tangible net assets acquired                 |  | $ | 1,529  | 
|Current technology                                         |  |   | 8,788  | 
|Customer base                                              |  |   | 8,788  | 
|Non-compete agreements                                     |  |   | 450    | 
|Existing purchase orders                                   |  |   | 200    | 
|                                                           |  |   |       
|Total purchase price excluding deferred stock compensation |  |   | 19,755 | 
|Deferred stock compensation                                |  |   | 1,000  | 
|                                                           |  |   |       
|Total purchase price                                       |  | $ | 20,755 | 
|                                                           |  |   |       

Useful life of intangible assets.




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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




| |     
| | ----
| | 2003



Note 3  Restructuring and other items




| |     
| | ----
| | 2005





| |                                                   
| | --------------------------------------------------
| | Restructuring and impairment of long-lived assets:



| |                       
| | ----------------------
| | First quarter of 2005:





| |                        
| | -----------------------
| | Second quarter of 2005:





| |                       
| | ----------------------
| | Third quarter of 2005:





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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)








| |                        
| | -----------------------
| | Fourth quarter of 2005:









|                                                         |  |                |        |  |               |   |         |            |  |          |        |   |            |              |          |   |  |   |        | 
|-------------------------------------------------------- |  | -------------- | ------ |  | ------------- | - | ------- | ---------- |  | -------- | ------ | - | ---------- | ------------ | -------- | - |  | - | ------ | 
|                                                         |  | Balance at     |        |  | Restructuring |   |         |            |  | Utilized |        |   | Balance at |             
|                                                         |  | December 31,   |        |  | Expense       |   |         | Release of |  |          | During |   |            | December 31, |         
|                                                         |  | 2004           |        |  | 2005          |   |         | Reserve    |  |          | 2005   |   |            | 2005         |         
|                                                         |  |                |        |  |               |   |         |            |  |          |        |   |            |              |         
|                                                         |  | (In thousands) |       
|Write-down of excess assets and decommissioning costs(a) |  | $              | 1,207  |  |               | $ | 92,421  |            |  | $        | (518   | ) |            | $            | (88,117  | ) |  | $ | 4,993  | 
|Lease terminations and maintenance contracts(b)          |  |                | 20,065 |  |               |   | 12,241  |            |  |          |       |   |            |              | (10,019  | ) |  |   | 22,287 | 
|Facility closure and other exit costs(c)                 |  |                | 543    |  |               |   | 1,427   |            |  |          |       |   |            |              | (1,970   | ) |  |   |       | 
|Payments to employees for severance(d)                   |  |                | 7,408  |  |               |   | 7,527   |            |  |          | (284   | ) |            |              | (9,256   | ) |  |   | 5,395  | 
|                                                         |  |                |        |  |               |   |         |            |  |          |        |   |            |              |         
|Total                                                    |  | $              | 29,223 |  |               | $ | 113,616 |            |  | $        | (802   | ) |            | $            | (109,362 | ) |  | $ | 32,675 | 
|                                                         |  |                |        |  |               |   |         |            |  |          |        |   |            |              |         

63



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)







|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amounts utilized in 2005 reflect non-cash write-downs of
    long-lived assets in the U.S. due to impairment, primarily
    related to the impairment charge for the Gresham facility of
    $85.2 million, other assets write-downs of
    $2.8 million, cash payments to decommission and sell assets
    of $0.5 million and a credit of $0.4 million of net of
    other miscellaneous items. The write-downs of long-lived assets
    were accounted for as a reduction of the assets and did not
    result in a liability. The $5.0 million balance as of
    December 31, 2005, relates to estimates for selling costs
    for assets held for sale and is expected to be utilized during
    2006.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Amounts utilized represent cash payments. The balance remaining
    for real estate lease terminations will be paid during the
    remaining terms of these contracts, which extend through 2011.                                                                                                                                                                                                                                            
|   
|(c) |  | Amounts utilized represent cash payments.                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(d) |  | Amounts utilized represent cash severance payments to 126
    employees during the year ended December 31, 2005 for the
    action announced in the third quarter of 2004. Amounts utilized
    also include cash severance payments for 124 employees for the
    action announced in the third quarter of 2005 for the year ended
    December 31, 2005. The balance remaining for severance is
    expected to be paid by the end of 2006.



| |             
| | ------------
| | Other Items:



| |                        
| | -----------------------
| | Second quarter of 2005:







| |     
| | ----
| | 2004





| |                                                   
| | --------------------------------------------------
| | Restructuring and impairment of long-lived assets:



| |                       
| | ----------------------
| | First quarter of 2004:





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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




| |                        
| | -----------------------
| | Second quarter of 2004:







| |                       
| | ----------------------
| | Third quarter of 2004:













| |                        
| | -----------------------
| | Fourth quarter of 2004:



65



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


















66



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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                         |       |                |        |        |               |   |         |              |  |          |        |        |            |              |          |          |   |   |        |        | 
|-------------------------------------------------------- | ----- | -------------- | ------ | ------ | ------------- | - | ------- | ------------ |  | -------- | ------ | ------ | ---------- | ------------ | -------- | -------- | - | - | ------ | ------ | 
|                                                         |       | Balance at     |        |        | Restructuring |   |         |              |  | Utilized |        |        | Balance at |             
|                                                         |       | December 31,   |        |        | Expense       |   |         | Release of   |  |          | During |        |            | December 31, |         
|                                                         |       | 2003           |        |        | 2004          |   |         | Reserve 2004 |  |          | 2004   |        |            | 2004         |         
|                                                         |       |                |        |        |               |   |         |              |  |          |        |        |            |              |         
|                                                         |       | (In thousands) |       
|Write-down of excess assets and decommissioning costs(a) |       | $              | 2,661  |        |               | $ | 404,723 |              |  | $        | (760   | )      |            | $            | (405,417 | )        |   | $ | 1,207  |       
|Lease terminations and maintenance contracts(b)          |       |                | 21,021 |        |               |   | 11,388  |              |  |          | (665   | )      |            |              | (11,679  | )        |   |   | 20,065 |       
|Facility closure and other exit costs(c)                 |       |                | 2,136  |        |               |   | 64      |              |  |          |       |        |            |              | (1,657   | )        |   |   | 543    |       
|Payments to employees for severance(d)                   |       |                | 874    |        |               |   | 18,812  |              |  |          | (18    | )      |            |              | (12,260  | )        |   |   | 7,408  |       
|                                                         |       |                |        |        |               |   |         |              |  |          |        |        |            |              |         
|                                                         | Total |                | $      | 26,692 |               |   | $       | 434,987      |  |          | $      | (1,443 | )          |              | $        | (431,013 | ) |   | $      | 29,223 | 
|                                                         |       |                |        |        |               |   |         |              |  |          |        |        |            |              |         






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amounts utilized in 2004 reflect $411.6 million of
    non-cash write-downs of long-lived assets in the U.S. due
    to impairment and $0.8 million in cash payments to
    decommission and sell assets, offset by a $7.0 million
    realized gain on the sale of fixed assets previously held for
    sale. The write-downs of long-lived assets were accounted for as
    a reduction of the assets and did not result in a liability. The
    $1.2 million balance as of December 31, 2004, relates
    to machinery and equipment decommissioning costs in the U.S. and
    estimates of selling costs for assets held for sale.



|    |  |                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Amounts utilized represent cash payments. The balance remaining
    for primarily real estate lease terminations and maintenance
    contracts will be paid during the remaining terms of these
    contracts, which extend through 2011.
|   
|(c) |  | Amounts utilized represent cash payments.                                                                                                                                                                                                
|   
|(d) |  | Amounts utilized represent cash severance payments to 495
    employees during the year ended December 31, 2004. The
    balance remaining for severance benefits was paid during 2005.                                                  



| |            
| | -----------
| | Other Items









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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




| |     
| | ----
| | 2003





| |                                                   
| | --------------------------------------------------
| | Restructuring and impairment of long-lived assets:





| |                       
| | ----------------------
| | First quarter of 2003:





| |                        
| | -----------------------
| | Second quarter of 2003:







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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




| |                       
| | ----------------------
| | Third quarter of 2003:



| |                                              
| | ---------------------------------------------
| | Agreement to sell Japan fabrication facility:





| |                                                
| | -----------------------------------------------
| | Other third quarter 2003 restructuring actions:







| |                        
| | -----------------------
| | Fourth quarter of 2003:





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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                         |       |                |       |        |               |   |         |                   |  |   |          |        |   |              |          |          |   |   |        |        | 
|-------------------------------------------------------- | ----- | -------------- | ----- | ------ | ------------- | - | ------- | ----------------- |  | - | -------- | ------ | - | ------------ | -------- | -------- | - | - | ------ | ------ | 
|                                                         |       | Balance at     |       |        | Restructuring |   |         | Release of        |  |   | Utilized |        |   | Balance at   |         
|                                                         |       | December 31,   |       |        | Expense       |   |         | Reserve and       |  |   | During   |        |   | December 31, |         
|                                                         |       | 2002           |       |        | 2003          |   |         | Reclassifications |  |   | 2003     |        |   | 2003         |         
|                                                         |       |                |       |        |               |   |         |                   |  |   |          |        |   |              |         
|                                                         |       | (In thousands) |      
|Write-down of excess assets and decommissioning costs(a) |       | $              | 6,008 |        |               | $ | 147,454 |                   |  | $ | (6,422   | )      |   | $            | (144,379 | )        |   | $ | 2,661  |       
|Lease terminations and maintenance contracts(b)          |       |                | 6,757 |        |               |   | 23,444  |                   |  |   | (1,146   | )      |   |              | (8,034   | )        |   |   | 21,021 |       
|Facility closure and other exit costs(c)                 |       |                | 8,129 |        |               |   | 1,072   |                   |  |   | 1,203    |        |   |              | (8,268   | )        |   |   | 2,136  |       
|Payments to employees for severance(d)                   |       |                | 1,391 |        |               |   | 18,095  |                   |  |   | (928     | )      |   |              | (17,684  | )        |   |   | 874    |       
|                                                         |       |                |       |        |               |   |         |                   |  |   |          |        |   |              |         
|                                                         | Total |                | $     | 22,285 |               |   | $       | 190,065           |  |   | $        | (7,293 | ) |              | $        | (178,365 | ) |   | $      | 26,692 | 
|                                                         |       |                |       |        |               |   |         |                   |  |   |          |        |   |              |         






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The amounts utilized in 2003 reflect $142 million of
    non-cash write-downs of amortizable intangible and other
    long-lived assets in the U.S. and Japan due to impairment, and
    $2 million in cash payments to decommission and sell
    assets. The write-downs of the intangible and other long-lived
    assets were accounted for as a reduction of the assets and did
    not result in a liability. The $3 million balance as of
    December 31, 2003 relates to machinery and equipment
    decommissioning costs in U.S. and estimates of selling costs for
    assets held for sale.



|    |  |                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Amounts utilized represent cash payments. The balance remaining
    for primarily real estate lease terminations and maintenance
    contracts will be paid during the remaining terms of these
    contracts, which extend through 2011.
|   
|(c) |  | Amounts utilized represent cash payments.                                                                                                                                                                                                
|   
|(d) |  | Amounts utilized represent cash severance payments to 777
    employees during 2003. The $0.9 million balance as of
    December 31, 2003 was paid during 2004.                                                                          



| |             
| | ------------
| | Other items:



Note 4  Segment and Geographic Information




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##### Table of Contents



LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Information about profit or loss and assets.


