##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended July 5, 2009
 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 Number: 1-10317
 LSI CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    94-2712976(State of Incorporation)
    
    (I.R.S. Employer Identification Number)
 1621 Barber Lane
Milpitas, California 95035  (Address of principal executive offices)
(Zip code)
 (408) 433-8000
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



LSI CORPORATION
Form 10-Q
For the Quarter Ended July 5, 2009
INDEX
 PageNo.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of July 5, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three and six months ended July 5, 2009 and June 29, 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the six months ended July 5, 2009 and June 29, 2008 (unaudited)
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 6. Exhibits
    
    
    34Signatures
    
    
    35Exhibit Index
    
    
    36EX-31.1EX-31.2EX-32.1EX-32.2
  FORWARD-LOOKING STATEMENTS
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 LSI CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 July 5,
    
    
    December 31,2009
    
    
    2008(In thousands, exceptper share amounts)ASSETSCash and cash equivalents
    
    $
    654,954
    
    
    $
    829,301Short-term investments
    
    
    218,679
    
    
    
    289,841Accounts receivable, less allowances of $6,711 and $9,627, respectively
    
    
    267,917
    
    
    
    303,971Inventories
    
    
    158,658
    
    
    
    220,535Prepaid expenses and other current assets
    
    
    140,466
    
    
    
    155,814Total current assets
    
    
    1,440,674
    
    
    
    1,799,462Property and equipment, net
    
    
    217,541
    
    
    
    235,963Identified intangible assets, net
    
    
    809,294
    
    
    
    889,995Goodwill
    
    
    179,212
    
    
    
    175,624Other assets
    
    
    235,596
    
    
    
    243,150Total assets
    
    $
    2,882,317
    
    
    $
    3,344,194LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    145,714
    
    
    $
    201,035Accrued salaries, wages and benefits
    
    
    82,004
    
    
    
    114,730Other accrued liabilities
    
    
    236,416
    
    
    
    236,661Current portion of long-term debt
    
    
    350,000
    
    
    
    245,107Total current liabilities
    
    
    814,134
    
    
    
    797,533Long-term debt, net of current portion
    
    
    
    
    
    
    350,000Pension, postretirement and other benefits
    
    
    444,458
    
    
    
    451,079Income taxes payable  non-current
    
    
    198,099
    
    
    
    193,590Other non-current liabilities
    
    
    108,201
    
    
    
    111,070Total long-term obligations and other liabilities
    
    
    750,758
    
    
    
    1,105,739Commitments and contingencies (Note 16)Stockholders equity:Preferred stock, $.01 par value: 2,000 shares authorized; none outstanding
    
    
    
    
    
    
    Common stock, $.01 par value: 1,300,000 shares authorized; 651,406 and
648,132 shares outstanding, respectively
    
    
    6,514
    
    
    
    6,481Additional paid-in capital
    
    
    6,105,249
    
    
    
    6,058,786Accumulated deficit
    
    
    (4,525,805
    )
    
    
    (4,360,775
    )Accumulated other comprehensive loss
    
    
    (268,533
    )
    
    
    (263,570
    )Total stockholders equity
    
    
    1,317,425
    
    
    
    1,440,922Total liabilities and stockholders equity
    
    $
    2,882,317
    
    
    $
    3,344,194
  3




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##### Table of Contents



LSI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In thousands, except per share amounts)Revenues
    
    $
    520,665
    
    
    $
    692,063
    
    
    $
    1,002,944
    
    
    $
    1,352,810Cost of revenues
    
    
    339,772
    
    
    
    407,167
    
    
    
    651,979
    
    
    
    808,361Gross profit
    
    
    180,893
    
    
    
    284,896
    
    
    
    350,965
    
    
    
    544,449Research and development
    
    
    148,919
    
    
    
    170,115
    
    
    
    304,203
    
    
    
    339,832Selling, general and administrative
    
    
    81,727
    
    
    
    104,470
    
    
    
    165,484
    
    
    
    203,523Restructuring of operations and other items, net
    
    
    6,010
    
    
    
    20,719
    
    
    
    31,215
    
    
    
    25,283Loss from operations
    
    
    (55,763
    )
    
    
    (10,408
    )
    
    
    (149,937
    )
    
    
    (24,189
    )Interest expense
    
    
    (6,864
    )
    
    
    (8,959
    )
    
    
    (14,100
    )
    
    
    (17,937
    )Interest income and other, net
    
    
    6,344
    
    
    
    8,220
    
    
    
    12,207
    
    
    
    22,851Loss before income taxes
    
    
    (56,283
    )
    
    
    (11,147
    )
    
    
    (151,830
    )
    
    
    (19,275
    )Provision for income taxes
    
    
    5,200
    
    
    
    2,500
    
    
    
    13,200
    
    
    
    8,000Net loss
    
    $
    (61,483
    )
    
    $
    (13,647
    )
    
    $
    (165,030
    )
    
    $
    (27,275
    )Net loss per share:Basic
    
    $
    (0.09
    )
    
    $
    (0.02
    )
    
    $
    (0.25
    )
    
    $
    (0.04
    )Diluted
    
    $
    (0.09
    )
    
    $
    (0.02
    )
    
    $
    (0.25
    )
    
    $
    (0.04
    )Shares used in computing per share amounts:Basic
    
    
    650,300
    
    
    
    639,872
    
    
    
    649,360
    
    
    
    650,867Diluted
    
    
    650,300
    
    
    
    639,872
    
    
    
    649,360
    
    
    
    650,867
  4




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##### Table of Contents



LSI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Six Months EndedJuly 5, 2009
    
    
    June 29, 2008(In thousands)Operating activities:Net loss
    
    $
    (165,030
    )
    
    $
    (27,275
    )Adjustments:Depreciation and amortization
    
    
    131,318
    
    
    
    157,618Stock-based compensation expense
    
    
    34,992
    
    
    
    37,442Non-cash restructuring of operations and other items, net
    
    
    (9
    )
    
    
    (3,245
    )Gain on redemption of convertible subordinated notes
    
    
    (149
    )
    
    
    Write-down of debt and equity securities
    
    
    
