10-Q

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 1, 2012

OR

¨ 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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company.)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of August 1, 2012, there were 557,562,166 shares of the registrant’s Common Stock, $.01 par value, outstanding.

LSI CORPORATION

FORM 10-Q

For the Quarter Ended July 1, 2012

INDEX

	Page          No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		3
Condensed Consolidated Balance Sheets as of July 1, 2012 and December 31, 2011		3
Condensed Consolidated Statements of Operations for the three and six months ended July  1, 2012 and July 3, 2011		4
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July  1, 2012 and July 3, 2011		5
Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2012 and July  3, 2011		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures about Market Risk		28
Item 4. Controls and Procedures		28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		29
Item 1A. Risk Factors		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 6. Exhibits		30
Signatures		31
Exhibit Index		32

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “estimate,” “plan,” “intend,” “expect,” “anticipate,” “believe” and similar words are intended to identify forward-looking statements. Although we believe our expectations are based on reasonable assumptions, our actual results could differ materially from those projected in the forward-looking statements. We have described in Part II, Item 1A-”Risk Factors” a number of factors that could cause our actual results to differ materially from our projections or estimates. Except where otherwise indicated, the statements made in this report are made as of the date we filed this report with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. We expressly disclaim any obligation to update the information in this report, except as may otherwise be required by law.

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

LSI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	July 1, 2012			December 31, 2011
ASSETS
Cash and cash equivalents	$	402,144		$	779,811
Short-term investments		198,940			155,644
Accounts receivable, less allowances of $7,375 and $6,950, respectively		296,840			246,539
Inventories		204,013			180,035
Prepaid expenses and other current assets		63,394			60,659
Total current assets		1,165,331			1,422,688
Property and equipment, net		235,669			180,589
Identified intangible assets, net		546,118			433,790
Goodwill		255,838			72,377
Other assets		107,647			122,604
Total assets	$	2,310,603		$	2,232,048
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	206,041		$	175,093
Accrued salaries, wages and benefits		108,555			106,948
Other accrued liabilities		153,804			178,830
Total current liabilities		468,400			460,871
Pension and post-retirement benefit obligations		566,811			597,183
Income taxes payable — non-current		94,314			91,791
Other non-current liabilities		17,676			23,263
Total liabilities		1,147,201			1,173,108
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $.01 par value: 2,000 shares authorized; none outstanding		—			—
Common stock, $.01 par value: 1,300,000 shares authorized; 557,065 and 561,767 shares outstanding, respectively		5,571			5,618
Additional paid-in capital		5,588,935			5,623,581
Accumulated deficit		(3,903,121	)		(4,037,031	)
Accumulated other comprehensive loss		(527,983	)		(533,228	)
Total stockholders’ equity		1,163,402			1,058,940
Total liabilities and stockholders’ equity	$	2,310,603		$	2,232,048

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended					Six Months Ended
	July 1, 2012		July 3, 2011			July 1, 2012			July 3, 2011
Revenues	$	659,573	$	500,644		$	1,281,997		$	973,908
Cost of revenues		327,685		263,024			663,197			512,114
Gross profit		331,888		237,620			618,800			461,794
Research and development		175,564		145,873			345,435			288,220
Selling, general and administrative		88,914		71,793			179,014			140,660
Restructuring of operations and other items, net		6,491		(10,904	)		21,953			(8,098	)
Income from operations		60,919		30,858			72,398			41,012
Interest income and other, net		9,594		6,450			24,250			10,738
Income from continuing operations before income taxes		70,513		37,308			96,648			51,750
Provision for/(benefit from) income taxes		11,800		8,900			(37,262	)		4,796
Income from continuing operations		58,713		28,408			133,910			46,954
Income from discontinued operations (including a gain on disposal of $260,066 for the three and six months ended July 3, 2011), net of taxes		—		265,376			—			256,984
Net income	$	58,713	$	293,784		$	133,910		$	303,938
Basic income per share:
Income from continuing operations	$	0.10	$	0.05		$	0.24		$	0.08
Income from discontinued operations	$	—	$	0.44		$	—		$	0.42
Net income	$	0.10	$	0.49		$	0.24		$	0.50
Diluted income per share:
Income from continuing operations	$	0.10	$	0.05		$	0.23		$	0.08
Income from discontinued operations	$	—	$	0.43		$	—		$	0.41
Net income	$	0.10	$	0.48		$	0.23		$	0.49
Shares used in computing per share amounts:
Basic		563,686		594,957			564,945			605,315
Diluted		581,344		611,093			586,431			621,248

