8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

October 25, 2006

LSI LOGIC CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	1-10317	94-2712976
(State or other jurisdiction of	(Commission File Number)	(IRS Employer
incorporation)		Identification No.)

1621 Barber Lane
Milpitas, California 95035
(Address of principal executive offices, including zip code)

(408) 433-8000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02 Results of Operation and Financial Condition.

On October 25, 2006, LSI Logic Corporation (referred to here as “LSI Logic” or the “Company”) issued a news release regarding its financial results for the third quarter ended October 1, 2006. A copy of the news release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein.

Use of Non-GAAP Financial Information

LSI Logic has referenced non-GAAP financial information in the news release.

LSI Logic management believes that the presentation of non-GAAP net income and non-GAAP net income per basic and diluted share provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with our past financial reports.

Management has historically used these non-GAAP measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described below provides an additional measure of our core operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. Externally, we believe that these non-GAAP measures continue to be useful to investors in their assessment of our operating performance and the valuation of our Company.

Internally, these non-GAAP measures are significant measures used by management for purposes of:

• evaluating the core operating performance of the Company;

• determination of bonus compensation for certain key employees;

• establishing internal budgets;

• calculating return on investment for development programs and growth initiatives;

• comparing performance with internal forecasts and targeted business models;

• strategic planning;

• evaluating and valuing potential acquisition candidates and how their operations compare to the Company’s operations; and

• benchmarking performance externally against our competitors.

Non-GAAP financial measures:

Non-GAAP net income:

Non-GAAP net income is important to the Company for the reasons noted above and excludes the following items:

• Stock-based compensation. Stock-based compensation relates primarily to stock awards such as options and restricted stock units that are issued by LSI Logic. Stock-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are difficult to predict. As a result of this unpredictability, management excludes this item from its internal operating forecasts and models. Management believes that non-GAAP measures adjusted for stock-based compensation provide investors with a basis to

measure the Company’s core performance against the performance of other companies without the variability created by stock-based compensation.

• Amortization of acquisition related intangibles and in-process research and development. These charges are acquisition-related charges. Amortization of acquisition-related intangibles relate to purchased technology in acquisitions such as existing technology, patents and trademarks. In-process research and development relates to projects in process as of the acquisition date that have not reached technological feasibility and are immediately expensed. These charges are not factored into management’s evaluation of potential acquisitions, or our performance after completion of acquisitions, because they are not related to our core operating performance, and the frequency and amount of such charges vary significantly based on the size and timing of our acquisitions and the maturities of the businesses being acquired. Excluding this data provides investors with a basis to compare the Company against the performance of other companies without this variability.

• Restructuring of operations and other items, net. This represents charges/losses and gains that are not directly related to the Company’s ongoing or core business results. Management regularly excludes such items from internal operating forecasts and models because it is not considered a core operating activity for the Company and because the frequency and variability in the nature of the charges can vary significantly from period to period. Excluding this data provides investors with a basis to compare our Company against the performance of other companies without this variability.

• Other charges and gains. Other charges and gains consist of gains or losses on equity investments and certain non-operating gains and losses that occur on an infrequent basis and vary greatly in amount. We do not regularly trade public equity securities nor do we plan on these securities positions for funding of ongoing operations. Management excludes these items because they do not affect our core operations. Excluding this data provides investors with a basis to compare our company against the performance of other companies without this variability.

• Non-GAAP income tax expense/benefit. This line item represents the amount of tax expense or benefit that the Company would accrue if it used non-GAAP results instead of GAAP results in the calculation of its tax liability.

Non-GAAP net income per basic and dilutive share:

The calculation of non-GAAP net income excluding special items per dilutive share is adjusted in the numerator for all the items discussed above under net income excluding special items. In the denominator, the number of non-GAAP dilutive shares excludes the following item:

• The treasury stock method used to calculate weighted outstanding shares on a dilutive basis requires amounts related to compensation costs attributable to future services and not yet recognized in the financial statements to be treated as proceeds that are assumed to be used to repurchase shares. As a result, this reduces the total number of weighted average shares for purposes of calculating GAAP weighted average shares on a dilutive basis. LSI Logic does not include the effects of these compensation costs in its non-GAAP net income excluding special items. Management believes these amounts should not be applied to the calculation of shares to be repurchased in the computation of non-GAAP net income per diluted share.