|                               |                 |                         |   |           |           |  |   |           |           |   |   |           |           |  
|------------------------------ | --------------- | ----------------------- | - | --------- | --------- |  | - | --------- | --------- | - | - | --------- | --------- | -
|                               |                 | Year Ended December 31, |  
|                               |                 |                         |  
|                               |                 | 2005                    |   |           | 2004      |  |   | 2003      |          
|                               |                 |                         |   |           |           |  |   |           |          
|                               |                 | (In thousands)          |  
|Revenues:                      |                 |                         |   |           |           |  |   |           |           |   |   |          
|                               | Semiconductor   |                         | $ | 1,244,248 |           |  | $ | 1,095,091 |           |   | $ | 1,124,037 |          
|                               | Storage Systems |                         |   | 675,002   |           |  |   | 605,073   |           |   |   | 569,033   |          
|                               |                 |                         |   |           |           |  |   |           |          
|                               |                 | Total                   |   | $         | 1,919,250 |  |   | $         | 1,700,164 |   |   | $         | 1,693,070 |  
|                               |                 |                         |   |           |           |  |   |           |          
|Income/(loss) from operations: |                 |                         |   |           |           |  |   |           |           |   |   |          
|                               | Semiconductor   |                         | $ | (25,728   | )         |  | $ | (447,988  | )         |   | $ | (285,956  | )        
|                               | Storage Systems |                         |   | 37,934    |           |  |   | 11,639    |           |   |   | 13,340    |          
|                               |                 |                         |   |           |           |  |   |           |          
|                               |                 | Total                   |   | $         | 12,206    |  |   | $         | (436,349  | ) |   | $         | (272,616  | )
|                               |                 |                         |   |           |           |  |   |           |          





|              |                 |                |   |           |      |  |   |           |  |  |   |           | 
|------------- | --------------- | -------------- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|              |                 | December 31,   |  
|              |                 |                |  
|              |                 | 2005           |   |           | 2004 |  |   | 2003      | 
|              |                 |                |   |           |      |  |   |           | 
|              |                 | (In thousands) |  
|Total assets: |                 |                |   |           |      |  |   |           |  |  |   |          
|              | Semiconductor   |                | $ | 2,285,913 |      |  | $ | 2,394,952 |  |  | $ | 2,948,084 | 
|              | Storage Systems |                |   | 510,153   |      |  |   | 479,049   |  |  |   | 499,817   | 
|              |                 |                |   |           |      |  |   |           | 
|              | Total           |                | $ | 2,796,066 |      |  | $ | 2,874,001 |  |  | $ | 3,447,901 | 
|              |                 |                |   |           |      |  |   |           | 

Significant Customers.


|                         |                                     |                         |  |          |  |      |  |               |  |  |  |               | 
|------------------------ | ----------------------------------- | ----------------------- |  | -------- |  | ---- |  | ------------- |  |  |  | ------------- | 
|                         |                                     | Year Ended December 31,
|                         |                                     |                        
|                         |                                     | 2005                    |  | 2004     |  | 2003
|                         |                                     |                         |  |          |  |     
|Semiconductor segment:   |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 1        |  |      |  | 1             |  |  |  | 2             | 
|                         | Percentage of segment revenues      |                         |  | 17%      |  |      |  | 11%           |  |  |  | 20%,10%       | 
|Storage Systems segment: |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 2        |  |      |  | 3             |  |  |  | 3             | 
|                         | Percentage of segment revenues      |                         |  | 44%, 12% |  |      |  | 41%, 15%, 11% |  |  |  | 39%, 17%, 10% | 
|Consolidated:            |                                     |                         |  |          |  |      |  |               |  |  |  |              
|                         | Number of significant customers     |                         |  | 2        |  |      |  | 1             |  |  |  | 2             | 
|                         | Percentage of consolidated revenues |                         |  | 16%, 11% |  |      |  | 16%           |  |  |  | 15%, 13%      | 

71



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Information about geographic areas.


|          |                       |                         |   |         |           |  |   |         |           |  |   |         |           | 
|--------- | --------------------- | ----------------------- | - | ------- | --------- |  | - | ------- | --------- |  | - | ------- | --------- | 
|          |                       | Year Ended December 31, |  
|          |                       |                         |  
|          |                       | 2005                    |   |         | 2004      |  |   | 2003    |          
|          |                       |                         |   |         |           |  |   |         |          
|          |                       | (In thousands)          |  
|Revenues: |                       |                         |   |         |           |  |   |         |           |  |   |        
|          | North America         |                         | $ | 932,190 |           |  | $ | 852,453 |           |  | $ | 863,620 |          
|          | Asia, including Japan |                         |   | 755,960 |           |  |   | 655,077 |           |  |   | 677,266 |          
|          | Europe                |                         |   | 231,100 |           |  |   | 192,634 |           |  |   | 152,184 |          
|          |                       |                         |   |         |           |  |   |         |          
|          |                       | Total                   |   | $       | 1,919,250 |  |   | $       | 1,700,164 |  |   | $       | 1,693,070 | 
|          |                       |                         |   |         |           |  |   |         |          

|                   |                       |                |   |         |         |  |   |         |         |  |   |         |         | 
|------------------ | --------------------- | -------------- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                   |                       | December 31,   |  
|                   |                       |                |  
|                   |                       | 2005           |   |         | 2004    |  |   | 2003    |        
|                   |                       |                |   |         |         |  |   |         |        
|                   |                       | (In thousands) |  
|Long-lived assets: |                       |                |   |         |         |  |   |         |         |  |   |        
|                   | North America         |                | $ | 163,226 |         |  | $ | 380,527 |         |  | $ | 865,567 |        
|                   | Asia, including Japan |                |   | 34,833  |         |  |   | 37,870  |         |  |   | 50,471  |        
|                   | Europe                |                |   | 2,785   |         |  |   | 3,686   |         |  |   | 4,623   |        
|                   |                       |                |   |         |         |  |   |         |        
|                   |                       | Total          |   | $       | 200,844 |  |   | $       | 422,083 |  |   | $       | 920,661 | 
|                   |                       |                |   |         |         |  |   |         |        



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Note 5  Cash, Cash Equivalents and
Investments


|                                           |                                           |                                                  |         |         |         |   |         |         |         | 
|------------------------------------------ | ----------------------------------------- | ------------------------------------------------ | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                           |                                           | December 31,                                     |        
|                                           |                                           |                                                  |        
|                                           |                                           | 2005                                             |         |         | 2004    |  
|                                           |                                           |                                                  |         |         |         |  
|                                           |                                           | (In thousands)                                   |        
|Cash and cash equivalents                  |                                           |                                                  |         |         |         |   |         |        
|Cash in financial institutions             |                                           | $                                                | 85,641  |         |         | $ | 51,172  |        
|                                           |                                           |                                                  |         |         |         |  
|Cash equivalents:                          |                                           |                                                  |         |         |         |   |         |        
|                                           | Overnight deposits and money market funds |                                                  |         | 148,665 |         |   |         | 146,292 |        
|                                           | Commercial paper                          |                                                  |         | 17,473  |         |   |         | 18,260  |        
|                                           | U.S. government and agency securities     |                                                  |         | 10,870  |         |   |         | 2,999   |        
|                                           | Certificates of deposit                   |                                                  |         | 2,000   |         |   |         |        |        
|                                           |                                           |                                                  |         |         |         |  
|                                           | Total cash equivalents                    |                                                  |         | 179,008 |         |   |         | 167,551 |        
|                                           | Total cash and cash equivalents           |                                                  | $       | 264,649 |         |   | $       | 218,723 |        
|                                           |                                           |                                                  |         |         |         |  
|Available-for-sale debt securities         |                                           |                                                  |         |         |         |   |         |        
|Asset and mortgage-backed securities       |                                           | $                                                | 335,495 |         |         | $ | 292,898 |        
|U.S. government and agency securities      |                                           |                                                  | 266,077 |         |         |   | 234,787 |        
|Corporate and municipal debt securities    |                                           |                                                  | 72,688  |         |         |   | 68,177  |        
|                                           |                                           |                                                  |         |         |         |  
|                                           |                                           | Total short-term investments                     |         | $       | 674,260 |   |         | $       | 595,862 | 
|                                           |                                           |                                                  |         |         |         |  
|Long-term investments in equity securities |                                           |                                                  |         |         |         |   |         |        
|Marketable equity securities               |                                           | $                                                | 18,769  |         |         | $ | 28,372  |        
|Non-marketable equity securities           |                                           |                                                  | 7,070   |         |         |   | 9,307   |        
|                                           |                                           |                                                  |         |         |         |  
|                                           |                                           | Total long-term investments in equity securities |         | $       | 25,839  |   |         | $       | 37,679  | 
|                                           |                                           |                                                  |         |         |         |  



|                    |  |   |         | 
|------------------- |  | - | ------- | 
|Due within one year |  | $ | 91,400  | 
|Due in 1-5 years    |  |   | 385,401 | 
|Due in 5-10 years   |  |   | 38,676  | 
|Due after 10 years  |  |   | 158,783 | 
|                    |  |   |        
|Total               |  | $ | 674,260 | 
|                    |  |   |        









| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $8 million pre-tax gain related to the sale of certain
    marketable available-for-sale equity securities in the second
    and fourth quarters of 2005; and                                                     
|
| |  | A $1 million pre-tax gain associated with marketable
    available-for-sale equity securities of a certain technology
    company that was acquired by another technology company in the
    second quarter of 2005.

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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)






| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $3 million pre-tax gain associated with marketable
    available-for-sale equity securities of a certain technology
    company that was acquired by another technology company in the
    first quarter of 2004; and
|
| |  | A $5 million pre-tax gain related to the sales of certain
    marketable available-for-sale equity securities in the second
    quarter of 2004.                                                                       





|                                                                         |                              |                |     |             |  |   |     |     | 
|------------------------------------------------------------------------ | ---------------------------- | -------------- | --- | ----------- |  | - | --- | --- | 
|                                                                         |                              | Non-Marketable |     | Marketable 
|                                                                         |                              | Equity         |     | Equity     
|                                                                         |                              | Investments    |     | Investments
|                                                                         |                              |                |     |            
|                                                                         |                              | (In millions) 
|Pre-tax loss:                                                            |                              |                |     |             |  |   |     |    
|                                                                         | Year ended December 31, 2005 |                | $   | 2.4         |  |   | $   |    | 
|                                                                         | Year ended December 31, 2004 |                |     | 3.3         |  |   |     | 4.1 | 
|                                                                         | Year ended December 31, 2003 |                |     | 7.9         |  |   |     | 2.7 | 
|Total carrying value of impaired investments as of
    December 31, 2005 |                              | $              | 4.8 |             |  | $ | 2.6 |    



| |                                             
| | --------------------------------------------
| | Investments in available-for-sale securities

|                                       |  |                |         |                  |  |                  |        |                |  |   |        |   |  |   |         | 
|-------------------------------------- |  | -------------- | ------- | ---------------- |  | ---------------- | ------ | -------------- |  | - | ------ | - |  | - | ------- | 
|                                       |  | Adjusted       |         | Gross Unrealized |  | Gross Unrealized |        | Estimated Fair
|                                       |  | Cost           |         | Gains            |  | Losses           |        | Value         
|                                       |  |                |         |                  |  |                  |        |               
|                                       |  | (In thousands)
|December 31, 2005                      |  |                |         |                  |  |                  |        |                |  |   |        |   |  |   |         | 
|Short-term debt securities             |  | $              | 682,524 |                  |  | $                | 398    |                |  | $ | (8,662 | ) |  | $ | 674,260 | 
|Long-term marketable equity securities |  |                | 3,669   |                  |  |                  | 15,100 |                |  |   |       |   |  |   | 18,769  | 
|December 31, 2004                      |  |                |         |                  |  |                  |        |                |  |   |        |   |  |   |         | 
|Short-term debt securities             |  | $              | 600,527 |                  |  | $                | 728    |                |  | $ | (5,393 | ) |  | $ | 595,862 | 
|Long-term marketable equity securities |  |                | 5,912   |                  |  |                  | 22,460 |                |  |   |       |   |  |   | 28,372  | 



|                                        |  |                     |         |            |                        |   |       |            |            |   |         |  |  |   |       | 
|--------------------------------------- |  | ------------------- | ------- | ---------- | ---------------------- | - | ----- | ---------- | ---------- | - | ------- |  |  | - | ----- | 
|                                        |  | Less Than 12 Months |         |            | Greater Than 12 Months |  
|                                        |  |                     |         |            |                        |  
|                                        |  |                     |         | Unrealized |                        |   |       |            | Unrealized |  
|                                        |  | Fair Value          |         |            | Losses                 |   |       | Fair Value |            |   | Losses  | 
|                                        |  |                     |         |            |                        |   |       |            |            |   |         | 
|                                        |  | (In thousands)      |        
|Asset and mortgage-backed securities    |  | $                   | 148,089 |            |                        | $ | 1,545 |            |            | $ | 66,878  |  |  | $ | 1,935 | 
|U.S. government and agency securities   |  |                     | 115,385 |            |                        |   | 1,241 |            |            |   | 106,925 |  |  |   | 2,981 | 
|Corporate and municipal debt securities |  |                     | 28,647  |            |                        |   | 356   |            |            |   | 29,826  |  |  |   | 604   | 
|                                        |  |                     |         |            |                        |   |       |            |            |   |         | 
|                                        |  | $                   | 292,121 |            |                        | $ | 3,142 |            |            | $ | 203,629 |  |  | $ | 5,520 | 
|                                        |  |                     |         |            |                        |   |       |            |            |   |         | 