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Net income	$	58,713		$	293,784		$	133,910		$	303,938
Other comprehensive (loss)/income before tax:
Foreign currency translation adjustments		(4,844	)		190			(3,397	)		1,591
Unrealized gain on investments for the period		553			384			1,244			1,421
Reclassification adjustments for gain on investments included in net income		(918	)		(802	)		(1,413	)		(1,513	)
Unrealized loss on investments		(365	)		(418	)		(169	)		(92	)
Unrealized (loss)/gain on derivatives for the period		(1,989	)		399			(1,349	)		1,021
Reclassification adjustments for loss/(gain) on derivatives included in net income		1,335			(759	)		2,008			(972	)
Unrealized (loss)/gain on derivatives		(654	)		(360	)		659			49
Amortization of transition asset, prior service cost and net actuarial loss		4,183			1,784			8,152			3,562
Other comprehensive (loss)/income before tax		(1,680	)		1,196			5,245			5,110
Income tax expense related to items of other comprehensive (loss)/income		—			—			—			—
Other comprehensive (loss)/income, net of tax		(1,680	)		1,196			5,245			5,110
Comprehensive income	$	57,033		$	294,980		$	139,155		$	309,048

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	July 1, 2012			July 3, 2011
Operating activities:
Net income	$	133,910		$	303,938
Adjustments:
Depreciation and amortization		90,647			102,310
Stock-based compensation expense		56,152			27,112
Non-cash restructuring of operations and other items, net		5,041			20,964
Gain on re-measurement of a pre-acquisition equity interest to fair value		(5,765	)		—
Gain on sale of business		—			(260,066	)
Gain on sale of property and equipment		(70	)		(508	)
Unrealized foreign exchange (gain)/loss		(2,735	)		2,581
Deferred taxes		(43,174	)		(19,766	)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combination:
Accounts receivable		(39,417	)		92,477
Inventories		227			(43,140	)
Prepaid expenses, assets held for sale and other assets		(1,830	)		(10,991	)
Accounts payable		29,521			9,290
Accrued and other liabilities		(55,010	)		(77,878	)
Net cash provided by operating activities		167,497			146,323
Investing activities:
Purchases of debt securities available-for-sale		(72,369	)		(24,131	)
Proceeds from maturities and sales of debt securities available-for-sale		17,756			23,445
Purchases of other investments		—			(4,000	)
Purchases of property and equipment		(77,618	)		(37,198	)
Proceeds from sale of property and equipment		252			896
Acquisition of business, net of cash acquired		(319,231	)		—
Proceeds from sale of business, net of transaction costs		—			475,150
Net cash (used in)/provided by investing activities		(451,210	)		434,162
Financing activities:
Issuances of common stock		82,128			50,931
Purchases of common stock under repurchase program		(176,185	)		(396,792	)
Net cash used in financing activities		(94,057	)		(345,861	)
Effect of exchange rate changes on cash and cash equivalents		103			(968	)
Net change in cash and cash equivalents		(377,667	)		233,656
Cash and cash equivalents at beginning of period		779,811			521,786
Cash and cash equivalents at end of period	$	402,144		$	755,442

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

LSI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

For financial reporting purposes, LSI Corporation (“LSI” or the “Company”) reports on a 13- or 14-week quarter with the year ending December 31. The second quarter of 2012 and 2011 consisted of 13 weeks each and ended on July 1, 2012 and July 3, 2011, respectively. The results of operations for the quarter ended July 1, 2012 are not necessarily indicative of the results to be expected for the full year.