Some of the limitations in relying on non-GAAP financial measures are discussed below in relation to the items excluded from those non-GAAP measures.

• Stock-based compensation. LSI Logic’s stock-based incentive plans are important components of our employee incentive compensation arrangements and are reflected in our GAAP results

under Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based payment, commencing with the first quarter of 2006. They need to be considered for a complete view of the costs of our compensation arrangements.

• Amortization of acquisition-related intangibles. Acquisitions have been an important part of our business strategy and the corresponding acquisition-related charges reflect the costs of choosing acquisitions as a form of growth strategy.

• Restructuring of operations and other items, net. This item reflects charges for severance, exit costs associated with leased facilities, asset impairment charges and gains on sales of no longer strategic assets. While no longer strategic to the future of the Company, such items reflect the costs of decisions made as part of running a business and are critical to a complete view of our historical results.

• Other charges and gains. This item as discussed above should be included for a complete view of our historical performance even though they are not related to our core operations.

• Non-GAAP income tax expense/benefit. This line item represents the amount of tax expense or benefit that the Company would accrue if it used non-GAAP results instead of GAAP results in the calculation of its tax liability. The limitation in it is that it does not include the effect of all the items excluded from the Non-GAAP financial statements.

All supplemental non-GAAP financial measures should be read in conjunction with the comparable information presented in accordance with generally accepted accounting principles in the United States of America and the Company’s most recent annual report on Form 10-K for the fiscal year ended December 31, 2005. For a complete reconciliation of special items excluded from our results of operations for the three-month and nine-month periods ended October 1, 2006 and October 2, 2005, and the three-month period ended July 2, 2006, refer to the tables furnished in the news release attached as Exhibit 99.1.

Item 8.01 Other Events.

The Company reported revenues of $493 million in the third quarter of 2006, compared to revenues of $490 million reported in the second quarter of 2006, and a two percent increase compared to the $482 million reported in the third quarter of 2005.

Third quarter net income was $44 million or 11 cents per diluted share. The third quarter 2006 results compare to second quarter 2006 net income of $54 million or 13 cents per diluted share. Third quarter 2005 net loss was $73 million or 19 cents per diluted share.

Cash and short-term investments totaled $1.3 billion at the end of the third quarter of 2006.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	LSI Logic Corporation News Release issued October 25, 2006.*

* Furnished, not filed.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

LSI LOGIC CORPORATION,   a Delaware corporation
By:	/s/ Andrew S. Hughes
	Andrew S. Hughes
	Vice President, General Counsel and Corporate Secretary

Date: October 25, 2006

EXHIBIT INDEX

Exhibit No.	Description
99.1	LSI Logic Corporation News Release issued October 25, 2006.*

* Furnished, not filed.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Investor Relations Contact:	Media Relations Contact:
Tom Tran	Mitch Seigle
408-433-8105	408-954-3225
tom.tran@lsi.com	mitch.seigle@lsi.com
cc06-73

LSI LOGIC REPORTS THIRD QUARTER RESULTS
17% Year-Over-Year Revenue Growth in Storage

Third Quarter 2006 News Release Summary

n Revenues of $493 million

n GAAP* net income of 11 cents per diluted share

n Non-GAAP** net income of 16 cents per diluted share

n Cash and short-term investments of $1.3 billion

Fourth Quarter 2006 Business Outlook

n Projected revenues of $500 million to $525 million

n GAAP* net income range of 10 – 13 cents per diluted share

n Non-GAAP** net income in the range of 15 – 18 cents per diluted share

*	Generally Accepted Accounting Principles.
**	Excludes acquisition-related amortization, restructuring and other special items, and stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

MILPITAS, Calif., October 25, 2006 – LSI Logic Corporation (NYSE: LSI) today reported third quarter 2006 revenues of $493 million, a 2% increase year-over-year compared to the $482 million reported in the third quarter of 2005, and up 1% sequentially compared to the $490 million reported in the second quarter of 2006.