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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




Note 6  Balance Sheet Detail


|                                           |                                           |                |         |          |      |   |         |          |  
|------------------------------------------ | ----------------------------------------- | -------------- | ------- | -------- | ---- | - | ------- | -------- | -
|                                           |                                           | December 31,   |        
|                                           |                                           |                |        
|                                           |                                           | 2005           |         |          | 2004 |  
|                                           |                                           |                |         |          |      |  
|                                           |                                           | (In thousands) |        
|Inventories:                               |                                           |                |         |          |      |   |         |         
|                                           | Raw materials                             |                | $       | 30,541   |      |   | $       | 20,022   |  
|                                           | Work-in-process                           |                |         | 62,167   |      |   |         | 106,818  |  
|                                           | Finished goods                            |                |         | 102,106  |      |   |         | 92,060   |  
|                                           |                                           |                |         |          |      |  
|                                           |                                           | $              | 194,814 |          |      | $ | 218,900 |         
|                                           |                                           |                |         |          |      |  
|Prepaid expenses and other current assets: |                                           |                |         |          |      |   |         |         
|                                           | Assets held for sale                      |                | $       | 105,849  |      |   | $       | 11,034   |  
|                                           | Prepaid expense and other current assets  |                |         | 57,237   |      |   |         | 48,703   |  
|                                           |                                           |                |         |          |      |  
|                                           |                                           | $              | 163,086 |          |      | $ | 59,737  |         
|                                           |                                           |                |         |          |      |  
|Property and equipment:                    |                                           |                |         |          |      |   |         |         
|                                           | Land                                      |                | $       | 6,128    |      |   | $       | 31,305   |  
|                                           | Buildings and improvements                |                |         | 105,256  |      |   |         | 109,891  |  
|                                           | Equipment                                 |                |         | 403,696  |      |   |         | 463,271  |  
|                                           | Furniture and fixtures                    |                |         | 29,787   |      |   |         | 30,608   |  
|                                           | Leasehold improvements                    |                |         | 31,958   |      |   |         | 30,697   |  
|                                           | Construction in progress                  |                |         | 7,812    |      |   |         | 10,622   |  
|                                           |                                           |                |         |          |      |  
|                                           |                                           |                | 584,637 |          |      |   | 676,394 |         
|                                           | Accumulated depreciation and amortization |                |         | (486,352 | )    |   |         | (364,478 | )
|                                           |                                           |                |         |          |      |  
|                                           |                                           | $              | 98,285  |          |      | $ | 311,916 |         
|                                           |                                           |                |         |          |      |  

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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                        |                                                                                            |                |         |        |      |   |         |        | 
|--------------------------------------- | ------------------------------------------------------------------------------------------ | -------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                                        |                                                                                            | December 31,   |        
|                                        |                                                                                            |                |        
|                                        |                                                                                            | 2005           |         |        | 2004 |  
|                                        |                                                                                            |                |         |        |      |  
|                                        |                                                                                            | (In thousands) |        
|Other accrued liabilities:              |                                                                                            |                |         |        |      |   |         |       
|                                        | Accrued expenses                                                                           |                | $       | 90,210 |      |   | $       | 87,094 | 
|                                        | Restructuring reserves                                                                     |                |         | 32,818 |      |   |         | 29,223 | 
|                                        | Warranty reserves (Note 12)                                                                |                |         | 11,074 |      |   |         | 10,040 | 
|                                        | Sales tax payable                                                                          |                |         | 2,257  |      |   |         | 11,118 | 
|                                        | Interest payable                                                                           |                |         | 3,835  |      |   |         | 4,803  | 
|                                        |                                                                                            |                |         |        |      |  
|                                        |                                                                                            | $              | 140,194 |        |      | $ | 142,278 |       
|                                        |                                                                                            |                |         |        |      |  
|Tax related liabilities and other:      |                                                                                            |                |         |        |      |   |         |       
|                                        | Other long-term tax-related liabilities                                                    |                | $       | 74,738 |      |   | $       | 77,313 | 
|                                        | Other long-term liabilities                                                                |                |         | 372    |      |   |         | 257    | 
|                                        |                                                                                            |                |         |        |      |  
|                                        |                                                                                            | $              | 75,110  |        |      | $ | 77,570  |       
|                                        |                                                                                            |                |         |        |      |  
|Accumulated other comprehensive income: |                                                                                            |                |         |        |      |   |         |       
|                                        | Net unrealized gains on available-for-sale securities, net of
    tax of $2,394 and $6,228 |                | $       | 4,445  |      |   | $       | 11,567 | 
|                                        | Foreign currency translation adjustments                                                   |                |         | 13,407 |      |   |         | 26,383 | 
|                                        |                                                                                            |                |         |        |      |  
|                                        |                                                                                            | $              | 17,852  |        |      | $ | 37,950  |       
|                                        |                                                                                            |                |         |        |      |  

Note 7  Intangible Assets and
Goodwill




|               |                          |                   |         |         |                   |   |          |                |          |   |               |         |         |   |          |          |          |  
|-------------- | ------------------------ | ----------------- | ------- | ------- | ----------------- | - | -------- | -------------- | -------- | - | ------------- | ------- | ------- | - | -------- | -------- | -------- | -
|               |                          | December 31, 2005 |         |         | December 31, 2004 |  
|               |                          |                   |         |         |                   |  
|               |                          | Gross Carrying    |         |         | Accumulated       |   |          | Gross Carrying |          |   | Accumulated   |        
|               |                          | Amount*           |         |         | Amortization*     |   |          | Amount*        |          |   | Amortization* |        
|               |                          |                   |         |         |                   |   |          |                |          |   |               |        
|Semiconductor: |                          |                   |         |         |                   |   |          |                |          |   |               |         |         |   |          |         
|               | Current technology       |                   | $       | 244,301 |                   |   | $        | (213,671       | )        |   | $             | 244,302 |         |   | $        | (178,297 | )       
|               | Trademarks               |                   |         | 26,285  |                   |   |          | (22,258        | )        |   |               | 26,285  |         |   |          | (18,361  | )       
|               | Customer base            |                   |         | 8,788   |                   |   |          | (2,796         | )        |   |               | 8,788   |         |   |          | (1,198   | )       
|               | Non-compete agreements   |                   |         | 849     |                   |   |          | (476           | )        |   |               | 849     |         |   |          | (195     | )       
|               | Existing purchase orders |                   |         | 200     |                   |   |          | (200           | )        |   |               | 200     |         |   |          | (200     | )       
|               |                          |                   |         |         |                   |   |          |                |          |   |               |        
|               |                          | Subtotal          |         |         | 280,423           |   |          |                | (239,401 | ) |               |         | 280,424 |   |          |          | (198,251 | )
|               | Storage Systems:         |                   |         |         |                   |   |          |                |          |   |               |         |         |   |          |          |         
|               | Current technology       |                   |         | 124,139 |                   |   |          | (120,909       | )        |   |               | 124,139 |         |   |          | (103,100 | )       
|               | Trademarks               |                   |         | 7,150   |                   |   |          | (6,189         | )        |   |               | 7,150   |         |   |          | (5,085   | )       
|               | Customer base            |                   |         | 5,010   |                   |   |          | (4,249         | )        |   |               | 5,010   |         |   |          | (3,420   | )       
|               | Supply agreement         |                   |         | 7,247   |                   |   |          | (7,247         | )        |   |               | 7,247   |         |   |          | (5,657   | )       
|               |                          |                   |         |         |                   |   |          |                |          |   |               |        
|               |                          | Subtotal          |         |         | 143,546           |   |          |                | (138,594 | ) |               |         | 143,546 |   |          |          | (117,262 | )
|               |                          |                   |         |         |                   |   |          |                |          |   |               |        
|Total          |                          | $                 | 423,969 |         |                   | $ | (377,995 | )              |          | $ | 423,970       |         |         | $ | (315,513 | )       
|               |                          |                   |         |         |                   |   |          |                |          |   |               |        

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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                         |  |             |    |  |                         |   |        |      |  |   |        |  |  |   |        | 
|------------------------ |  | ----------- | -- |  | ----------------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                         |  | Weighted    |    |  | Year Ended December 31, |  
|                         |  | Average     |    |  |                         |  
|                         |  | Lives       |    |  | 2005                    |   |        | 2004 |  |   | 2003   | 
|                         |  |             |    |  |                         |   |        |      |  |   |        | 
|                         |  | (In months) |    |  | (In thousands)          |  
|Current technology       |  |             | 79 |  |                         | $ | 53,185 |      |  | $ | 65,153 |  |  | $ | 67,742 | 
|Trademarks               |  |             | 83 |  |                         |   | 5,001  |      |  |   | 5,007  |  |  |   | 5,334  | 
|Customer base            |  |             | 68 |  |                         |   | 2,427  |      |  |   | 2,078  |  |  |   | 856    | 
|Supply agreement         |  |             | 36 |  |                         |   | 1,590  |      |  |   | 2,417  |  |  |   | 2,420  | 
|Non-compete agreements   |  |             | 46 |  |                         |   | 281    |      |  |   | 195    |  |  |   |       | 
|Existing purchase orders |  |             | 9  |  |                         |   |       |      |  |   | 200    |  |  |   |       | 
|                         |  |             |    |  |                         |   |        |      |  |   |        | 
|Total                    |  |             | 78 |  |                         | $ | 62,484 |      |  | $ | 75,050 |  |  | $ | 76,352 | 
|                         |  |             |    |  |                         |   |        |      |  |   |        | 



|             |  |         |    | 
|------------ |  | ------- | -- | 
|             |  | Amount: |   
|             |  |         |   
|Fiscal year: |  |         |    | 
|2006         |  | $       | 32 | 
|2007         |  |         | 7  | 
|2008         |  |         | 4  | 
|2009         |  |         | 3  | 
|             |  |         |   
|             |  | $       | 46 | 
|             |  |         |   



|                                                                                                                                          |  |               |         |   |                 |   |         |       |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | --------------- | - | ------- | ----- |  | - | ------- | -
|                                                                                                                                          |  | Semiconductor |         |   | Storage Systems |   |         |      
|                                                                                                                                          |  | Segment*      |         |   | Segment*        |   |         | Total | 
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 
|Balance as of December 31, 2003*                                                                                                          |  | $             | 796,767 |   |                 | $ | 171,716 |       |  | $ | 968,483 |  
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 
|Goodwill acquired during the year                                                                                                         |  |               | 8,106   |   |                 |   |        |       |  |   | 8,106   |  
|Adjustment to goodwill recorded in a prior year for the
    resolution of a pre-acquisition income tax contingency                        |  |               | (4,463  | ) |                 |   |        |       |  |   | (4,463  | )
|Adjustment to goodwill recorded in prior periods                                                                                          |  |               |        |   |                 |   | 142     |       |  |   | 142     |  
|Purchase of minority interest                                                                                                             |  |               | 862     |   |                 |   |        |       |  |   | 862     |  
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 
|Balance as of December 31, 2004*                                                                                                          |  | $             | 801,272 |   |                 | $ | 171,858 |       |  | $ | 973,130 |  
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 
|Adjustment to goodwill recorded in a prior year for cash
    received from the resolution of a pre-acquisition income tax
    contingency |  |               | (36,307 | ) |                 |   |        |       |  |   | (36,307 | )
|Adjustment to goodwill recorded in prior periods**                                                                                        |  |               | (5,984  | ) |                 |   | (2,297  | )     |  |   | (8,281  | )
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 
|Balance as of December 31, 2005                                                                                                           |  | $             | 758,981 |   |                 | $ | 169,561 |       |  | $ | 928,542 |  
|                                                                                                                                          |  |               |         |   |                 |   |         |       | 






| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | The information provided herein has been recast to include the
    RAID Storage Adapter (RSA) business as part of the Storage
    Systems segment from the Semiconductor segment for all periods
    presented.

