NEW YORK, July 27 /PRNewswire/ -- S&P Equity Research Services has downgraded its opinion on LSI Logic (NYSE: LSI; $8.16) to "Strong Sell" (1-STARS out of 5) from "Hold" (3-STARS). LSI posted second-quarter earnings per share of $0.13 vs. $0.06, which was $0.03 above our estimate. Revenues rose 2% year to year, underperforming peers, and 3% quarter to quarter. Guidance for third-quarter sales is below our estimate. Two consumer semiconductor product lines are phasing out. We think LSI is apt to build up its consumer lines by acquisition, which would be expedient, but potentially expensive. Given our outlook for lackluster sales vs. peers, we believe LSI could trade down to a price-to-sales multiple at the low end of its historical range. As such, we have lowered our 12-month target price to $5 from $11.
Risks to our recommendation and target price include the possibility of higher demand for semiconductors than we expect, new design wins by LSI, and any acquisitions integrating more advantageously than we anticipate.
Thomas Smith, CFA Semiconductors Equity Analyst Standard & Poor's Equity Research Services
The analyst quoted above is a Standard & Poor's Equity Analyst. He has no affiliation with any company he covers. He has no ownership interest in any company he covers. Standard & Poor's other affiliates may provide services to the companies that are the subject of this report.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies , is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With approximately 7,500 employees, including wholly owned affiliates, located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/
About Standard & Poor's Equity Research Services
As the world's largest producer of independent equity research, over 1,000 institutions license Standard & Poor's research for their investors and advisors, including 19 of the top 20 securities firms, 13 of the top 20 banks, and 11 of the top 20 life insurance companies. Standard & Poor's team of 120 experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of approximately 2,000 equities across more than 120 industries worldwide. Follow Standard & Poor's equity analysts' US market commentary each day at http://www.equityresearch.standardandpoors.com/.
The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade on its own account. The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at http://www.standardandpoors.com/.