On January 3, 2012, the Company completed the acquisition of SandForce, Inc. (“SandForce”) for total consideration of approximately $346.4 million, net of cash acquired. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The acquisition was accounted for under the purchase method of accounting. Accordingly, the results of operations of SandForce and the estimated fair value of assets acquired and liabilities assumed were included in the Company’s condensed consolidated financial statements from January 3, 2012.

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp, Inc. (“NetApp”). The results of the external storage systems business are presented as discontinued operations in the Company’s condensed consolidated statements of operations and, as such, have been excluded from all line items other than “Income from discontinued operations” for all periods presented.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, comprehensive income and cash flows for the interim periods presented. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Recent Accounting Pronouncements

Pronouncements adopted:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued additional guidance on fair value measurements and related disclosures. The new guidance clarifies the application of existing guidance on fair value measurement for non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

Note 2 — Stock-Based Compensation Expense

In May 2012, the Company’s 2003 Equity Incentive Plan was amended to increase the number of shares available for new awards to a total of 25 million, of which 15 million shares were available for restricted stock and/or restricted stock units (“RSUs”). In addition, the period during which incentive stock options can be granted was extended to February 9, 2022, and the maximum number of shares that may be issued upon exercise of incentive stock options was set at 25 million.

Stock-based compensation expense included in continuing operations, net of estimated forfeitures, related to the Company’s stock options, Employee Stock Purchase Plan (“ESPP”) and restricted stock unit awards by expense category was as follows:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Cost of revenues	$	3,003	$	2,051	$	6,515	$	3,864
Research and development		11,973		6,653		24,281		12,876
Selling, general and administrative		10,342		4,948		25,356		10,579
Total stock-based compensation expense	$	25,318	$	13,652	$	56,152	$	27,319

7

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce. Stock-based compensation expense for the six months ended July 1, 2012 included $4.5 million of expense related to the accelerated vesting of stock options and RSUs for certain SandForce employees in January 2012. Stock-based compensation expense for the three and six months ended July 1, 2012 also includes $3.3 million and $5.7 million, respectively, related to stock options and RSUs assumed.

The Company has issued RSUs that will not vest unless specified performance criteria are met. In the first quarter of 2012, the compensation committee of the board of directors authorized additional vesting of performance-based RSUs where the Company’s performance had been adversely affected as a result of the flooding that occurred in Thailand in the fourth quarter of 2011 and as a result, vesting levels would have been lower. The Company recognized $1.6 million and $6.0 million of stock-based compensation expense related to the additional vesting for the three and six months ended July 1, 2012, respectively. No executive officers were included in the group of employees that received additional vesting. Executive officers hold RSUs, the vesting of which depends on the Company’s performance compared to specified peer companies over a three-year period. Based on the Company’s latest available financial performance, the Company recognized $1.6 million and $4.0 million of stock-based compensation expense related to the executive officer performance grants for the three and six months ended July 1, 2012, respectively. There was no stock-based compensation expense related to the executive officer performance grants for the three or six months ended July 3, 2011.

Stock Options

The fair value of each option grant is estimated as of the date of grant using a reduced-form calibrated binomial lattice model (“lattice model”). The following table summarizes the weighted-average assumptions that the Company applied in the lattice model:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.64		$	2.65		$	2.86		$	2.14
Expected life (years)		4.52			5.01			4.46			4.51
Risk-free interest rate		1	%		2	%		1	%		2	%
Volatility		49	%		47	%		47	%		47	%

The following table summarizes changes in stock options outstanding:

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding at December 31, 2011		64,245		$	6.19
Assumed in SandForce acquisition		7,542		$	0.75
Granted		5,033		$	8.50
Exercised		(11,942	)	$	5.69
Canceled		(2,757	)	$	9.32
Options outstanding at July 1, 2012		62,121		$	5.67		4.09	$	91,608
Options exercisable at July 1, 2012		37,288		$	6.15		2.81	$	43,806

As of July 1, 2012, the total unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, was $46.8 million and is expected to be recognized over the next 2.3 years on a weighted-average basis.