77



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




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



Note 8  Derivative Instruments




| |                      
| | ---------------------
| | Foreign currency risk









| |                   
| | ------------------
| | Interest rate risk





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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)






Note 9  Debt


|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |          |         |  |   |         |         | 
|--------------------------------------------------------------- | -------------------------------------------- | -------------- | ---- | -------- | ------ |  | ---------- | ------------ |  | - | ------- |  |  | ---- | -------- | ------- |  | - | ------- | ------- | 
|                                                                |                                              |                |      |          |        |  |            | December 31, | 
|                                                                |                                              |                |      | Interest |        |  | Conversion |              |  |   |        
|                                                                |                                              | Maturity       |      |          | Rate * |  |            | Price        |  |   | 2005    |  |  | 2004 |         
|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |         
|                                                                |                                              | (In thousands) |     
|2003 Convertible Subordinated Notes                             |                                              |                | 2010 |          |        |  | 4.00%      |              |  | $ | 13.4200 |  |  | $    | 350,000  |         |  | $ | 350,000 |        
|2001 Convertible Subordinated Notes                             |                                              |                | 2006 |          |        |  | 4.00%      |              |  | $ | 26.3390 |  |  |      | 271,848  |         |  |   | 421,500 |        
|Deferred gain on terminated swap                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      | 2,092    |         |  |   | 10,346  |        
|Capital lease obligations                                       |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |         |         |  |   | 129     |        
|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |         
|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      | 623,940  |         |  |   | 781,975 |        
|Current portion of long-term debt and capital lease obligations |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      | (273,940 | )       |  |   | (129    | )      
|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |         
|                                                                | Long-term debt and capital lease obligations |                |      |          |        |  |            |              |  |   |         |  |  |      | $        | 350,000 |  |   | $       | 781,846 | 
|                                                                |                                              |                |      |          |        |  |            |              |  |   |         |  |  |      |         






|  |                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The weighted average interest rate on the Convertible Notes was
    4.00% for the years ended December 31, 2005 and 2004. See
    Note 8 for further discussion of deferred gain on
    terminated swap.



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)










00-19,




Note 10  Common Stock, Stock-Based
Compensation and Other Employee Compensation Plans


Stock option and restricted stock award plans.


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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)










Engenio Stock Option Exchange Program.


Stock option exchange program.


81



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                    |  |           |         |                  |                |   |        |           |                  |  |                |   |  |                  |        |   |                |  |        |   |  |   |        |  
|----------------------------------- |  | --------- | ------- | ---------------- | -------------- | - | ------ | --------- | ---------------- |  | -------------- | - |  | ---------------- | ------ | - | -------------- |  | ------ | - |  | - | ------ | -
|                                    |  | 2005      |         |                  | 2004           |   |        | 2003      |                 
|                                    |  |           |         |                  |                |   |        |           |                 
|                                    |  |           |         | Weighted Average |                |   |        |           | Weighted Average |  |                |   |  | Weighted Average |       
|                                    |  | Number of |         |                  | Exercise Price |   |        | Number of |                  |  | Exercise Price |   |  | Number of        |        |   | Exercise Price | 
|                                    |  | Shares    |         |                  | per Share      |   |        | Shares    |                  |  | per Share      |   |  | Shares           |        |   | per Share      | 
|                                    |  |           |         |                  |                |   |        |           |                  |  |                |   |  |                  |        |   |                | 
|Options outstanding at January 1,   |  |           | 67,733  |                  |                | $ | 14.57  |           |                  |  | 69,166         |   |  | $                | 15.17  |   |                |  | 57,065 |   |  | $ | 18.24  |  
|Options canceled                    |  |           | (11,555 | )                |                |   | (14.63 | )         |                  |  | (7,993         | ) |  |                  | (14.01 | ) |                |  | (7,282 | ) |  |   | (16.39 | )
|Options granted                     |  |           | 16,493  |                  |                |   | 7.67   |           |                  |  | 7,450          |   |  |                  | 7.39   |   |                |  | 20,191 |   |  |   | 6.56   |  
|Options exercised                   |  |           | (2,053  | )                |                |   | (5.68  | )         |                  |  | (890           | ) |  |                  | (5.87  | ) |                |  | (808   | ) |  |   | (5.94  | )
|                                    |  |           |         |                  |                |   |        |           |                  |  |                |   |  |                  |        |   |                | 
|Options outstanding at December 31, |  |           | 70,618  |                  |                | $ | 13.21  |           |                  |  | 67,733         |   |  | $                | 14.57  |   |                |  | 69,166 |   |  | $ | 15.17  |  
|                                    |  |           |         |                  |                |   |        |           |                  |  |                |   |  |                  |        |   |                | 
|Options exercisable at December 31, |  |           | 44,489  |                  |                | $ | 16.52  |           |                  |  | 44,301         |   |  | $                | 17.54  |   |                |  | 38,936 |   |  | $ | 18.03  |  
|                                    |  |           |         |                  |                |   |        |           |                  |  |                |   |  |                  |        |   |                | 





|                      |  |             |        |           |              |  |                  |                |  |   |           |                  |  |                |        |  |  |   |       | 
|--------------------- |  | ----------- | ------ | --------- | ------------ |  | ---------------- | -------------- |  | - | --------- | ---------------- |  | -------------- | ------ |  |  | - | ----- | 
|                      |  | Outstanding |        |           | Exercisable  | 
|                      |  |             |        |           |              | 
|                      |  |             |        | Remaining |              |  | Weighted Average |                |  |   |           | Weighted Average | 
|Options with Exercise |  | Number of   |        |           | Contractual  |  |                  | Exercise Price |  |   | Number of |                  |  | Exercise Price |       
|Prices Ranging from:  |  | Shares      |        |           | Life (Years) |  |                  | per Share      |  |   | Shares    |                  |  | per Share      |       
|                      |  |             |        |           |              |  |                  |                |  |   |           |                  |  |                |       
|$0.10 to $5.00        |  |             | 2,990  |           |              |  | 5.68             |                |  | $ | 4.49      |                  |  |                | 927    |  |  | $ | 4.34  | 
|$5.01 to $10.00       |  |             | 34,972 |           |              |  | 6.03             |                |  |   | 7.31      |                  |  |                | 14,443 |  |  |   | 7.53  | 
|$10.01 to $15.00      |  |             | 11,318 |           |              |  | 4.49             |                |  |   | 12.05     |                  |  |                | 8,425  |  |  |   | 12.51 | 
|$15.01 to $20.00      |  |             | 8,281  |           |              |  | 4.40             |                |  |   | 17.20     |                  |  |                | 7,637  |  |  |   | 17.26 | 
|$20.01 to $25.00      |  |             | 6,645  |           |              |  | 4.98             |                |  |   | 22.15     |                  |  |                | 6,645  |  |  |   | 22.15 | 
|$25.01 to $30.00      |  |             | 2,697  |           |              |  | 3.85             |                |  |   | 29.25     |                  |  |                | 2,697  |  |  |   | 29.25 | 
|$30.01 to $72.25      |  |             | 3,715  |           |              |  | 4.15             |                |  |   | 42.76     |                  |  |                | 3,715  |  |  |   | 42.76 | 
|                      |  |             |        |           |              |  |                  |                |  |   |           |                  |  |                |       
|                      |  |             | 70,618 |           |              |  | 5.30             |                |  | $ | 13.21     |                  |  |                | 44,489 |  |  | $ | 16.52 | 
|                      |  |             |        |           |              |  |                  |                |  |   |           |                  |  |                |       



|                                |  |           |       |                  |  |           |      |                  |  |           |     |                  |  |   |      |  |  |  |   |  |  |   |   | 
|------------------------------- |  | --------- | ----- | ---------------- |  | --------- | ---- | ---------------- |  | --------- | --- | ---------------- |  | - | ---- |  |  |  | - |  |  | - | - | 
|                                |  | 2005      |       | 2004             |  | 2003     
|                                |  |           |       |                  |  |          
|                                |  |           |       | Weighted Average |  |           |      | Weighted Average |  |           |     | Weighted Average
|                                |  | Number of |       | Grant Date       |  | Number of |      | Grant Date       |  | Number of |     | Grant Date      
|                                |  | Shares    |       | Fair Value       |  | Shares    |      | Fair Value       |  | Shares    |     | Fair Value      
|                                |  |           |       |                  |  |           |      |                  |  |           |     |                 
|Restricted stock awards granted |  |           | 2,125 |                  |  | $         | 6.32 |                  |  |           | 892 |                  |  | $ | 6.75 |  |  |  |  |  |  | $ |  | 

Forfeitures of stock options and restricted stock awards
prior to vesting.


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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




Stock purchase plans. 12-month


Stock repurchase program.


Stock purchase rights.


LSI 401(k) Defined Contribution Plan.