Third quarter 2006 GAAP* net income was $44 million or 11 cents per diluted share, compared to third quarter 2005 GAAP net loss of $73 million or 19 cents loss per diluted share. Third quarter 2006 GAAP results compare to second quarter 2006 GAAP net income of $54 million or 13 cents per diluted share. Third quarter GAAP net income included $11 million of stock-based compensation expense and a net charge of $10 million from special items, acquisition-related amortization, restructuring and their related tax effect.

Third quarter 2006 non-GAAP** net income was $65 million or 16 cents per diluted share, an increase of 43% compared to third quarter 2005 non-GAAP net income of $45 million or 11 cents per diluted share. Second quarter non-GAAP 2006 net income was $57 million or 14 cents per diluted share.

Cash and short-term investments grew 6% sequentially to $1.3 billion, from $1.2 billion in the second quarter and up 50% from the year-ago period.

“Revenues increased modestly during the quarter, with strong growth in storage semiconductors partially offset by expected lower demand for our portable media player products,” said Abhi Talwalkar, LSI Logic president and chief executive officer. “Total storage revenues were 17% higher than the year-ago period, fueled in part by increasing demand for SAS-enabled storage solutions. We further strengthened investments in our storage business, entering into a definitive agreement to acquire StoreAge Networking Technologies, a privately held maker of storage management applications software.”

“Higher gross margins and improved operating performance contributed to solid third quarter results, with net income significantly exceeding guidance,” said Bryon Look, LSI Logic chief financial officer. “SG&A expenditures as compared to second quarter 2006 declined on both a percentage and an absolute basis. Our balance sheet also strengthened, with a $68 million increase in cash and short-term investments.”

LSI Logic Fourth Quarter 2006 Business Outlook

	GAAP*	Special Items	Non-GAAP**
Revenue	$500 million to $525 million		$500 million to $525 million
Gross Margin	43.0 – 44.0%	Approximately $2 million	43.5 – 44.5%
Operating Expenses	$177 million to $181 million	Approximately $22 million	$155 million to $159 million
Net Other Income	$5 million		$5 million
Tax Provision	Approximately $3 million	Approximately ($4 million)	Approximately $7 million
Net Income Per Share	$0.10 to $0.13	Approximately ($0.05)	$0.15 to $0.18
Diluted Share Count	409 million		432 million

Capital spending is projected to be around $8 million in the fourth quarter and approximately $45 million in total for 2006.

Fourth quarter depreciation and software amortization is expected to be approximately $13 million.

*	Generally Accepted Accounting Principles.
**	Excludes special items defined as acquisition-related amortization, restructuring and other special items, and approximately $12.1 million in stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

NOTE: The Company’s financial guidance will be limited to the comments made on today’s public conference call and contained in the Fourth Quarter 2006 Business Outlook section of this news release.

LSI Logic Conference Call Information

LSI Logic will hold a conference call today at 2 pm PDT to discuss third quarter financial results and the fourth quarter 2006 business outlook. The number is 1-303-262-2191. Internet users can access the conference call at http://www.lsi.com/investors. A replay of the call will be available today at approximately 5 pm PDT and will be available for 48 hours. The replay access numbers are 1-800-405-2236 within the U.S. and 1-303-590-3000 for all other locations, passcode 11073169#.

Safe Harbor for Forward Looking Statements: This news release contains forward-looking statements, which include the following: projected revenues for the fourth quarter of 2006, projected GAAP net income for the fourth quarter of 2006, projected non-GAAP net income for the fourth quarter of 2006, projected capital spending in the fourth quarter of 2006 and for the year and expected fourth quarter of 2006 depreciation and software amortization. Forward-looking statements also include projections of gross margins, operating expenses, net other income, tax provisions, net income per share and diluted share count. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause LSI Logic’s actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: fluctuations in the timing and volumes of customer demand; the company’s inability to achieve revenue objectives; the company’s inability to meet financial targets and failure to execute on its financial plan; the company’s inability to generate positive operating cash flow or control operating expenses; and the unavailability of appropriate levels of manufacturing capacity. For additional information, readers are referred to the documents filed by LSI Logic with the SEC, and specifically the risk factors set forth in the company’s most recent reports on Form 10-K, 10-Q and 8-K. LSI Logic is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document.