Restricted Stock Units

The cost of service-based and performance-based RSUs is determined using the fair value of the Company’s common stock on the date of grant. For performance-based RSU expense, the Company also considers the probability that those RSUs will vest.

Service-based:

The vesting of service-based RSUs requires that the employees remain employed by the Company for a specified period of time.

8

The following table summarizes changes in service-based RSUs outstanding:

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested service-based RSUs at December 31, 2011		12,085		$	5.94
Assumed in SandForce acquisition		1,576		$	6.17
Granted		7,012		$	8.32
Vested		(3,035	)	$	5.90
Forfeited		(464	)	$	6.32
Unvested service-based RSUs at July 1, 2012		17,174		$	6.93

As of July 1, 2012, the total unrecognized compensation expense related to service-based RSUs, net of estimated forfeitures, was $98.7 million and will be recognized over the next 2.9 years on a weighted-average basis.

Performance-based:

The vesting of performance-based RSUs is contingent upon the Company meeting specified performance criteria and requires that the employees remain employed by the Company for a specified period of time.

The following table summarizes changes in performance-based RSUs outstanding:

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested performance-based RSUs at December 31, 2011		4,729		$	5.98
Granted		2,986		$	8.52
Vested		(1,446	)	$	5.85
Forfeited		(535	)	$	6.41
Unvested performance-based RSUs at July 1, 2012		5,734		$	7.30

As of July 1, 2012, the total unrecognized compensation expense related to performance-based RSUs, net of estimated forfeitures, was $30.0 million and, if the performance conditions are fully met, will be recognized over the next 3 years.

A total of 9,117,372 shares of common stock were reserved for future issuance upon exercise of options and RSUs assumed in the SandForce acquisition. Those options and RSUs are included in the preceding tables. The options vest over four years and have ten year terms. The RSUs vest over one to four years.

Employee Stock Purchase Plan

Compensation expense for the Company’s ESPP is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Under the ESPP, rights to purchase shares are granted during the second and fourth quarters of each year. The Company issued 2.8 million and 2.9 million shares under the ESPP during the three months ended July 1, 2012 and July 3, 2011, respectively. The following table summarizes the weighted-average assumptions that the Company applied in the calculation of the fair value for the May 2012 and May 2011 grants:

	Three Months Ended
	July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.19		$	2.10
Expected life (years)		0.8			0.8
Risk-free interest rate		0.17	%		0.02	%
Volatility		41	%		37	%

Note 3 — Common Stock Repurchases

On March 9, 2011, the Company’s board of directors authorized a stock repurchase program of up to $750.0 million of the Company’s common stock. As of July 1, 2012, $75.0 million remained available under this stock repurchase program. The Company repurchased 17.9 million shares for $138.0 million during the three months ended July 1, 2012 and 22.5 million shares for $176.2 million during the six months ended July 1, 2012. The Company repurchased 41.6 million shares for $300.0 million during the three months ended July 3, 2011 and 56.3 million shares for $396.8 million during the six months ended July 3, 2011. Repurchased shares are retired immediately after the repurchases are completed. Retirement of repurchased shares is recorded as a reduction of common stock and additional paid-in capital. On August 1, 2012, the Company’s board of directors authorized the repurchase of up to an additional $500.0 million of the Company’s common stock.

9

Note 4 — Restructuring and Other Items

The following table summarizes items included in restructuring of operations and other items, net:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(In thousands)
Lease terminations (a)	$	1,181		$	1,865		$	2,815		$	3,553
Employee severance and benefits (b)		1,028			289			1,459			1,932
Total restructuring expense		2,209			2,154			4,274			5,485
Other items, net		4,282	(c)		(13,058	)(d)		17,679	(e)		(13,583	)(d)
Total restructuring of operations and other items, net	$	6,491		$	(10,904	)	$	21,953		$	(8,098	)

(a) Includes changes in time value, on-going operating expense and changes in estimates related to previously vacated facilities.

(b) Relates to restructuring actions taken as the Company continued to streamline operations.

(c) Primarily consists of $2.4 million of property and equipment write-downs and $1.9 million of transition service agreement costs related to the sale of the external storage systems business.