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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)


Note 11  Income Taxes




|          |         |                         |        |        |        |   |        |        |        |   |        |        |        |  
|--------- | ------- | ----------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|          |         | Year Ended December 31, |       
|          |         |                         |       
|          |         | 2005                    |        |        | 2004   |   |        | 2003   |       
|          |         |                         |        |        |        |   |        |        |       
|          |         | (In thousands)          |       
|Current:  |         |                         |        |        |        |   |        |        |        |   |        |       
|          | Federal |                         | $      | (70    | )      |   | $      | 3,815  |        |   | $      | 8,679  |       
|          | State   |                         |        | 451    |        |   |        | 615    |        |   |        | 600    |       
|          | Foreign |                         |        | 14,861 |        |   |        | 14,689 |        |   |        | 15,056 |       
|          |         |                         |        |        |        |   |        |        |       
|          |         | Total                   |        |        | 15,242 |   |        |        | 19,119 |   |        |        | 24,335 |  
|          |         |                         |        |        |        |   |        |        |       
|Deferred: |         |                         |        |        |        |   |        |        |        |   |        |       
|          | Federal |                         |        | 4,369  |        |   |        |       |        |   |        |       |       
|          | State   |                         |        | 985    |        |   |        |       |        |   |        |       |       
|          | Foreign |                         |        | 5,944  |        |   |        | 4,881  |        |   |        | (335   | )     
|          |         |                         |        |        |        |   |        |        |       
|          |         | Total                   |        |        | 11,298 |   |        |        | 4,881  |   |        |        | (335   | )
|          |         |                         |        |        |        |   |        |        |       
|Total     |         | $                       | 26,540 |        |        | $ | 24,000 |        |        | $ | 24,000 |       
|          |         |                         |        |        |        |   |        |        |       



|                                                        |  |                         |         |   |      |   |          |      |  |   |          |  
|------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                        |  | Year Ended December 31, |        
|                                                        |  |                         |        
|                                                        |  | 2005                    |         |   | 2004 |   |          | 2003 | 
|                                                        |  |                         |         |   |      |   |          |      | 
|                                                        |  | (In thousands)          |        
|Domestic                                                |  | $                       | (55,140 | ) |      | $ | (392,070 | )    |  | $ | (42,382  | )
|Foreign                                                 |  |                         | 76,063  |   |      |   | (47,429  | )    |  |   | (242,004 | )
|                                                        |  |                         |         |   |      |   |          |      | 
|Income/(loss) before income taxes and minority interest |  | $                       | 20,923  |   |      | $ | (439,499 | )    |  | $ | (284,386 | )
|                                                        |  |                         |         |   |      |   |          |      | 

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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                              |                                                   |                |       |          |      |   |       |          |  
|----------------------------- | ------------------------------------------------- | -------------- | ----- | -------- | ---- | - | ----- | -------- | -
|                              |                                                   | December 31,   |      
|                              |                                                   |                |      
|                              |                                                   | 2005           |       |          | 2004 |  
|                              |                                                   |                |       |          |      |  
|                              |                                                   | (In thousands) |      
|Deferred tax assets:          |                                                   |                |       |          |      |   |       |         
|                              | Tax credit carryovers                             |                | $     | 329,529  |      |   | $     | 232,013  |  
|                              | Net operating loss carryforwards                  |                |       | 108,882  |      |   |       | 35,633   |  
|                              | Future deductions for purchased intangible assets |                |       | 82,352   |      |   |       | 85,043   |  
|                              | Depreciation and amortization                     |                |       | 65,531   |      |   |       | 116,192  |  
|                              | Future deductions for reserves and other          |                |       | 50,214   |      |   |       | 51,163   |  
|                              | Future deductions for inventory reserves          |                |       | 17,479   |      |   |       | 29,894   |  
|                              |                                                   |                |       |          |      |  
|                              | Total deferred tax assets                         |                |       | 653,987  |      |   |       | 549,938  |  
|                              | Valuation allowance                               |                |       | (649,220 | )    |   |       | (539,233 | )
|                              |                                                   |                |       |          |      |  
|                              | Net deferred tax assets                           |                |       | 4,767    |      |   |       | 10,705   |  
|Deferred tax liabilities:     |                                                   |                |       |          |      |   |       |         
|                              | Gain on unrealized investments                    |                |       | (2,394   | )    |   |       | (6,228   | )
|                              |                                                   |                |       |          |      |  
|Total net deferred tax assets |                                                   | $              | 2,373 |          |      | $ | 4,477 |         
|                              |                                                   |                |       |          |      |  







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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                      |  |                         |         |   |      |  |     |      |  |   |          |   |  |  |     |    |  |   |         |   |  |  |     |   
|------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- |  | --- | ---- |  | - | -------- | - |  |  | --- | -- |  | - | ------- | - |  |  | --- | --
|                                                                                      |  | Year Ended December 31, |        
|                                                                                      |  |                         |        
|                                                                                      |  | 2005                    |         |   | 2004 |  |     | 2003 | 
|                                                                                      |  |                         |         |   |      |  |     |      | 
|                                                                                      |  | (In thousands)          |        
|Federal statutory rate                                                                |  | $                       | 7,324   |   |      |  | 35  | %    |  | $ | (153,825 | ) |  |  | (35 | )% |  | $ | (99,535 | ) |  |  | (35 | )%
|State taxes, net of federal benefit                                                   |  |                         | 294     |   |      |  | 1   | %    |  |   | 400      |   |  |  |    |    |  |   | 390     |   |  |  |    |   
|Foreign earnings taxed in the U.S.                                                    |  |                         | 29,904  |   |      |  | 143 | %    |  |   | 6,191    |   |  |  | 1   | %  |  |   | 59,539  |   |  |  | 21  | % 
|Benefit of net operating losses and deferred tax assets not
    previously recognized |  |                         | (11,067 | ) |      |  | (53 | )%   |  |   | (854     | ) |  |  |    |    |  |   | (5,378  | ) |  |  | (2  | )%
|Change in valuation allowance from the correction of prior
    period errors*         |  |                         | 5,354   |   |      |  | 26  | %    |  |   |         |   |  |  |    |    |  |   |        |   |  |  |    |   
|Difference between U.S. and foreign tax rates                                         |  |                         | (3,206  | ) |      |  | (15 | )%   |  |   | 35,148   |   |  |  | 8   | %  |  |   | 79,820  |   |  |  | 28  | % 
|State tax refund, net of federal affect                                               |  |                         | (2,837  | ) |      |  | (14 | )%   |  |   |         |   |  |  |    |    |  |   |        |   |  |  |    |   
|Release of foreign withholding taxes previously accrued                               |  |                         | (2,500  | ) |      |  | (12 | )%   |  |   |         |   |  |  |    |    |  |   |        |   |  |  |    |   
|Net impact of federal income tax audit not previously accrued                         |  |                         | 2,345   |   |      |  | 11  | %    |  |   |         |   |  |  |    |    |  |   |        |   |  |  |    |   
|Alternative minimum tax                                                               |  |                         | 302     |   |      |  | 1   | %    |  |   |         |   |  |  |    |    |  |   | 8,679   |   |  |  | 3   | % 
|Nondeductible expenses                                                                |  |                         | (14     | ) |      |  |    |      |  |   | 10,054   |   |  |  | 2   | %  |  |   | 7,055   |   |  |  | 3   | % 
|Net operating loss and future deductions not currently benefited                      |  |                         |        |   |      |  |    |      |  |   | 122,423  |   |  |  | 28  | %  |  |   | 19,590  |   |  |  | 7   | % 
|Foreign tax credits                                                                   |  |                         |        |   |      |  |    |      |  |   |         |   |  |  |    |    |  |   | (27,469 | ) |  |  | (10 | )%
|Research and development tax credit                                                   |  |                         |        |   |      |  |    |      |  |   |         |   |  |  |    |    |  |   | (15,905 | ) |  |  | (6  | )%
|Other                                                                                 |  |                         | 641     |   |      |  | 4   | %    |  |   | 4,463    |   |  |  | 1   | %  |  |   | (2,786  | ) |  |  | (1  | )%
|                                                                                      |  |                         |         |   |      |  |     |      |  |   |          |   |  |  |     |    |  |  
|Effective tax rate                                                                    |  | $                       | 26,540  |   |      |  | 127 | %    |  | $ | 24,000   |   |  |  | 5   | %  |  | $ | 24,000  |   |  |  | 8   | % 
|                                                                                      |  |                         |         |   |      |  |     |      |  |   |          |   |  |  |     |    |  |  






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







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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)






Note 12  Commitments and Contingencies




| |                 
| | ----------------
| | Operating Leases







| |                 
| | ----------------
| | Indemnifications



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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




| |           
| | ----------
| | Guarantees



| |                    
| | -------------------
| | Product warranties.

|                                                                                 |  |                |         |   |      |   |        |  
|-------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------ | -
|                                                                                 |  | Years Ended    |        
|                                                                                 |  | December 31,   |        
|                                                                                 |  |                |        
|                                                                                 |  | 2005           |         |   | 2004 |  
|                                                                                 |  |                |         |   |      |  
|                                                                                 |  | (In thousands) |        
|Balance at the beginning of the period                                           |  | $              | 10,040  |   |      | $ | 9,474  |  
|Accruals for warranties issued during the period                                 |  |                | 13,060  |   |      |   | 10,955 |  
|Accruals related to pre-existing warranties (including changes
    in estimates) |  |                | (967    | ) |      |   | (463   | )
|Settlements made during the period (in cash or in kind)                          |  |                | (11,059 | ) |      |   | (9,926 | )
|                                                                                 |  |                |         |   |      |  
|Balance at the end of the period                                                 |  | $              | 11,074  |   |      | $ | 10,040 |  
|                                                                                 |  |                |         |   |      |  

Standby letters of credit.


Purchase commitments.


Legal Matters.




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LSI Logic Corporation


Notes to Consolidated Financial
Statements  (Continued)




89



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Report of Independent Registered Public Accounting Firm








Consolidated financial statements and financial statement
schedule




Internal control over financial reporting


Internal Control  Integrated Framework Internal Control 
Integrated Framework




90



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Supplementary Financial Data


Interim Financial Information (Unaudited)


|                                 |  |                                          |         |  |        |   |         |       |  |   |          |   |  |   |          |  
|-------------------------------- |  | ---------------------------------------- | ------- |  | ------ | - | ------- | ----- |  | - | -------- | - |  | - | -------- | -
|                                 |  | Quarter                                  |        
|                                 |  |                                          |        
|                                 |  | First                                    |         |  | Second |   |         | Third |  |   | Fourth   |  
|                                 |  |                                          |         |  |        |   |         |       |  |   |          |  
|                                 |  | (In thousands, except per share amounts) |        
|Year Ended December 31, 2005     |  |                                          |         |  |        |   |         |       |  |   |          |   |  |   |          |  
|Revenues                         |  | $                                        | 450,007 |  |        | $ | 481,292 |       |  | $ | 481,716  |   |  | $ | 506,235  |  
|Gross profit                     |  |                                          | 190,267 |  |        |   | 211,761 |       |  |   | 210,205  |   |  |   | 220,203  |  
|Net income/(loss)                |  |                                          | 4,719   |  |        |   | 25,262  |       |  |   | (73,394  | ) |  |   | 37,790   |  
|Basic income/(loss) per share:   |  | $                                        | 0.01    |  |        | $ | 0.06    |       |  | $ | (0.19    | ) |  | $ | 0.10     |  
|Diluted income/(loss) per share: |  | $                                        | 0.01    |  |        | $ | 0.06    |       |  | $ | (0.19    | ) |  | $ | 0.09     |  
|Year Ended December 31, 2004     |  |                                          |         |  |        |   |         |       |  |   |          |   |  |   |          |  
|Revenues                         |  | $                                        | 452,357 |  |        | $ | 447,897 |       |  | $ | 380,217  |   |  | $ | 419,693  |  
|Gross profit                     |  |                                          | 201,432 |  |        |   | 208,816 |       |  |   | 151,799  |   |  |   | 173,561  |  
|Net income/(loss)                |  |                                          | 9,085   |  |        |   | 7,242   |       |  |   | (282,432 | ) |  |   | (197,426 | )
|Basic income/(loss) per share:   |  | $                                        | 0.02    |  |        | $ | 0.02    |       |  | $ | (0.73    | ) |  | $ | (0.51    | )
|Diluted income/(loss) per share: |  | $                                        | 0.02    |  |        | $ | 0.02    |       |  | $ | (0.73    | ) |  | $ | (0.51    | )










|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures


13a-15(e)


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##### Table of Contents



Managements Report on Internal Control Over Financial
Reporting


13a-15(f)


Internal Control  Integrated
Framework.




Changes in Internal Control over Financial Reporting.







Item 9B.     Other
Information







PART III







Item 10.     Directors and
Executive Officers of the Registrant




10-K.








93



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www.lsilogic.com.