About LSI Logic

LSI Logic Corporation is a leading provider of silicon-to-systems solutions that are used at the core of products that create, store and consume digital information. LSI offers a broad portfolio of capabilities including custom and standard product ICs, host bus and RAID adapters, storage area network solutions and software applications. LSI products enable leading technology companies in the Storage and Consumer markets to deliver some of the most advanced and well-known electronic systems in the market today. More information is available at www.lsi.com.

# # #

Editor’s Notes:

1.	All LSI Logic news releases (financial, acquisitions, manufacturing, products, technology etc.) are issued exclusively by PR Newswire and are immediately thereafter posted on the company’s external website, http://www.lsi.com.
2.	The LSI Logic logo design is a registered trademark of LSI Logic Corporation.
3.	All other brand or product names may be trademarks or registered trademarks of their respective companies.

LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended									Nine Months Ended
	October 1,			July 2,			October 2,			October 1,			October 2,
	2006			2006			2005			2006			2005
Revenues	$	492,978		$	489,635		$	481,716		$	1,458,497		$	1,413,015
Cost of revenues		276,725			277,970			271,511			824,565			800,782
Stock-based compensation expense*		1,719			2,458			186			5,702			511
Total cost of revenues		278,444			280,428			271,697			830,267			801,293
Gross profit		214,534			209,207			210,019			628,230			611,722
Research and development		98,625			95,719			100,524			292,096			299,420
Stock-based compensation expense*		3,908			4,643			503			13,073			1,908
Total research and development		102,533			100,362			101,027			305,169			301,328
Selling, general and administrative		54,878			58,439			58,342			176,411			176,354
Stock-based compensation expense*		5,398			6,197			624			17,379			1,521
Total selling, general and administrative		60,276			64,636			58,966			193,790			177,875
Restructuring of operations and other items, net		2,614			(21,648	)		99,986			(13,384	)		108,675
Amortization of acquisition related intangibles		6,436			10,801			15,693			28,453			50,919
Income/(loss) from operations		42,675			55,056			(65,653	)		114,202			(27,075	)
Interest expense		(6,556	)		(6,428	)		(6,058	)		(19,314	)		(19,088	)
Interest income and other, net		13,066			10,319			4,567			32,912			21,500
Income/(loss) before income taxes		49,185			58,947			(67,144	)		127,800			(24,663	)
Provision for income taxes		5,575			5,100			6,250			17,175			18,750
Net income/(loss)	$	43,610		$	53,847		$	(73,394	)	$	110,625		$	(43,413	)
Income/(loss) per share:
Basic	$	0.11		$	0.14		$	(0.19	)	$	0.28		$	(0.11	)
Diluted	$	0.11		$	0.13		$	(0.19	)	$	0.27		$	(0.11	)
Shares used in computing per share amounts:
Basic		399,613			397,790			391,017			397,408			389,247
Diluted		403,715			405,613			391,017			403,779			389,247

* The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

A reconciliation between net income on a GAAP basis and non-GAAP net income including items a)-i) is provided in the following table:

	Three Months Ended									Nine Months Ended
	October 1,			July 2,			October 2,			October 1,			October 2,
Reconciliation of GAAP to Non-GAAP net income:	2006			2006			2005			2006			2005
GAAP net income/(loss)	$	43,610		$	53,847		$	(73,394	)	$	110,625		$	(43,413	)
Special items:
a) Stock-based compensation expense — Cost of revenues		1,719			2,458			186			5,702			511
b) Stock-based compensation expense — R&D		3,908			4,643			503			13,073			1,908
c) Stock-based compensation expense — SG&A		5,398			6,197			624			17,379			1,521
d) Amortization of acquisition related intangibles		6,436			10,801			15,693			28,453			50,919
e) Restructuring of operations and other items, net		2,614			(21,648	)		99,986			(13,384	)		108,675
f) Gain on sale of certain equity securities		(787	)		—			—			(2,216	)		(2,358	)
g) Gain on repurchase of convertible Subordinated Notes		—			—			—			—			(4,123	)
h) Loss on impairment on certain equity securities		—			—			1,487			—			1,487
i) Income tax effect		1,738			453			—			1,421			—
Total special items		21,026			2,904			118,479			50,428			158,540
Non-GAAP net income	$	64,636		$	56,751		$	45,085		$	161,053		$	115,127
Non-GAAP income per share:
Basic	$	0.16		$	0.14		$	0.12		$	0.41		$	0.30
Diluted**	$	0.16		$	0.14		$	0.11		$	0.40		$	0.29
Shares used in computing Non-GAAP per share amounts:
Basic		399,613			397,790			391,017			397,408			389,247
Diluted		431,713			435,312			402,664			406,791			395,406

** In computing diluted earnings per share for the three month period ended October 1, 2006 and July 2, 2006, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock equivalents, respectively.