    
    
    
    2,827Loss/(gain) on sale of property and equipment
    
    
    117
    
    
    
    (23
    )Non-cash foreign exchange (gain)/loss
    
    
    (8,116
    )
    
    
    5,049Deferred taxes
    
    
    (11
    )
    
    
    4,129Changes in assets and liabilities, net of assets acquired and liabilities
assumed in business combination:Accounts receivable, net
    
    
    36,054
    
    
    
    47,019Inventories
    
    
    73,582
    
    
    
    (99
    )Prepaid expenses and other assets
    
    
    43,458
    
    
    
    (9,592
    )Accounts payable
    
    
    (53,388
    )
    
    
    (50,808
    )Accrued and other liabilities
    
    
    (33,753
    )
    
    
    (39,590
    )Net cash provided by operating activities
    
    
    59,065
    
    
    
    123,452Investing activities:Purchases of debt securities available-for-sale
    
    
    (10
    )
    
    
    (106,632
    )Proceeds from maturities and sales of debt securities available-for-sale
    
    
    63,945
    
    
    
    93,203Purchases of equity securities
    
    
    (5,000
    )
    
    
    (3,500
    )Purchases of property, equipment and software
    
    
    (48,601
    )
    
    
    (67,855
    )Proceeds from sale of property and equipment
    
    
    112
    
    
    
    11,250Acquisition of businesses and companies, net of cash acquired
    
    
    (20,840
    )
    
    
    (95,137
    )Decrease/(increase) in non-current assets and deposits
    
    
    13,501
    
    
    
    (13,300
    )Proceeds received from the resolution of a pre-acquisition income tax contingency
    
    
    
    
    
    
    4,821Net cash provided by/(used in) investing activities
    
    
    3,107
    
    
    
    (177,150
    )Financing activities:Redemption of convertible subordinated notes
    
    
    (244,047
    )
    
    
    Issuances of common stock
    
    
    6,673
    
    
    
    29,549Purchases of common stock under repurchase programs
    
    
    
    
    
    
    (229,231
    )Net cash used in financing activities
    
    
    (237,374
    )
    
    
    (199,682
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    855
    
    
    
    872Decrease in cash and cash equivalents
    
    
    (174,347
    )
    
    
    (252,508
    )Cash and cash equivalents at beginning of year
    
    
    829,301
    
    
    
    1,021,569Cash and cash equivalents at end of period
    
    $
    654,954
    
    
    $
    769,061
  5




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##### Table of Contents



LSI CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
    Recent Accounting Pronouncements
 Pronouncements not yet Effective:
   Pronouncements Adopted during the Second Quarter of 2009:
   6




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Note 2  Stock-Based Compensation
   Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008Stock-Based Compensation Expense Included In:
    
    
    
    
    
    (In thousands)Cost of revenues
    
    $
    2,022
    
    
    $
    2,572
    
    
    $
    4,035
    
    
    $
    4,633Research and development
    
    
    7,195
    
    
    
    7,569
    
    
    
    15,057
    
    
    
    15,392Selling, general and administrative
    
    
    7,785
    
    
    
    9,506
    
    
    
    15,900
    
    
    
    17,417Total stock-based compensation expense
    
    $
    17,002
    
    
    $
    19,647
    
    
    $
    34,992
    
    
    $
    37,442
  Stock Options
  Three Months Ended
    
    Six Months EndedJuly 5, 2009
    
    June 29, 2008
    
    July 5, 2009
    
    June 29, 2008Weighted average estimated grant date fair value per share
    
    $
    1.89
    
    
    $
    2.20
    
    
    $
    1.37
    
    
    $
    1.81Weighted average assumptions in calculation:Expected life (years)
    
    
    4.29
    
    
    
    4.05
    
    
    
    4.29
    
    
    
    4.36Risk-free interest rate
    
    
    2
    %
    
    
    3
    %
    
    
    2
    %
    
    
    2
    %Volatility
    
    
    66
    %
    
    
    51
    %
    
    
    68
    %
    
    
    52
    %
   7




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##### Table of Contents



Number ofShares
    
    
    Weighted AverageExercisePrice Per 
Share
    
    
    Weighted AverageRemainingContractual 
Term
    
    
    AggregateIntrinsicValue(In thousands)
    
    
    
    
    
    
    (In years)
    
    
    (In thousands)Options outstanding at December 31, 2008
    
    
    85,113
    
    
    $
    12.62
    
    
    
    
    
    
    
    Options granted
    
    
    21,167
    
    
    
    2.94
    
    
    
    
    
    
    
    Options exercised
    
    
    (7
    )
    
    
    (3.14
    )
    
    
    
    
    
    
    Options canceled
    
    
    (7,447
    )
    
    
    (13.02
    )
    
    
    
    
    
    
    Options outstanding at July 5, 2009
    
    
    98,826
    
    
    $
    10.52
    
    
    
    4.20
    
    
    $
    37,389Options exercisable at July 5, 2009
    
    
    52,665
    
    
    $
    15.21
    
    
    
    2.79
    
    
    $
    258
   Employee Stock Purchase Plan
  Three Months EndedJuly 5, 2009
    
    June 29, 2008Weighted average estimated grant date fair value per share
    
    $
    1.39
    
    
    $
    2.13Weighted average assumptions in calculation:Expected life (years)
    
    
    0.5
    
    
    
    0.8Risk-free interest rate
    
    
    0.3
    %
    
    
    2
    %Volatility
    
    
    78
    %
    
    
    44
    %
 Restricted Stock Unit Awards
  Number of Units(In thousands)Non-vested restricted stock units at December 31, 2008
    
    
    6,391Granted
    
    
    76Vested
    
    
    (1,171
    )Forfeited
    
    
    (412
    )Non-vested restricted stock units at July 5, 2009
    
    
    4,884
 8




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##### Table of Contents



Note 3  Restructuring of Operations and Other Items
  Restructuring
 First Quarter of 2009:
  
    
    A charge of $14.0 million primarily related to an accrual for remaining payments to be
made under a licensing arrangement for design tools that will no longer be used by the
Company;
    