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters

10-K.









|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules



1.     FINANCIAL STATEMENTS. 10-K:


|                                                                                                                 |  |             |    | 
|---------------------------------------------------------------------------------------------------------------- |  | ----------- | -- | 
|                                                                                                                 |  | PAGE IN THE
|                                                                                                                 |  | FORM 10-K  
|                                                                                                                 |  |            
|Consolidated Balance Sheets  As of December 31,
    2005 and 2004                                               |  |             | 48 | 
|Consolidated Statements of Operations  For the Three
    Years Ended December 31, 2005, 2004 and 2003           |  |             | 49 | 
|Consolidated Statements of Stockholders Equity 
    For the Three Years Ended December 31, 2005, 2004 and 2003 |  |             | 50 | 
|Consolidated Statements of Cash Flows  For the Three
    Years Ended December 31, 2005, 2004 and 2003           |  |             | 51 | 
|Notes to Consolidated Financial Statements                                                                       |  |             | 52 | 
|Report of Independent Registered Public Accounting Firm                                                          |  |             | 90 | 

52-week


94



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2.     FINANCIAL STATEMENT
SCHEDULE.


SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS


(In millions)


|                                |  |            |    |                      |  |             |    |            |  |   |     |   |  |   |    | 
|------------------------------- |  | ---------- | -- | -------------------- |  | ----------- | -- | ---------- |  | - | --- | - |  | - | -- | 
|Column A                        |  | Column B   |    | Column C             |  | Column D    |    | Column E  
|                                |  |            |    |                      |  |             |    |           
|                                |  | Balance at |    | Additions Charged to |  |             |    | Balance at
|                                |  | Beginning  |    | Costs, Expenses      |  |             |    | End       
|Description                     |  | of Period  |    | or Other Accounts    |  | Deductions* |    | of Period 
|                                |  |            |    |                      |  |             |    |           
|2005                            |  |            |    |                      |  |             |    |            |  |   |     |   |  |   |    | 
|Allowance for doubtful accounts |  | $          | 10 |                      |  | $           | 48 |            |  | $ | (43 | ) |  | $ | 15 | 
|2004                            |  |            |    |                      |  |             |    |            |  |   |     |   |  |   |    | 
|Allowance for doubtful accounts |  | $          | 7  |                      |  | $           | 8  |            |  | $ | (5  | ) |  | $ | 10 | 
|2003                            |  |            |    |                      |  |             |    |            |  |   |     |   |  |   |    | 
|Allowance for doubtful accounts |  | $          | 7  |                      |  | $           | 5  |            |  | $ | (5  | ) |  | $ | 7  | 






|  |                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------
|* | Deductions include write-offs of uncollectable accounts and
    collections of amounts previously reserved.

3.     EXHIBITS:


| |   |     |  |                                                                                                                                                                                                                                                                                                       
| | - | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2 | .1  |  | Agreement and Plan of Reorganization dated March 26, 2001
    by and among Registrant, Clover Acquisition Corporation and
    C-Cube Microsystems Inc. Incorporated by reference to exhibits
    filed with the Registrants Registration Statement on
    Form S-4 (No. 333-58862) on April 13, 2001.
| | 2 | .2  |  | Master Separation Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                             
| | 2 | .3  |  | General Assignment and Assumption Agreement between Registrant
    and LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2003.             
| | 2 | .4  |  | Intellectual Property Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                         
| | 2 | .5  |  | Indemnification and Insurance Matters Agreement between
    Registrant and LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2003.         
| | 2 | .6  |  | Employee Matters Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                              
| | 2 | .7  |  | Real Estate Matters Agreement between LSI Logic Corporation and
    LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.            
| | 2 | .8  |  | Tax Sharing Agreement between LSI Logic Corporation and LSI
    Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.                       
| | 2 | .9  |  | Transition Services Agreement between LSI Logic Corporation and
    LSI Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.               
| | 2 | .10 |  | Investor Rights Agreement between LSI Logic Corporation and LSI
    Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.                   
| | 3 | .1  |  | Restated Certificate of Incorporation of Registrant.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-46436) on September 22, 2000.                                                                                          

95



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| |    |     |  |                                                                                                                                                                                                                                                                                                     
| | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | .2  |  | By-laws of Registrant. Incorporated by reference to exhibits
    filed with the Registrants Current Report on Form 8-K
    filed on September 3, 2004.                                                                                                                                             
| | 4  | .1  |  | Indenture dated February 15, 2000 between LSI Logic
    Corporation and State Street Bank and Trust Company of
    California, N.A., as Trustee. Incorporated by reference to
    exhibits filed with the Registrants Current Report on
    Form 8-K filed on February 24, 2000.                   
| | 4  | .2  |  | Indenture dated as of October 30, 2001, between LSI Logic
    Corporation and State Street Bank and Trust Company of
    California, N.A., as Trustee. Incorporated by reference to
    exhibits filed with Registrants Registration Statement on
    Form S-3 (No. 333-81434) on January 25, 2002.
| | 4  | .3  |  | Indenture dated as of May 16, 2003, between LSI Logic
    Corporation and U.S. Bank, N.A., as Trustee. Incorporated
    by reference to exhibits filed with Registrants Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2003.                                                 
| | 4  | .4  |  | See Exhibit 3.1.                                                                                                                                                                                                                                                                                    
| | 10 | .1  |  | Form of Indemnification Agreement between Registrant and our
    officers, directors and certain key employees. Incorporated by
    reference to exhibits filed with the Registrants Annual
    Report on Form 10-K for the year ended December 31,
    1987.*                                     
| | 10 | .2  |  | Amended and Restated LSI Logic Corporation 1991 Equity Incentive
    Plan. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-96543) on July 16, 2002.*                                                                              
| | 10 | .3  |  | 1995 Director Option Plan. Incorporated by reference to
    exhibits filed with the Registrants Registration Statement
    on Form S-8 (No. 333-106205) on June 17, 2003.*                                                                                                                         
| | 10 | .4  |  | LSI Logic Corporation International Employee Stock Purchase
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-115762) on May 21, 2004.*                                                                               
| | 10 | .5  |  | Form of LSI Logic Corporation Change of Control Severance
    Agreement between LSI Logic Corporation and each of its
    executive officers. Incorporated by reference to exhibits filed
    with the Registrants Annual Report on Form 10-K for
    the year ended December 31, 2003.*           
| | 10 | .6  |  | Technology Transfer Agreement between LSI Logic Corporation and
    Wafer Technology (Malaysia) Sdn. Bhd., dated September 8,
    1999. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1999. +         
| | 10 | .7  |  | Mint Technology, Inc. Amended 1996 Stock Option Plan.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-34285) on August 25, 1997.*                                                                                         
| | 10 | .8  |  | Registrants Amended and Restated Employee Stock Purchase
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-115762) on May 21, 2004.*                                                                                 
| | 10 | .9  |  | Symbios Logic, Inc. 1995 Stock Plan. Incorporated by reference
    to exhibits filed with the Registrants Registration
    Statement on Form S-8 (No. 333-62159) on August 25,
    1998.                                                                                                           
| | 10 | .10 |  | LSI Logic Corporation 1999 Nonstatutory Stock Option Plan.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-96549) on July 16, 2002.*                                                                                      
| | 10 | .11 |  | SEEQ Technology, Inc. Amended and Restated 1982 Stock Option
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-81435) on June 24, 1999.*                                                                              
| | 10 | .12 |  | IntraServer Technology, Inc. 1998 Stock Option Plan.
    Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-38746) on June 7, 2000.                                                                                                  
| | 10 | .13 |  | DataPath Systems, Inc. Amended 1994 Stock Option Plan.
    Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-42888) on August 2, 2000.*                                                                                             
| | 10 | .14 |  | DataPath Systems, Inc. Amended and Restated 1997 Stock Option
    Plan. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-42888) on August 2, 2000.*                                                                                
| | 10 | .15 |  | Syntax Systems, Inc. Restated Stock Option Plan of
    January 5, 1999. Incorporated by reference to exhibits
    filed with Registrants Registration Statement on
    Form S-8 (No. 333-52050) on December 18, 2000.*                                                                             

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| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                              
| | -- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .16 |  | C-Cube Microsystems Inc. 2000 Stock Plan. Incorporated by
    reference to exhibits filed with Registrants Registration
    Statement on Form S-8 (No. 333-62960) on June 14, 2001.                                                                                                                                                                                         
| | 10 | .17 |  | Wilfred J. Corrigan Employment Agreement dated as of
    September 20, 2001. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2001.*                                                                                                                                                     
| | 10 | .18 |  | Manufacturing Technology Joint Development and Foundry Supply
    Agreement dated as of March 30, 2001 by and between the
    Registrant and Taiwan Semiconductor Manufacturing Co., Ltd.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2002.+                                    
| | 10 | .19 |  | LSI Logic Corporation 2003 Equity Incentive Plan. Incorporated
    by reference to exhibits filed with the Registrants
    Registration Statement on From S-8 (No. 333-106206) on
    June 17, 2003.*                                                                                                                                                                       
| | 10 | .20 |  | Registration Rights Agreement between LSI Logic Corporation and
    Morgan Stanley & Co., Inc., dated May 16, 2003.
    Incorporated by reference to exhibits filed with
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2003.                                                                                                             
| | 10 | .21 |  | LSI Logic Corporation 1991 Equity Incentive Plan Nonqualified
    Stock Option Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                                                    
| | 10 | .22 |  | Form of Notice of Grant under LSI Logic Corporation Nonqualified
    Stock Option Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                                                 
| | 10 | .23 |  | LSI Logic Corporation 2003 Equity Incentive Plan Restricted
    Stock Unit Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                                                        
| | 10 | .24 |  | Engenio Information Technologies, Inc. Amended and Restated 2004
    Equity Incentive Plan. Incorporated by reference to exhibits
    filed with the Registrants Current Report on Form 8-K
    on November 4, 2004.*                                                                                                                                                       
| | 10 | .25 |  | Engenio Information Technologies, Inc. 2004 Equity Incentive
    Plan Nonqualified Stock Option Agreement. Incorporated by
    reference to exhibits filed with the Registrants Current
    Report on Form 8-K on November 4, 2004.*                                                                                                                                        
| | 10 | .26 |  | Form of Notice of Grant under Engenio Information Technologies,
    Inc. 2004 Equity Incentive Plan Nonqualified Stock Option
    Agreement. Incorporated by reference to exhibits filed with the
    Registrants Current Report on Form 8-K on
    November 4, 2004.*                                                                                                      
| | 10 | .27 |  | Lease Agreement dated June 30, 2004, for
    670 N. McCarthy Boulevard, Milpitas, California,
    between Engenio Information Technologies, Inc. and The Irvine
    Company. Incorporated by reference to exhibit filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.                                                       
| | 10 | .28 |  | First Amendment, dated October 28, 2004, to the Lease
    Agreement (dated June 30, 2004), for
    670 N. McCarthy Boulevard, Milpitas, California,
    between Engenio Information Technologies, Inc. and The Irvine
    Company. Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.
| | 10 | .29 |  | Lease Agreement dated December 31, 2003, for 1621 Barber
    Lane, Milpitas, California, between the Registrant and Limar
    Realty Corp. #9. Incorporated by reference to exhibits filed
    with Registrants Annual Report on Form 10-K for the
    year ended December 31, 2004.                                                                                        
| | 10 | .30 |  | Lease Agreement dated December 31, 2003, for 765 Sycamore
    Drive, Milpitas, California, between the Registrant and Limar
    Realty Corp. #4. Incorporated by reference to exhibits filed
    with Registrants Annual Report on Form 10-K for the
    year ended December 31, 2004.                                                                                      
| | 10 | .31 |  | Lease Agreement dated December 31, 2003, for 1501 McCarthy
    Boulevard, Milpitas, California, between the Registrant and
    Limar Realty Corp. #4. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.                                                                                 
| | 10 | .32 |  | Lease Agreement dated February 20, 2004, for 1855 Barber
    Lane, Milpitas, California, between the Registrant and TriNet
    Milpitas Associates, LLC. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                              