	Three Months Ended						Nine Months Ended
Reconciliation of shares used in the calculation of GAAP to	October 1,		July 2,		October 2,		October 1,		October 2,
Non-GAAP diluted net income per share:	2006		2006		2005		2006		2005
Diluted shares used in per-share calculation — GAAP		403,715		405,613		391,017		403,779		389,247
Effect of SFAS (R)		1,918		3,619		—		3,012		—
Effect of dilutive common stock equivalents		—		—		11,647		—		6,159
Effect of $350 million convertible notes considered dilutive**		26,080		26,080		—		—		—
Diluted shares used in per-share calculation — Non-GAAP		431,713		435,312		402,664		406,791		395,406

LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)

	October 1,			July 2,			December 31,
	2006			2006			2005
Assets
Current assets:
Cash and short-term investments	$	1,268.1		$	1,200.6		$	938.9
Accounts receivable, net		320.3			310.8			323.3
Inventories		183.7			173.8			194.8
Prepaid expenses and other current assets		64.0			85.6			163.1
Total current assets		1,836.1			1,770.8			1,620.1
Property and equipment, net		83.3			94.1			98.3
Goodwill and other intangibles		941.4			949.1			974.5
Other assets		118.1			108.0			103.2
Total assets	$	2,978.9		$	2,922.0		$	2,796.1
Liabilities and Stockholders’ Equity
Current liabilities:
Other current liabilities	$	470.2		$	482.9		$	468.9
Current portion of long-term debt		272.0			272.6			273.9
Total current liabilities		742.2			755.5			742.8
Long-term debt		350.0			350.0			350.0
Tax related liabilities and other		82.5			73.5			75.1
Total liabilities		1,174.7			1,179.0			1,167.9
Minority interest in subsidiary		0.2			0.2			0.2
Stockholders’ equity:
Common stock and additional paid-in capital		3,070.2			3,055.4			3,000.0
Accumulated deficit		(1,279.3	)		(1,322.9	)		(1,389.9	)
Accumulated other comprehensive income		13.1			10.3			17.9
Total stockholders’ equity		1,804.0			1,742.8			1,628.0
Total liabilities and stockholders’ equity	$	2,978.9		$	2,922.0		$	2,796.1

LSI LOGIC CORPORATION
Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)