    A charge of $4.5 million for severance and termination benefits for employees; and
    
    A charge of $0.8 million primarily for the change in time value of accruals for
previously accrued facility lease exit costs.
 Second Quarter of 2009:
  
    
    A charge of $4.5 million for severance and termination benefits for employees; and
    
    A charge of $1.2 million primarily for the change in time value of accruals for
previously accrued facility lease exit costs.
  Balance at
    
    
    Expense
    
    
    Utilized
    
    
    Balance at
    
    
    Expense
    
    
    Utilized
    
    
    Balance atDecember 31,
    
    
    During
    
    
    During
    
    
    April 5,
    
    
    During
    
    
    During
    
    
    July 5,2008
    
    
    Q1 2009
    
    
    Q1 2009
    
    
    2009
    
    
    Q2 2009
    
    
    Q2 2009
    
    
    2009(In thousands)Write-down of excess assets and
other liabilities
    
    $
    83
    
    
    $
    (83
    )
    
    $
    
    
    
    $
    
    
    
    $
    (8
    )
    
    $
    8
    
    
    $
    Lease terminations (a)
    
    
    44,555
    
    
    
    14,878
    
    
    
    (10,323
    )
    
    
    49,110
    
    
    
    1,166
    
    
    
    (1,260
    )
    
    
    49,016Payments to employees for severance (b)
    
    
    28,031
    
    
    
    4,518
    
    
    
    (17,347
    )
    
    
    15,202
    
    
    
    4,546
    
    
    
    (7,374
    )
    
    
    12,374Total
    
    $
    72,669
    
    
    $
    19,313
    
    
    $
    (27,670
    )
    
    $
    64,312
    
    
    $
    5,704
    
    
    $
    (8,626
    )
    
    $
    61,390
 
 (a)
    
    The amount utilized represents cash payments. The balance remaining for the termination of
real estate leases and other is expected to be paid during the remaining terms of the leases,
which extend through 2013.(b)
    
    The majority of the balance remaining for severance is expected to be paid by the end of
2009. 9




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Other Items
  Assets Held for Sale
   Note 4  Business Combinations
   Entity Name or Type of Technology;
    
    
    
    
    
    Fair Value of
    
    
    
    
    
    NetSegment Included in;
    
    
    
    
    
    Total
    
    Type of
    
    Tangible
    
    IdentifiedDescription of Acquired Business
    
    Acquisition Date
    
    Consideration
    
    Consideration
    
    Assets
    
    Intangible Assets
    
    Goodwill(Dollars in millions)3ware RAID storage adapter
business;Storage Systems segment; 
Host bus
RAID adapters and storage solutions
    
    April 21, 2009
    
    $
    20.9
    
    
    Cash
    
    $
    12.3
    
    
    $
    5.0
    
    
    $
    3.6
   WeightedFair Value
    
    
    Average Life(In millions)
    
    
    (In years)Current technology
    
    $
    1.5
    
    
    
    2Customer base
    
    
    3.2
    
    
    
    5Trade names
    
    
    0.3
    
    
    
    2Total acquired identified intangible assets
    
    $
    5.0
  Note 5  Benefit Obligations
  10




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Three Months EndedJuly 5, 2009
    
    
    June 29, 2008Pension
    
    
    Postretirement
    
    
    Pension
    
    
    PostretirementBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits(In thousands)Service cost
    
    $
    486
    
    
    $
    20
    
    
    $
    1,405
    
    
    $
    26Interest cost
    
    
    18,605
    
    
    
    607
    
    
    
    18,528
    
    
    
    767Expected return on plan assets
    
    
    (19,191
    )
    
    
    (1,219
    )
    
    
    (20,581
    )
    
    
    (1,259
    )Amortization of prior service cost
    
    
    11
    
    
    
    
    
    
    
    4
    
    
    
    Net actuarial gain recognized
    
    
    (24
    )
    
    
    
    
    
    
    (13
    )
    
    
    (30
    )Total benefit credit
    
    $
    (113
    )
    
    $
    (592
    )
    
    $
    (657
    )
    
    $
    (496
    )
 Six Months EndedJuly 5, 2009
    
    
    June 29, 2008Pension
    
    
    Postretirement
    
    
    Pension
    
    
    PostretirementBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits(In thousands)Service cost
    
    $
    957
    
    
    $
    40
    
    
    $
    2,811
    
    
    $
    52Interest cost
    
    
    36,876
    
    
    
    1,212
    
    
    
    37,056
    
    
    
    1,533Expected return on plan assets
    
    
    (38,403
    )
    
    
    (2,438
    )
    
    
    (41,163
    )
    
    
    (2,517
    )Amortization of prior service cost
    
    
    22
    
    
    
    
    
    
    
    8
    
    
    
    Net actuarial gain recognized
    
    
    (45
    )
    
    
    
    
    
    
    (26
    )
    
    
    (59
    )Total benefit credit
    
    $
    (593
    )
    
    $
    (1,186
    )
    
    $
    (1,314
    )
    
    $
    (991
    )
  Note 6  Balance Sheet Details
 July 5,
    
    
    December 31,2009
    
    
    2008(In thousands)Inventories:Raw materials
    
    $
    33,784
    
    
    $
    44,208Work-in-process
    
    
    26,360
    
    
    
    52,242Finished goods
    
    
    98,514
    
    
    
    124,085Total inventories
    
    $
    158,658
    
    
    $
    220,535
 Interest
    
    
    Conversion
    
    
    July 5,
    
    
    December 31,Maturity
    
    
    Rate
    
    
    Price
    
    
    2009
    
    
    2008(In thousands)Debt:4% Convertible Subordinated Notes
    
    
    2010
    
    
    
    4.00
    %
    
    $
    13.4200
    
    
    $
    350,000
    
    
    $
    350,0006.5% Convertible Subordinated Notes
    
    
    2009
    
    
    
    6.50
    %
    
    $
    15.3125
    
    
    
    
    
    
    
    243,002Accrued debt premium
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,405Amortization of accrued debt premium
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,300
    )Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000
    
    
    
    595,107Current portion of longterm debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (350,000
    )
    