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| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .33 |  | Lease Agreement dated February 20, 2004, for 560 Cottonwood
    Drive, Milpitas, California, between the Registrant and TriNet
    Milpitas Associates, LLC. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                 
| | 10 | .34 |  | Assignment and Assumption of Lease dated May 27, 2004, for
    5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado,
    between LakeCentre Plaza Limited, Ltd., LLLP and Engenio
    Information Technologies, Inc. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.
| | 10 | .35 |  | Lease Modification Agreement dated June 21, 2004, for 5400
    Airport Boulevard, Suites 100 and 200, Boulder, Colorado,
    between LakeCentre Plaza Limited, Ltd., LLLP and Engenio
    Information Technologies, Inc. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.     
| | 10 | .36 |  | Form of Notice of Grant of Restricted Stock Units under LSI
    Logic Corporation 2003 Equity Incentive Plan. Incorporated by
    reference to exhibits filed with Registrants Annual Report
    on Form 10-K for the year ended December 31, 2004.*                                                                                                               
| | 10 | .37 |  | LSI Logic Corporation 2004 16(b) Executive Officer Incentive
    Plan. Incorporated by reference to exhibit filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.*                                                                                                                                                   
| | 10 | .38 |  | Summary Description of the Engenio Information Technologies,
    Inc. 2004 Incentive Plan. Incorporated by reference to exhibit
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2004.*                                                                                                                               
| | 10 | .39 |  | Summary Description of LSI Logic Corporation 2005 Semiconductor
    Incentive Plan. Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                                                                             
| | 10 | .40 |  | Summary Description of Engenio Technologies, Inc. 2005 Incentive
    Plan. Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                                                                                      
| | 10 | .41 |  | Form of Annual Director Option Agreement. Incorporated by
    reference to exhibits filed with Registrants Current
    Report on Form 8-K on April 7, 2005.*                                                                                                                                                                                                       
| | 10 | .42 |  | Form of Notice of Grant of Stock Options and Option Agreement.
    Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                                                                                              
| | 10 | .43 |  | Employment Agreement with Abhijit Y. Talwalkar, effective as of
    May 23, 2005. Incorporated by reference to exhibits filed
    with Registrants Current Report on Form 8-K on
    May 24, 2005.*                                                                                                                                                                
| | 10 | .44 |  | Amendment No. 1 to the LSI Logic Corporation 1991 Equity
    Incentive Stock Option Agreement dated August 15, 1997 with
    Wilfred J. Corrigan. Incorporated by reference to exhibits filed
    with Registrants Current Report on Form 8-K on
    June 17, 2005.*                                                                                               
| | 10 | .45 |  | Amendment No. 1 to the LSI Logic Corporation 1991 Equity
    Incentive Stock Option Agreement dated November 20, 1998
    with Wilfred J. Corrigan. Incorporated by reference to exhibits
    filed with Registrants Current Report on Form 8-K on
    June 17, 2005.*                                                                                             
| | 10 | .46 |  | Standalone Stock Option Agreement issued to Abhijit Y.
    Talwalkar. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-126594) on July 14, 2005.*                                                                                                                                                  
| | 10 | .47 |  | Abhijit Y. Talwalkar LSI Logic Corporation 2003 Equity Incentive
    Plan Nonqualified Stock Option Agreement, effective as of
    June 1, 2005. Incorporated by reference to exhibits filed
    with Registrants Quarterly Report on Form 10-Q for
    the quarter ended July 3, 2005.*                                                                           
| | 10 | .48 |  | Abhijit Y. Talwalkar Notice of Grant under LSI Logic Corporation
    2003 Equity Incentive Plan Nonqualified Stock Option Agreement,
    effective as of June 1, 2005. Incorporated by reference to
    exhibits filed with Registrants Quarterly Report on
    Form 10-Q for the quarter ended July 3, 2005.*+                                                    
| | 10 | .49 |  | LSI Logic Corporation 2003 Equity Incentive Plan Nonqualified
    Stock Option Agreement. Incorporated by reference to
    exhibits filed with Registrants Quarterly Report on
    Form 10-Q for the quarter ended July 3, 2005.*                                                                                                                                 
| | 10 | .50 |  | LSI Logic Corporation Form of Notice of Grant of Stock Options
    under the 2003 Equity Incentive Plan. Incorporated by reference
    to exhibits filed with Registrants Quarterly Report on
    Form 10-Q for the quarter ended July 3, 2005.*                                                                                                                   

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| |    |     |  |                                                                                                                                                                                                           
| | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .51 |  | Separation Agreement with W. Richard Marz, effective
    October 5, 2005. Incorporated by reference to exhibits
    filed with Registrants Current Report on Form 8-K on
    October 11, 2005.*          
| | 14 | .1  |  | Code of Ethics for Principal Executive and Senior Financial
    Officers of LSI Logic Corporation. Included as an exhibit
    to this Annual Report on Form 10-K for the year ended
    December 31, 2005.
| | 21 | .1  |  | List of Subsidiaries.                                                                                                                                                                                     
| | 23 | .1  |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                 
| | 24 | .1  |  | Power of Attorney (included in this Annual Report on
    Form 10-K).                                                                                                                                      
| | 31 | .1  |  | Certification of the Chief Executive Officer pursuant to
    Securities and Exchange Act Rules 13a-15(e) and 15d-1(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.      
| | 31 | .2  |  | Certification of the Chief Financial Officer pursuant to
    Securities and Exchange Act Rules 13a-15(e) and 15de-1(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.     
| | 32 | .1  |  | Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**                                          
| | 32 | .2  |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**                                          






|   |                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | 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.                                                                                                                                                             

EXHIBITS.




FINANCIAL STATEMENT SCHEDULE




TRADEMARK ACKNOWLEDGMENTS






99



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SIGNATURES






| |                      
| | ---------------------
| | LSI LOGIC CORPORATION



| |     |                         
| | --- | ------------------------
| | By: | /s/ ABHIJIT Y. TALWALKAR

| |                                      
| | -------------------------------------
| |                                      
| | Abhijit Y. Talwalkar                 
| | President and Chief Executive Officer



POWER OF ATTORNEY


attorneys-in 10-K, attorneys-in




|                                                        |  |                                                                                                                                 |  |                |  | 
|------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                               |  | Title                                                                                                                           |  | Date          
|                                                        |  |                                                                                                                                 |  |               
|                                                       
|/s/ ABHIJIT Y.
    TALWALKAR (Abhijit
    Y. Talwalkar) |  | President and Chief Executive Officer and Director                                                                              |  | March 15, 2006
|                                                       
|/s/ BRYON LOOK (Bryon
    Look)                         |  | Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer
    and Principal Accounting Officer) |  | March 15, 2006
|                                                       
|/s/ WILFRED J. CORRIGAN (Wilfred
    J. Corrigan)       |  | Director                                                                                                                        |  | March 15, 2006
|                                                       
|/s/ T.Z. CHU (T.Z.
    Chu)                             |  | Director                                                                                                                        |  | March 15, 2006
|                                                       
|/s/ MALCOLM R. CURRIE (Malcolm
    R. Currie)           |  | Director                                                                                                                        |  | March 15, 2006
|                                                       
|/s/ JAMES H. KEYES (James
    H. Keyes)                 |  | Director                                                                                                                        |  | March 15, 2006
|                                                       
|/s/ R. DOUGLAS NORBY (R.
    Douglas Norby)             |  | Director                                                                                                                        |  | March 15, 2006

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|                                                |  |          |  |                |  | 
|----------------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                       |  | Title    |  | Date          
|                                                |  |          |  |               
|                                               
|/s/ MATTHEW
    OROURKE (Matthew
    ORourke) |  | Director |  | March 15, 2006
|                                               
|/s/ GREGORIO REYES (Gregorio
    Reyes)         |  | Director |  | March 15, 2006

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INDEX TO EXHIBITS


| |    |     |  |                                                                                                                                                                                                                                                                                                       
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2  | .1  |  | Agreement and Plan of Reorganization dated March 26, 2001
    by and among Registrant, Clover Acquisition Corporation and
    C-Cube Microsystems Inc. Incorporated by reference to exhibits
    filed with the Registrants Registration Statement on
    Form S-4 (No. 333-58862) on April 13, 2001.
| | 2  | .2  |  | Master Separation Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                             
| | 2  | .3  |  | General Assignment and Assumption Agreement between Registrant
    and LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2003.             
| | 2  | .4  |  | Intellectual Property Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                         
| | 2  | .5  |  | Indemnification and Insurance Matters Agreement between
    Registrant and LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2003.         
| | 2  | .6  |  | Employee Matters Agreement between Registrant and LSI Logic
    Storage Systems, Inc., effective as of December 31, 2003.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2003.                              
| | 2  | .7  |  | Real Estate Matters Agreement between LSI Logic Corporation and
    LSI Logic Storage Systems, Inc., effective as of
    December 31, 2003. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.            
| | 2  | .8  |  | Tax Sharing Agreement between LSI Logic Corporation and LSI
    Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.                       
| | 2  | .9  |  | Transition Services Agreement between LSI Logic Corporation and
    LSI Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.               
| | 2  | .10 |  | Investor Rights Agreement between LSI Logic Corporation and LSI
    Logic Storage Systems, Inc., effective as of March 15,
    2004. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended October 3, 2004.                   
| | 3  | .1  |  | Restated Certificate of Incorporation of Registrant.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-46436) on September 22, 2000.                                                                                          
| | 3  | .2  |  | By-laws of Registrant. Incorporated by reference to exhibits
    filed with the Registrants Current Report on Form 8-K
    filed on September 3, 2004.                                                                                                                                               
| | 4  | .1  |  | Indenture dated February 15, 2000 between LSI Logic
    Corporation and State Street Bank and Trust Company of
    California, N.A., as Trustee. Incorporated by reference to
    exhibits filed with the Registrants Current Report on
    Form 8-K filed on February 24, 2000.                     
| | 4  | .2  |  | Indenture dated as of October 30, 2001, between LSI Logic
    Corporation and State Street Bank and Trust Company of
    California, N.A., as Trustee. Incorporated by reference to
    exhibits filed with Registrants Registration Statement on
    Form S-3 (No. 333-81434) on January 25, 2002.  
| | 4  | .3  |  | Indenture dated as of May 16, 2003, between LSI Logic
    Corporation and U.S. Bank, N.A., as Trustee. Incorporated
    by reference to exhibits filed with Registrants Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2003.                                                   
| | 4  | .4  |  | See Exhibit 3.1.                                                                                                                                                                                                                                                                                      
| | 10 | .1  |  | Form of Indemnification Agreement between Registrant and our
    officers, directors and certain key employees. Incorporated by
    reference to exhibits filed with the Registrants Annual
    Report on Form 10-K for the year ended December 31,
    1987.*                                       
| | 10 | .2  |  | Amended and Restated LSI Logic Corporation 1991 Equity Incentive
    Plan. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-96543) on July 16, 2002.*                                                                                