	Three Months Ended									Nine Months Ended
	October 1,			July 2,			October 2,				October 1,			October 2,
	2006			2006			2005				2006			2005
Operating Activities:
Net income/(loss)	$	43,610		$	53,847		$	(73,394	)		$	110,625		$	(43,413	)
Adjustments:
Depreciation & amortization *		17,527			22,831			38,175				65,693			120,468
Stock-based compensation expense		11,025			13,298			1,313				36,154			3,940
Non-cash restructuring and other items		173			209			85,311				(2,576	)		86,661
Gain on sale of intellectual property		—			(15,000	)		—				(15,000	)		—
Gain on sale of Gresham manufacturing facility and associated intellectual property		—			(12,553	)		—				(12,553	)		—
Write-off of intangible assets acquired in a purchase business combination		—			3,325			—				3,325			—
Non-cash foreign exchange (gain)/loss		(941	)		1,057			—				(472	)		—
(Gain)/loss on sale of equity securities/ loss on write-down		(787	)		218			1,487				(1,998	)		(824	)
Gain on repurchase of Convertible Subordinated Notes		—			—			—				—			(4,123	)
(Gain)/loss on sales of property and equipment		(240	)		(5	)		(88	)			(245	)		(91	)
Changes in deferred tax assets and liabilities		4			23			58				24			112
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable		(9,460	)		(44,366	)		(13,615	)			3,063			(26,468	)
Inventories		(10,148	)		8,613			(3,393	)			7,158			29,767
Prepaid expenses and other assets		(7,403	)		(15,381	)		6,070				(13,380	)		(2,090	)
Accounts payable		(9,904	)		31,751			8,496				(1,161	)		6,118
Accrued and other liabilities		13,303			1,575			27,120				17,104			26,627
Net cash provided by operating activities		46,759			49,442			77,540				195,761			196,684
Investing activities:
Purchases of debt securities available-for-sale		(116,196	)		(216,019	)		(134,708	)			(498,408	)		(397,240	)
Proceeds from maturities and sales of debt securities available-for-sale		96,494			97,747			82,045				302,407			365,228
Purchases of equity securities		(3,000	)		(5,000	)		—				(8,150	)		—
Proceeds from sales of equity securities		2,511			2,026			—				6,092			3,871
Purchases of property, equipment and software		(15,587	)		(12,679	)		(15,906	)			(44,244	)		(35,326	)
Proceeds from sale of property and equipment		49			40			184				89			3,399
Proceeds from sale of intellectual property		7,670			15,000			—				22,670			—
Proceeds from sale of Fort Collins facility		—			10,998			—				10,998			—
Proceeds from sale of Colorado Springs facility		—			7,029			—				7,029			—
Proceeds from sale of Gresham manufacturing facility		15,000			81,426			—				96,426			—
Proceeds from sale of Gresham manufacturing facility associated intellectual property		—			5,100			—				5,100			—
Adjustment to goodwill acquired in a prior year for resolution of a pre-acquisition income tax contingency		1,373			—			—				1,373			7,662
Net cash used in investing activities		(11,686	)		(14,332	)		(68,385	)			(98,618	)		(52,406	)
Financing activities:
Issuance of common stock		3,868			20,149			7,247				36,005			20,073
Repurchase of Convertible Subordinated Notes		—			—			—				—			(148,126	)
Repayment of debt obligations		—			—			—				—			(129	)
Net cash provided by/(used in) financing activities		3,868			20,149			7,247				36,005			(128,182	)
Effect of exchange rate changes on cash and cash equivalents		15			365			(2,204	)			613			(9,165	)
Increase in cash and cash equivalents		38,956			55,624			14,198				133,761			6,931
Cash and cash equivalents at beginning of period		359,454			303,830			211,456				264,649			218,723
Cash and cash equivalents at end of period	$	398,410		$	359,454		$	225,654			$	398,410		$	225,654

* Depreciation of fixed assets, amortization of intangible assets, software, capitalized intellectual property, debt issuance costs and deferred gains on cancelled interest rate swaps.

LSI LOGIC CORPORATION
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)

	Three Months Ended
	October 1,			July 2,			October 2,
	2006			2006			2005
Semiconductor revenues	$	313.3		$	307.4		$	311.7
Storage Systems revenues	$	179.7		$	182.2		$	170.0
Total revenues	$	493.0		$	489.6		$	481.7
Percentage change in revenues-qtr./qtr. (a)		0.7	%		2.9	%		0.1	%
Percentage change in revenues-yr./yr. (b)		2.3	%		1.7	%		26.7	%
Days sales outstanding		58			57			56
Days of inventory		59			56			63
Current ratio		2.5			2.3			3.5
Quick ratio		2.1			2.0			2.7
Gross margin as a percentage of revenues		43.5	%		42.7	%		43.6	%
R&D as a percentage of revenues		20.8	%		20.5	%		20.9	%
SG&A as a percentage of revenues		12.2	%		13.2	%		12.1	%
Employees (c)		3,884			3,867			4,415
Revenues per employee (in thousands) (d)	$	507.7		$	506.5		$	436.4
Selected Cash Flow information
Purchases of property and equipment (e)	$	6.0		$	7.6		$	14.8
Depreciation / amortization (f)	$	10.5		$	10.8		$	20.6

(a)	Represents sequential quarter growth in revenues.
(b)	Represents growth in revenues in the quarter presented as compared to the same quarter of the previous year.
(c)	Actual number of employees at the end of each period presented.
(d)	Revenue per employee is calculated by annualizing revenue for each quarter presented and dividing it by the number of employees.
(e)	Excludes purchases of software.
(f)	Represents depreciation of fixed assets and amortization of software.