    
    (245,107
    )Long-term debt, net of current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    350,000
 11




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Note 7  Identified Intangible Assets and Goodwill
 Identified Intangible Assets
  July 5, 2009
    
    
    December 31, 2008Gross
    
    
    Accumulated
    
    
    Gross
    
    
    AccumulatedCarrying Amount
    
    
    Amortization
    
    
    Carrying Amount
    
    
    Amortization(In thousands)Semiconductor:Current technology
    
    $
    894,808
    
    
    $
    (569,203
    )
    
    $
    894,808
    
    
    $
    (524,120
    )Trademarks
    
    
    26,657
    
    
    
    (26,657
    )
    
    
    26,657
    
    
    
    (26,657
    )Customer base
    
    
    399,508
    
    
    
    (179,970
    )
    
    
    399,508
    
    
    
    (160,925
    )Non-compete agreements
    
    
    1,949
    
    
    
    (1,929
    )
    
    
    1,949
    
    
    
    (1,888
    )Existing purchase orders
    
    
    200
    
    
    
    (200
    )
    
    
    200
    
    
    
    (200
    )Supply agreement
    
    
    100
    
    
    
    (100
    )
    
    
    100
    
    
    
    (100
    )Patent licensing
    
    
    312,800
    
    
    
    (81,313
    )
    
    
    312,800
    
    
    
    (63,243
    )Order backlog
    
    
    41,300
    
    
    
    (41,300
    )
    
    
    41,300
    
    
    
    (41,300
    )Workforce
    
    
    3,567
    
    
    
    (1,555
    )
    
    
    3,567
    
    
    
    (1,258
    )Trade names
    
    
    2,248
    
    
    
    (2,248
    )
    
    
    2,248
    
    
    
    (2,248
    )Subtotal
    
    
    1,683,137
    
    
    
    (904,475
    )
    
    
    1,683,137
    
    
    
    (821,939
    )Storage Systems:Current technology
    
    
    165,829
    
    
    
    (139,099
    )
    
    
    164,339
    
    
    
    (136,104
    )Trademarks
    
    
    7,150
    
    
    
    (7,150
    )
    
    
    7,150
    
    
    
    (7,150
    )Customer base
    
    
    8,240
    
    
    
    (5,118
    )
    
    
    5,010
    
    
    
    (5,010
    )Non-compete agreements
    
    
    1,600
    
    
    
    (1,600
    )
    
    
    1,600
    
    
    
    (1,600
    )Supply agreement
    
    
    8,147
    
    
    
    (8,147
    )
    
    
    8,147
    
    
    
    (8,147
    )Trade names
    
    
    1,100
    
    
    
    (320
    )
    
    
    800
    
    
    
    (238
    )Subtotal
    
    
    192,066
    
    
    
    (161,434
    )
    
    
    187,046
    
    
    
    (158,249
    )Total identified intangible assets
    
    $
    1,875,203
    
    
    $
    (1,065,909
    )
    
    $
    1,870,183
    
    
    $
    (980,188
    )
   Weighted
    
    
    Six Months EndedAverage Life
    
    
    July 5, 2009
    
    
    June 29, 2008(In months)
    
    
    (In thousands)Current technology
    
    
    57
    
    
    $
    48,078
    
    
    $
    65,525Trademarks
    
    
    83
    
    
    
    
    
    
    
    25Customer base
    
    
    45
    
    
    
    19,152
    
    
    
    29,309Non-compete agreements
    
    
    27
    
    
    
    42
    
    
    
    760Patent licensing
    
    
    36
    
    
    
    18,070
    
    
    
    18,122Workforce
    
    
    72
    
    
    
    298
    
    
    
    298Trade names
    
    
    71
    
    
    
    83
    
    
    
    244Total
    
    
    50
    
    
    $
    85,723
    
    
    $
    114,283
 12




---



##### Table of Contents



Amount(In thousands)Fiscal Year2009 (July 6 through December 31, 2009)
    
    $
    85,4172010
    
    
    156,9892011
    
    
    121,6442012
    
    
    104,6432013 and thereafter
    
    
    340,601Total
    
    $
    809,294
 Goodwill
  Storage SystemsSegment(In thousands)Balance as of December 31, 2008
    
    $
    175,624Additions as a result of acquisition during the period *
    
    
    3,588Balance as of July 5, 2009
    
    $
    179,212
 
 *
    
    During the three months ended July 5, 2009, the Company recorded $3.6 million of goodwill in
connection with the acquisition of the 3ware RAID storage adapter business. Note 8  Cash, Cash Equivalents and Investments
  July 5,
    
    
    December 31,2009
    
    
    2008(In thousands)Cash and cash equivalents:Cash in financial institutions
    
    $
    177,038
    
    
    $
    77,372Cash equivalents:Overnight deposits and money market funds
    
    
    477,916
    
    
    
    744,430Commercial paper
    
    
    
    
    
    
    1,085U.S. government and agency securities
    
    
    
    
    
    
    6,414Total cash equivalents
    
    
    477,916
    
    
    
    751,929Total cash and cash equivalents
    
    $
    654,954
    
    
    $
    829,301Available-for-sale debt securities:*Asset-backed and mortgage-backed securities
    
    $
    157,816
    
    
    $
    184,511U.S. government and agency securities
    
    
    52,987
    
    
    
    88,504Corporate and municipal debt securities
    
    
    7,876
    
    
    
    16,826Total short-term investments
    
    $
    218,679
    
    
    $
    289,841Long-term investments in equity securities:**Marketable available-for-sale equity securities
    
    $
    1,502
    
    
    $
    566Non-marketable equity securities
    
    
    49,070
    
    
    
    46,141Total long-term investments in equity securities
    
    $
    50,572
    
    
    $
    46,707
 
 *
    
    Short-term investments in marketable debt securities are reported at fair value.**
    
    Included in other assets in the consolidated balance sheets. Long-term investments in
marketable equity securities are reported at fair value. For non-marketable equity securities,
the Company does not estimate the fair values unless there are identified events or changes in
circumstances that may have a significant adverse effect on the investment. If management
determines that these non-
marketable equity investments are impaired, losses are generally measured by using pricing
reflected in current rounds of financing. 13