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| |    |     |  |                                                                                                                                                                                                                                                                                                                                          
| | -- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .3  |  | 1995 Director Option Plan. Incorporated by reference to
    exhibits filed with the Registrants Registration Statement
    on Form S-8 (No. 333-106205) on June 17, 2003.*                                                                                                                                                              
| | 10 | .4  |  | LSI Logic Corporation International Employee Stock Purchase
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-115762) on May 21, 2004.*                                                                                                                    
| | 10 | .5  |  | Form of LSI Logic Corporation Change of Control Severance
    Agreement between LSI Logic Corporation and each of its
    executive officers. Incorporated by reference to exhibits filed
    with the Registrants Annual Report on Form 10-K for
    the year ended December 31, 2003.*                                                
| | 10 | .6  |  | Technology Transfer Agreement between LSI Logic Corporation and
    Wafer Technology (Malaysia) Sdn. Bhd., dated September 8,
    1999. Incorporated by reference to exhibits filed with the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1999.+                                               
| | 10 | .7  |  | Mint Technology, Inc. Amended 1996 Stock Option Plan.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-34285) on August 25, 1997.*                                                                                                                              
| | 10 | .8  |  | Registrants Amended and Restated Employee Stock Purchase
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-115762) on May 21, 2004.*                                                                                                                      
| | 10 | .9  |  | Symbios Logic, Inc. 1995 Stock Plan. Incorporated by reference
    to exhibits filed with the Registrants Registration
    Statement on Form S-8 (No. 333-62159) on August 25,
    1998.                                                                                                                                                
| | 10 | .10 |  | LSI Logic Corporation 1999 Nonstatutory Stock Option Plan.
    Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-96549) on July 16, 2002.*                                                                                                                           
| | 10 | .11 |  | SEEQ Technology, Inc. Amended and Restated 1982 Stock Option
    Plan. Incorporated by reference to exhibits filed with the
    Registrants Registration Statement on Form S-8 (No.
    333-81435) on June 24, 1999.*                                                                                                                   
| | 10 | .12 |  | IntraServer Technology, Inc. 1998 Stock Option Plan.
    Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-38746) on June 7, 2000.                                                                                                                                       
| | 10 | .13 |  | DataPath Systems, Inc. Amended 1994 Stock Option Plan.
    Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-42888) on August 2, 2000.*                                                                                                                                  
| | 10 | .14 |  | DataPath Systems, Inc. Amended and Restated 1997 Stock Option
    Plan. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-42888) on August 2, 2000.*                                                                                                                     
| | 10 | .15 |  | Syntax Systems, Inc. Restated Stock Option Plan of
    January 5, 1999. Incorporated by reference to exhibits
    filed with Registrants Registration Statement on
    Form S-8 (No. 333-52050) on December 18, 2000.*                                                                                                                  
| | 10 | .16 |  | C-Cube Microsystems Inc. 2000 Stock Plan. Incorporated by
    reference to exhibits filed with Registrants Registration
    Statement on Form S-8 (No. 333-62960) on June 14, 2001.                                                                                                                                                     
| | 10 | .17 |  | Wilfred J. Corrigan Employment Agreement dated as of
    September 20, 2001. Incorporated by reference to exhibits
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2001.*                                                                                                                 
| | 10 | .18 |  | Manufacturing Technology Joint Development and Foundry Supply
    Agreement dated as of March 30, 2001 by and between the
    Registrant and Taiwan Semiconductor Manufacturing Co., Ltd.
    Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2002.+
| | 10 | .19 |  | LSI Logic Corporation 2003 Equity Incentive Plan. Incorporated
    by reference to exhibits filed with the Registrants
    Registration Statement on From S-8 (No. 333-106206) on
    June 17, 2003.*                                                                                                                                   
| | 10 | .20 |  | Registration Rights Agreement between LSI Logic Corporation and
    Morgan Stanley & Co., Inc., dated May 16, 2003.
    Incorporated by reference to exhibits filed with
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2003.                                                                         
| | 10 | .21 |  | LSI Logic Corporation 1991 Equity Incentive Plan Nonqualified
    Stock Option Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                

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| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                              
| | -- | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .22 |  | Form of Notice of Grant under LSI Logic Corporation Nonqualified
    Stock Option Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                                                 
| | 10 | .23 |  | LSI Logic Corporation 2003 Equity Incentive Plan Restricted
    Stock Unit Agreement. Incorporated by reference to exhibits
    filed with the Registrants Quarterly Report on
    Form 10-Q for the quarter ended October 3, 2004.*                                                                                                                                        
| | 10 | .24 |  | Engenio Information Technologies, Inc. Amended and Restated 2004
    Equity Incentive Plan. Incorporated by reference to exhibits
    filed with the Registrants Current Report on Form 8-K
    on November 4, 2004.*                                                                                                                                                       
| | 10 | .25 |  | Engenio Information Technologies, Inc. 2004 Equity Incentive
    Plan Nonqualified Stock Option Agreement. Incorporated by
    reference to exhibits filed with the Registrants Current
    Report on Form 8-K on November 4, 2004.*                                                                                                                                        
| | 10 | .26 |  | Form of Notice of Grant under Engenio Information Technologies,
    Inc. 2004 Equity Incentive Plan Nonqualified Stock Option
    Agreement. Incorporated by reference to exhibits filed with the
    Registrants Current Report on Form 8-K on
    November 4, 2004.*                                                                                                      
| | 10 | .27 |  | Lease Agreement dated June 30, 2004, for
    670 N. McCarthy Boulevard, Milpitas, California,
    between Engenio Information Technologies, Inc. and The Irvine
    Company. Incorporated by reference to exhibit filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.                                                       
| | 10 | .28 |  | First Amendment, dated October 28, 2004, to the Lease
    Agreement (dated June 30, 2004), for
    670 N. McCarthy Boulevard, Milpitas, California,
    between Engenio Information Technologies, Inc. and The Irvine
    Company. Incorporated by reference to exhibits filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.
| | 10 | .29 |  | Lease Agreement dated December 31, 2003, for 1621 Barber
    Lane, Milpitas, California, between the Registrant and Limar
    Realty Corp. #9. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                                        
| | 10 | .30 |  | Lease Agreement dated December 31, 2003, for 765 Sycamore
    Drive, Milpitas, California, between the Registrant and Limar
    Realty Corp. #4. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                                      
| | 10 | .31 |  | Lease Agreement dated December 31, 2003, for 1501 McCarthy
    Boulevard, Milpitas, California, between the Registrant and
    Limar Realty Corp. #4. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.                                                                                 
| | 10 | .32 |  | Lease Agreement dated February 20, 2004, for 1855 Barber
    Lane, Milpitas, California, between the Registrant and TriNet
    Milpitas Associates, LLC. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                              
| | 10 | .33 |  | Lease Agreement dated February 20, 2004, for 560 Cottonwood
    Drive, Milpitas, California, between the Registrant and TriNet
    Milpitas Associates, LLC. Incorporated by reference to exhibits
    filed with Registrants Annual Report on Form 10-K for
    the year ended December 31, 2004.                                                                          
| | 10 | .34 |  | Assignment and Assumption of Lease dated May 27, 2004, for
    5400 Airport Boulevard, Suites 100 and 200, Boulder, Colorado,
    between LakeCentre Plaza Limited, Ltd., LLLP and Engenio
    Information Technologies, Inc. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.         
| | 10 | .35 |  | Lease Modification Agreement dated June 21, 2004, for 5400
    Airport Boulevard, Suites 100 and 200, Boulder, Colorado,
    between LakeCentre Plaza Limited, Ltd., LLLP and Engenio
    Information Technologies, Inc. Incorporated by reference to
    exhibits filed with Registrants Annual Report on
    Form 10-K for the year ended December 31, 2004.              
| | 10 | .36 |  | Form of Notice of Grant of Restricted Stock Units under LSI
    Logic Corporation 2003 Equity Incentive Plan. Incorporated by
    reference to exhibits filed with Registrants Annual Report
    on Form 10-K for the year ended December 31, 2004.*                                                                                                                        
| | 10 | .37 |  | LSI Logic Corporation 2004 16(b) Executive Officer Incentive
    Plan. Incorporated by reference to exhibit filed with the
    Registrants Annual Report on Form 10-K for the year
    ended December 31, 2004.*                                                                                                                                                            

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| |    |     |  |                                                                                                                                                                                                                                                                                                                 
| | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .38 |  | Summary Description of the Engenio Information Technologies,
    Inc. 2004 Incentive Plan. Incorporated by reference to exhibit
    filed with the Registrants Annual Report on Form 10-K
    for the year ended December 31, 2004.*                                                                           
| | 10 | .39 |  | Summary Description of LSI Logic Corporation 2005 Semiconductor
    Incentive Plan. Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                         
| | 10 | .40 |  | Summary Description of Engenio Technologies, Inc. 2005 Incentive
    Plan. Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                                  
| | 10 | .41 |  | Form of Annual Director Option Agreement. Incorporated by
    reference to exhibits filed with Registrants Current
    Report on Form 8-K on April 7, 2005.*                                                                                                                                                   
| | 10 | .42 |  | Form of Notice of Grant of Stock Options and Option Agreement.
    Incorporated by reference to exhibits filed with
    Registrants Current Report on Form 8-K on
    April 7, 2005.*                                                                                                                          
| | 10 | .43 |  | Employment Agreement with Abhijit Y. Talwalkar, effective as of
    May 23, 2005. Incorporated by reference to exhibits filed
    with Registrants Current Report on Form 8-K on
    May 24, 2005.*                                                                                                            
| | 10 | .44 |  | Amendment No. 1 to the LSI Logic Corporation 1991 Equity
    Incentive Stock Option Agreement dated August 15, 1997 with
    Wilfred J. Corrigan. Incorporated by reference to exhibits filed
    with Registrants Current Report on Form 8-K on
    June 17, 2005.*                                           
| | 10 | .45 |  | Amendment No. 1 to the LSI Logic Corporation 1991 Equity
    Incentive Stock Option Agreement dated November 20, 1998
    with Wilfred J. Corrigan. Incorporated by reference to exhibits
    filed with Registrants Current Report on Form 8-K on
    June 17, 2005.*                                         
| | 10 | .46 |  | Standalone Stock Option Agreement issued to Abhijit Y.
    Talwalkar. Incorporated by reference to exhibits filed with
    Registrants Registration Statement on Form S-8 (No.
    333-126594) on July 14, 2005.*                                                                                              
| | 10 | .47 |  | Abhijit Y. Talwalkar LSI Logic Corporation 2003 Equity Incentive
    Plan Nonqualified Stock Option Agreement, effective as of
    June 1, 2005. Incorporated by reference to exhibits filed
    with Registrants Quarterly Report on Form 10-Q for
    the quarter ended July 3, 2005.*                       
| | 10 | .48 |  | Abhijit Y. Talwalkar Notice of Grant under LSI Logic Corporation
    2003 Equity Incentive Plan Nonqualified Stock Option Agreement,
    effective as of June 1, 2005. Incorporated by reference to
    exhibits filed with Registrants Quarterly Report on
    Form 10-Q for the quarter ended July 3, 2005.*+
| | 10 | .49 |  | LSI Logic Corporation 2003 Equity Incentive Plan Nonqualified
    Stock Option Agreement. Incorporated by reference to exhibits
    filed with Registrants Quarterly Report on Form 10-Q
    for the quarter ended July 3, 2005.*                                                                              
| | 10 | .50 |  | LSI Logic Corporation Form of Notice of Grant of Stock Options
    under the 2003 Equity Incentive Plan. Incorporated by reference
    to exhibits filed with Registrants Quarterly Report on
    Form 10-Q for the quarter ended July 3, 2005.*                                                               
| | 10 | .51 |  | Separation Agreement with W. Richard Marz, effective
    October 5, 2005. Incorporated by reference to exhibits
    filed with Registrants Current Report on Form 8-K on
    October 11, 2005.*                                                                                                                
| | 14 | .1  |  | Code of Ethics for Principal Executive and Senior Financial
    Officers of LSI Logic Corporation. Included as an exhibit
    to this Annual Report on Form 10-K for the year ended
    December 31, 2005.                                                                                                      
| | 21 | .1  |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                           
| | 23 | .1  |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                       
| | 24 | .1  |  | Power of Attorney (included as part of this Annual Report on
    Form 10-K).                                                                                                                                                                                                                                    
| | 31 | .1  |  | Certification of the Chief Executive Officer pursuant to
    Securities and Exchange Act Rules 13a-15(e) and 15d-1(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                            
| | 31 | .2  |  | Certification of the Chief Financial Officer pursuant to
    Securities and Exchange Act Rules 13a-15(e) and 15de-1(e),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                           

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| |    |    |  |                                                                                                                                                                 
| | -- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 32 | .1 |  | Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**
| | 32 | .2 |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**






|   |  |                                                                                                                                                                                   
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  |  | 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.                                                                                                                                                             

106