---



##### Table of Contents



Investments in Available-for-Sale Securities
  Amount(In thousands)Due within one year
    
    $
    21,203Due in 1-5 years
    
    
    44,789Due in 5-10 years
    
    
    18,432Due after 10 years
    
    
    134,255Total
    
    $
    218,679
   July 5, 2009Amortized
    
    
    Gross Unrealized
    
    
    Gross UnrealizedCost
    
    
    Gain
    
    
    Loss
    
    
    Fair Value(In thousands)Short-term debt securities:Asset-backed and mortgage-backed securities
    
    $
    155,270
    
    
    $
    4,681
    
    
    $
    (2,135
    )
    
    $
    157,816U.S. government and agency securities
    
    
    50,701
    
    
    
    2,286
    
    
    
    
    
    
    
    52,987Corporate and municipal debt securities
    
    
    7,870
    
    
    
    111
    
    
    
    (105
    )
    
    
    7,876$
    213,841
    
    
    $
    7,078
    
    
    $
    (2,240
    )
    
    $
    218,679Long-term marketable equity securities
    
    $
    155
    
    
    $
    1,349
    
    
    $
    (2
    )
    
    $
    1,502
 December 31, 2008Amortized
    
    
    Gross Unrealized
    
    
    Gross UnrealizedCost
    
    
    Gain
    
    
    Loss
    
    
    Fair Value(In thousands)Short-term debt securities:Asset-backed and mortgage-backed securities
    
    $
    183,385
    
    
    $
    1,829
    
    
    $
    (703
    )
    
    $
    184,511U.S. government and agency securities
    
    
    85,426
    
    
    
    3,078
    
    
    
    
    
    
    
    88,504Corporate and municipal debt securities
    
    
    17,183
    
    
    
    54
    
    
    
    (411
    )
    
    
    16,826$
    285,994
    
    
    $
    4,961
    
    
    $
    (1,114
    )
    
    $
    289,841Long-term marketable equity securities
    
    $
    155
    
    
    $
    413
    
    
    $
    (2
    )
    
    $
    566
  Less than 12 Months
    
    
    Greater than 12 MonthsFair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses(In thousands)Asset-backed and mortgage-backed securities
    
    $
    25,305
    
    
    $
    (1,979
    )
    
    $
    5,102
    
    
    $
    (156
    )Corporate and municipal debt securities
    
    
    4,113
    
    
    
    (91
    )
    
    
    988
    
    
    
    (14
    )Total
    
    $
    29,418
    
    
    $
    (2,070
    )
    
    $
    6,090
    
    
    $
    (170
    )
  14




---



##### Table of Contents



Note 9  Derivative Instruments
        July 5, 2009(In thousands)Prepaid expenses and other current assets:Derivative assets designated as cash flow hedges:Foreign exchange forward contracts
    
    $
    1,593Derivative assets not designated as cash flow hedges:Foreign exchange forward contracts
    
    $
    996Other accrued liabilities:Derivative liabilities designated as cash flow hedges:Foreign exchange forward contracts
    
    $
    102Derivative liabilities not designated as cash flow hedges:Foreign exchange forward contracts
    
    $
    136
 15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    July 5, 2009(In thousands)Accumulated loss in OCI, beginning of period, net of tax
    
    $
    (1,117
    )
    
    $
    (905
    )Net unrealized gain recorded in OCI (effective portion)
    
    
    1,357
    
    
    
    133Loss reclassified from AOCI to research and development expenses (effective portion)
    
    
    20
    
    
    
    388Loss reclassified from AOCI to selling, general and administrative expenses (effective portion)
    
    
    2
    
    
    
    646Accumulated gain in OCI, end of period, net of tax
    
    $
    262
    
    
    $
    262
   Three Months Ended
    
    Six Months EndedJuly 5, 2009
    
    July 5, 2009(In thousands)Gain/(loss) recognized in interest income and other, net
    
    $
    12,441
    
    
    $
    (4,349
    )
 Note 10  Fair Value Measurements
       16




---



##### Table of Contents



Fair Value Measurements as of July 5, 2009Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(In thousands)Short-term investments in debt securities and cash equivalents
    
    $
    530,914
    
    
    $
    165,681
    
    
    
    
    
    
    $
    696,595Long-term investments in marketable equity securities
    
    $
    1,502
    
    
    
    
    
    
    
    
    
    
    $
    1,502Derivative assets, net
    
    
    
    
    
    $
    2,351
    
    
    
    
    
    
    $
    2,351Rabbi Trust  all invested in money market funds
    
    $
    9,763
    
    
    
    
    
    
    
    
    
    
    $
    9,763
 Note 11  Reconciliation of Basic and Diluted Loss per Share
  Three Months EndedJuly 5, 2009
    
    June 29, 2008Per-Share
    
    
    
    
    
    
    
    
    
    Per-ShareLoss*
    
    Shares+
    
    Amount
    
    Loss*
    
    Shares+
    
    Amount(In thousands except per share amounts)Basic loss per share:Net loss available to common stockholders
    
    $
    (61,483
    )
    
    
    650,300
    
    
    $
    (0.09
    )
    
    $
    (13,647
    )
    
    
    639,872
    
    
    $
    (0.02
    )Stock options, employee stock purchase
rights and restricted stock unit awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted loss per share:Net loss available to common stockholders
    
    $
    (61,483
    )
    
    
    650,300
    
    
    $
    (0.09
    )
    
    $
    (13,647
    )
    
    
    639,872
    
    
    $
    (0.02
    )
 Six Months EndedJuly 5, 2009
    
    June 29, 2008Per-Share
    
    
    
    
    
    
    
    
    
    Per-ShareLoss*
    
    Shares+
    
    Amount
    
    Loss*
    
    Shares+
    
    Amount(In thousands except per share amounts)Basic loss per share:Net loss available to common stockholders
    
    $
    (165,030
    )
    
    
    649,360
    
    
    $
    (0.25
    )
    
    $
    (27,275
    )
    
    
    650,867
    
    
    $
    (0.04
    )Stock options, employee stock purchase
rights and restricted stock unit awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted loss per share:Net loss available to common stockholders
    
    $
    (165,030
    )
    
    
    649,360
    
    
    $
    (0.25
    )
    
    $
    (27,275
    )
    
    
    650,867
    
    
    $
    (0.04
    )
 
 *
    
    Numerator+
    
    Denominator   Note 12  Segment and Geographic Information
  17




---



##### Table of Contents



Summary of Operations by Segment
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In thousands)Revenues:Semiconductor
    
    $
    343,786
    
    
    $
    462,010
    
    
    $
    668,820
    
    
    $
    920,812Storage Systems
    
    
    176,879
    
    
    
    230,053
    
    
    
    334,124
    
    
    
    431,998Total
    
    $
    520,665
    
    
    $
    692,063
    
    
    $
    1,002,944
    
    
    $
    1,352,810Loss from operations:Semiconductor
    
    $
    (52,232
    )
    
    $
    (31,926
    )
    
    $
    (132,327
    )
    
    $
    (56,263
    )Storage Systems
    
    
    (3,531
    )
    
    
    21,518
    
    
    
    (17,610
    )
    
    
    32,074Total
    
    $
    (55,763
    )
    
    $
    (10,408
    )
    
    $
    (149,937
    )
    
    $
    (24,189
    )
 Significant Customers
  Three Months Ended
    
    Six Months EndedJuly 5, 2009
    
    June 29, 2008
    
    July 5, 2009
    
    June 29, 2008Semiconductor segment:Number of significant customers
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Percentage of segment revenues
    
    
    24
    %
    
    
    25
    %
    
    
    24
    %
    
    
    27
    %Storage Systems segment:Number of significant customers
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    2Percentage of segment revenues
    
    
    48%, 11
    %
    
    
    47%, 16
    %
    
    
    46%, 12%, 11
    %
    
    
    45%, 16
    %Consolidated:Number of significant customers
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2Percentage of consolidated revenues
    
    
    18%, 16
    %
    
    
    17%, 16
    %
    
    
    17%, 16
    %
    
    
    19%, 15
    %
 Information about Geographic Areas
   Note 13  Comprehensive Income/(Loss)
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In thousands)Net loss
    
    $
    (61,483
    )
    
    $
    (13,647
    )
    
    $
    (165,030
    )
    
    $
    (27,275
    )Net unrealized gain/(loss) on available-for-sale securities
    
    
    3,857
    
    
    
    (2,297
    )
    
    
    1,215
    
    
    
    (2,366
    )Net unrealized gain on cash-flow hedges
    
    
    1,379
    
    
    
    
    
    
    
    1,167
    
    
    
    Foreign currency translation adjustments
    
    
    7,779
    
    
    
    (9,109
    )
    
    
    (7,322
    )
    
    
    5,795Amortization of prior service cost and net actuarial gain
included in net periodic benefit credit
    
    
    (13
    )
    
    
    (51
    )
    
    
    (23
    )
    
    
    (51
    )Total comprehensive loss
    
    $
    (48,481
    )
    
    $
    (25,104
    )
    
    $
    (169,993
    )
    
    $
    (23,897
    )
 Note 14  Income Taxes
   18




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##### Table of Contents



Note 15  Related Party Transactions
    Note 16  Commitments, Contingencies and Legal Matters
 Purchase Commitments
   19




---



##### Table of Contents



Guarantees
 Product Warranties :
   Six Months EndedJuly 5, 2009(In thousands)Balance as of December 31, 2008
    
    $
    12,238Accruals for warranties issued during the period
    
    
    8,127Accruals related to pre-existing warranties (including changes in estimates)
    
    
    58Settlements made during the period (in cash or in kind)
    
    
    (6,558
    )Balance as of July 5, 2009
    
    $
    13,865
 Standby Letters of Credit:
  Uncertain Tax Positions
  Indemnifications
  Legal Matters
  20




---



##### Table of Contents



Note 17  Subsequent Events
   21




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Managements discussion and analysis should be read in conjunction with the other
sections of this Form 10-Q , including Part 1, Item 1. Financial Statements.
  OVERVIEW
         22




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##### Table of Contents



RESULTS OF OPERATIONS
 Revenues
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)Semiconductor segment
    
    $
    343.8
    
    
    $
    462.0
    
    
    $
    668.8
    
    
    $
    920.8Storage Systems segment
    
    
    176.9
    
    
    
    230.1
    
    
    
    334.1
    
    
    
    432.0Consolidated
    
    $
    520.7
    
    
    $
    692.1
    
    
    $
    1,002.9
    
    
    $
    1,352.8
 Three months ended July 5, 2009 compared to the three months ended June 29, 2008:
 Semiconductor Segment:
  Storage Systems Segment:
  Six months ended July 5, 2009 compared to the six months ended June 29, 2008:
 Semiconductor Segment:
  Storage Systems Segment:
   Revenues by Geography
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)North America *
    
    $
    112.1
    
    
    $
    220.8
    
    
    $
    219.7
    
    
    $
    427.6Asia **
    
    
    280.4
    
    
    
    346.9
    
    
    
    525.3
    
    
    
    695.1Europe and the Middle East
    
    
    128.2
    
    
    
    124.4
    
    
    
    257.9
    
    
    
    230.1Total
    
    $
    520.7
    
    
    $
    692.1
    
    
    $
    1,002.9
    
    
    $
    1,352.8
 
 *
    
    Primarily the United States.**
    
    Including Japan. 23




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##### Table of Contents



Three months ended July 5, 2009 compared to the three months ended June 29, 2008:
  Six months ended July 5, 2009 compared to the six months ended June 29, 2008:
  Gross Profit Margin
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)Semiconductor segment
    
    $
    122.1
    
    
    $
    196.0
    
    
    $
    246.7
    
    
    $
    380.9Percentage of segment revenues
    
    
    35.5
    %
    
    
    42.4
    %
    
    
    36.9
    %
    
    
    41.4
    %Storage Systems segment
    
    $
    58.8
    
    
    $
    88.9
    
    
    $
    104.3
    
    
    $
    163.6Percentage of segment revenues
    
    
    33.2
    %
    
    
    38.6
    %
    
    
    31.2
    %
    
    
    37.9
    %Consolidated
    
    $
    180.9
    
    
    $
    284.9
    
    
    $
    351.0
    
    
    $
    544.5Percentage of total revenues
    
    
    34.7
    %
    
    
    41.2
    %
    
    
    35.0
    %
    
    
    40.2
    %
 Three months ended July 5, 2009 compared to the three months ended June 29, 2008:
  Semiconductor Segment:
  24




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##### Table of Contents



Storage Systems Segment:
  Six months ended July 5, 2009 compared to the six months ended June 29, 2008:
  Semiconductor Segment:
  Storage Systems Segment:
  Research and Development
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)Semiconductor segment
    
    $
    116.2
    
    
    $
    135.4
    
    
    $
    239.2
    
    
    $
    270.6Percentage of segment revenues
    
    
    33.8
    %
    
    
    29.3
    %
    
    
    35.8
    %
    
    
    29.4
    %Storage Systems segment
    
    $
    32.7
    
    
    $
    34.7
    
    
    $
    65.0
    
    
    $
    69.2Percentage of segment revenues
    
    
    18.5
    %
    
    
    15.1
    %
    
    
    19.5
    %
    
    
    16.0
    %Consolidated
    
    $
    148.9
    
    
    $
    170.1
    
    
    $
    304.2
    
    
    $
    339.8Percentage of total revenues
    
    
    28.6
    %
    
    
    24.6
    %
    
    
    30.3
    %
    
    
    25.1
    %
 Three months ended July 5, 2009 compared to the three months ended June 29, 2008:
  Semiconductor Segment:
  25




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##### Table of Contents



Storage Systems Segment:
  Six months ended July 5, 2009 compared to the six months ended June 29, 2008:
  Semiconductor Segment:
  Storage Systems Segment:
  Selling, General and Administrative
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)Semiconductor segment
    
    $
    53.6
    
    
    $
    72.2
    
    
    $
    110.1
    
    
    $
    141.6Percentage of segment revenues
    
    
    15.6
    %
    
    
    15.6
    %
    
    
    16.5
    %
    
    
    15.4
    %Storage Systems segment
    
    $
    28.1
    
    
    $
    32.3
    
    
    $
    55.4
    
    
    $
    62.0Percentage of segment revenues
    
    
    15.9
    %
    
    
    14.0
    %
    
    
    16.6
    %
    
    
    14.4
    %Consolidated
    
    $
    81.7
    
    
    $
    104.5
    
    
    $
    165.5
    
    
    $
    203.6Percentage of total revenues
    
    
    15.7
    %
    
    
    15.1
    %
    
    
    16.5
    %
    
    
    15.1
    %
 Three months ended July 5, 2009 compared to the three months ended June 29, 2008:
  Semiconductor Segment:
  26




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##### Table of Contents



Storage Systems Segment:
  Six months ended July 5, 2009 compared to the six months ended June 29, 2008:
  Semiconductor Segment:
  Storage Systems Segment:
  Restructuring of Operations and Other Items, net
    27




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##### Table of Contents



Interest (Expense) or Income and Other, net
  Three Months Ended
    
    
    Six Months EndedJuly 5, 2009
    
    
    June 29, 2008
    
    
    July 5, 2009
    
    
    June 29, 2008(In millions)Interest expense
    
    $
    (6.9
    )
    
    $
    (9.0
    )
    
    $
    (14.1
    )
    
    $
    (17.9
    )Interest income
    
    
    5.8
    
    
    
    10.6
    
    
    
    12.2
    
    
    
    24.9Other income/(expense), net
    
    
    0.5
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (2.1
    )Total
    
    $
    (0.6
    )
    
    $
    (0.8
    )
    
    $
    (1.9
    )
    
    $
    4.9
 Interest Expense:
  Interest Income and Other, net:
   Provision for Income Taxes
    FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
  28




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##### Table of Contents



Working Capital
  
    
    Cash, cash equivalents and short-term investments decreased by $245.5 million;
    
    Current portion of long-term debt increased by $104.9 million as a result of a
reclassification of $350.0 million of 4% Convertible Subordinated Notes that are due in May
2010 from long-term debt to current portion of long-term debt, offset in part by the redemption of
$243.0 million principal amount of 6.5%  Convertible Subordinated Notes during the second
quarter of 2009;
    
    Inventories decreased by $61.9 million primarily as a result of lowering inventory
purchases, reflecting our continued focus on supply chain management;
    
    Accounts receivable decreased by $36.1 million primarily as a result of lower revenues in
the second quarter of 2009 as compared to the fourth quarter of 2008; and
    
    Prepaid expenses and other current assets decreased by $15.3 million primarily as a
result of declines in tax-related receivables, other receivables and prepaid software,
offset in part by an increase in prepaid taxes.
  
    
    Accounts payable decreased by $55.3 million primarily as a result of lower purchases
following the global economic downturn and the timing of invoice receipts and payments; and
    
    Accrued salaries, wages and benefits decreased by $32.7 million primarily as a result of
the absence of performance-based compensation accruals.
 Cash Provided by Operating Activities
  
    
    A net loss adjusted for non-cash transactions, primarily depreciation and amortization
and stock-based compensation expense. The non-cash items and other non-operating adjustments
are quantified in the Statements of Cash Flows included in Item 1; offset by
    
    A net increase in assets and liabilities, including changes in working capital
components, from December 31, 2008 to July 5, 2009, as discussed above.
 Cash Provided by Investing Activities
  
    
    Proceeds from maturities and sales of available-for-sale debt securities and equity
securities, net of purchases;
    
    Purchases of property, equipment and software, net of sales;
    
    Acquisition of business, net of cash acquired; and
    
    A decrease in non-current assets and deposits.
  29




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##### Table of Contents



Cash Used in Financing Activities
   CONTRACTUAL OBLIGATIONS
  Payments Due by PeriodLess Than 1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 Years
    
    
    Other
    
    
    Total(In millions)Convertible subordinated notes
    
    $
    350.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    350.0Estimated interest payments on
convertible subordinated notes
    
    
    14.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.0Operating lease obligations
    
    
    75.7
    
    
    
    61.9
    
    
    
    15.6
    
    
    
    2.3
    
    
    
    
    
    
    
    155.5Purchase commitments
    
    
    376.6
    
    
    
    248.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625.5Unrecognized tax positions
    
    
    36.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198.1
    **
    
    
    235.0Pension and postretirement contributions
    
    
    16.0 to 55.0
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    16.0 to 55.0Total
    
    $
    869.2 to $908.2
    
    
    $
    310.8
    
    
    $
    15.6
    
    
    $
    2.3
    
    
    $
    198.1
    
    
    $
    1,396.0 to $1,435.0
 
 *
    
    We have pension plans covering substantially all former Agere Systems U.S. employees,
excluding management employees hired after June 30, 2003. We also have pension plans covering
certain international employees. Although additional future contributions will be required,
the amount and timing of these contributions will be impacted by actuarial assumptions, the
actual rate of return on plan assets, the level of market interest rates, and the amount of
voluntary contributions to the plans. The amount shown in the table
represents the range of our anticipated contributions to our pension
plans for the remainder of 2009. Because any contributions for 2010
and later will depend on the value of the plan assets in the future
and thus are uncertain, we have not included any amounts for 2010 and
beyond. If current macroeconomic conditions continue, the
additional contributions in future years would likely be higher than those projected for 2009.
Effective April 6, 2009, we froze the U.S. management pension plan, which covers active
participants who joined us from Agere.**
    
    Represents the non-current tax payable obligation. We are unable to make a reasonably
reliable estimate as to when cash settlement with a taxing authority may occur. Convertible Subordinated Notes
   Operating Lease Obligations
  30




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##### Table of Contents



Purchase Commitments
  Uncertain Tax Positions
  Standby Letters of Credit
  CRITICAL ACCOUNTING POLICIES
  RECENT ACCOUNTING PRONOUNCEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures:
 Changes in Internal Control:
 31




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
    
    We depend on a small number of customers. The loss of, or a significant reduction in
revenue from, any of these customers would harm our results of operations.
   
    
    If we fail to keep pace with technological advances, or if we pursue technologies that do
not become commercially accepted, customers may not buy our products and our results of
operations may be harmed.
    
    We operate in intensely competitive markets, and our failure to compete effectively would
harm our results of operations.
    
    Customer orders and ordering patterns can change quickly, making it difficult for us to
predict our revenues and making it possible that our actual revenues may vary materially
from our expectations, which could harm our results of operations and stock price.
    
    A prolonged economic downturn could have a material negative impact on our results of
operations and financial condition.
   32




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##### Table of Contents




    
    We depend on outside suppliers to manufacture, assemble, package and test our products;
accordingly, any failure to secure and maintain sufficient manufacturing capacity or to
maintain the quality of our products could harm our business and results of operations.
    
    Failure to qualify our semiconductor products or our suppliers manufacturing lines with
key customers could harm our business and results of operations.
    
    Any defects in our products could harm our reputation, customer relationships and results
of operations.
    
    We may be subject to intellectual property infringement claims and litigation, which
could cause us to incur significant expenses or prevent us from selling our products.
    
    If we are unable to protect or assert our intellectual property rights, our business and
results of operations may be harmed.
    
    A decline in the revenue that we derive from the licensing of intellectual property could
have a significant impact on our net income.
    
    We are exposed to legal, business, political and economic risks associated with our
international operations.
    
    We use indirect channels of product distribution over which we have limited control.
    
    We may engage in acquisitions and strategic alliances, which may not be successful and
could harm our business and operating results.
    
    The semiconductor industry is highly cyclical, which may cause our operating results to
fluctuate.
    
    Our failure to attract, retain and motivate key employees could harm our business.
    
    Our operations and our suppliers operations are subject to natural disasters and other
events outside of our control that may disrupt our business and harm our operating results.
 33




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##### Table of Contents




    
    We are subject to various environmental laws and regulations that could impose
substantial costs on us and may harm our business.
    
    Our blank check preferred stock and Delaware law contain provisions that may inhibit
potential acquisition bids, which may harm our stock price, discourage merger offers or
prevent changes in our management.
    
    Class action litigation due to stock price volatility or other factors could cause us to
incur substantial costs and divert our managements attention and resources.
 
 Item 4. Submission of Matters to a Vote of Security Holders
   For
    
    Against
    
    AbstainCharles A. Haggerty
    
    
    510,114,704
    
    
    
    48,283,957
    
    
    
    2,101,611Richard S. Hill
    
    
    536,759,550
    
    
    
    21,523,074
    
    
    
    2,217,649John H.F. Miner
    
    
    525,145,803
    
    
    
    33,117,021
    
    
    
    2,237,448Arun Netravali
    
    
    524,031,670
    
    
    
    33,964,313
    
    
    
    2,504,290Matthew J. ORourke
    
    
    543,148,022
    
    
    
    15,067,005
    
    
    
    2,285,246Gregorio Reyes
    
    
    543,954,973
    
    
    
    14,286,912
    
    
    
    2,258,387Michael G. Strachan
    
    
    548,683,772
    
    
    
    9,535,999
    
    
    
    2,280,501Abhijit Y. Talwalkar
    
    
    544,376,220
    
    
    
    14,062,195
    
    
    
    2,061,859Susan M. Whitney
    
    
    543,506,101
    
    
    
    14,597,445
    
    
    
    2,396,727
  For
    
    Against
    
    Abstain546,782,847
    
    12,569,729
    
    1,147,695
  For
    
    Against
    
    Abstain507,485,473
    
    50,656,863
    
    2,357,884
 
 Item 6. Exhibits
  34




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##### Table of Contents



SIGNATURES
  LSI CORPORATION
(Registrant)Date: August 11, 2009
    By
    /s/ Bryon LookBryon LookExecutive Vice President, Chief Financial Officer
and Chief Administrative Officer 35




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    LSI Corporation Incentive Plan (Incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K, filed May 18, 2009)31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 135032.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350
 36