(d) Primarily relates to the reversal of a $14.5 million sales and use tax related liability as a result of concluding various audits, partially offset by $1.3 million of transition service agreement costs related to the sale of the external storage systems business.

(e) Primarily consists of $8.4 million of SandForce acquisition-related costs and $6.5 million of transition service agreement costs related to the sale of the external storage systems business.

The following table summarizes the significant activity within, and components of, the Company’s restructuring obligations:

	Lease Terminations			Employee Severance and Benefits			Total
	(In thousands)
Balance at December 31, 2011	$	11,752		$	10,444		$	22,196
Expense		2,815			1,459			4,274
Utilized(a)		(4,844	)		(10,810	)		(15,654	)
Balance at July 1, 2012 (b)	$	9,723		$	1,093		$	10,816

(a) Represents cash payments.

(b) The balance remaining for lease terminations is expected to be paid during the remaining terms of the leases, which extend through 2013. The balance remaining for employee severance and benefits is expected to be paid by the end of 2013.

Note 5 — Business Combination

Acquisition of SandForce

On January 3, 2012, the Company completed the acquisition of SandForce. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The Company acquired SandForce to enhance its position in storage technology solutions.

Total consideration consisted of the following (in thousands):

Cash paid, net of cash acquired	$	319,231
Fair value of partially vested equity awards		19,089
Fair value of LSI’s previous investment in SandForce		8,120
Total	$	346,440

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce and converted them into LSI stock options and RSUs. The portion of the fair value of partially vested equity awards associated with prior service of SandForce employees represents a component of the total consideration for the SandForce acquisition, as presented above. Stock options assumed were valued using a binomial lattice model calibrated to the exercise behavior of LSI’s employees. RSUs were valued based on LSI’s stock price as of the acquisition date.

10

Prior to the acquisition, the Company held an equity interest in SandForce. The Company determined the fair value by applying the per share value of the contractual cash consideration to the SandForce shares held by the Company immediately prior to the acquisition. The fair value of the Company’s pre-acquisition investment in SandForce represents a component of total consideration, as presented above. As a result of re-measuring the pre-acquisition equity interest in SandForce to fair value, the Company recognized a gain of $5.8 million, which was included in interest income and other, net, for the six month period ended July 1, 2012.

The allocation of the purchase price to SandForce’s tangible and identified intangible assets acquired and liabilities assumed was based on their estimated fair values.

The purchase price has been allocated as follows (in thousands):

Accounts receivable	$	10,711
Inventory		24,268
Identified intangible assets		172,400
Goodwill		183,461
Net deferred tax liabilities		(43,198	)
Other, net		(1,202	)
Total	$	346,440

The goodwill is primarily attributable to the assembled workforce of SandForce and synergies and economies of scale expected from combining the operations of LSI and SandForce. The goodwill recognized is not deductible for tax purposes.

Identified intangible assets were comprised of the following:

	Fair Value		Weighted- Average  Life
	(In thousands)		(In years)
Current technology	$	73,400		4.0
Customer relationships		41,700		7.0
Order backlog		4,500		0.5
Trade names		1,500		3.0
Total identified intangible assets subject to amortization		121,100		4.9
In-process research and development		51,300
Total identified intangible assets	$	172,400

The allocation of the purchase price to identified intangible assets acquired was based on the Company’s best estimate of the fair value of such assets. Fair value for acquired identified intangible assets is determined based on inputs that are unobservable and significant to the overall fair value measurement. As such, acquired intangible assets are classified as Level 3 assets.

The fair value of each of the acquired identified intangible assets was determined using a discounted cash flow methodology. The cash flows for each category of identified intangible assets represent the estimated incremental effect on the Company’s cash flows directly attributable to that intangible asset over its estimated remaining life. Estimated cash flows represent expected incremental revenues, net of returns on contributory assets and after considering estimated incremental operating costs and income taxes. Discount rates ranging from 12.9% to 17.9% were used based on the cost of capital, adjusted to reflect the specific risk associated with each of the cash flows.

Current technology represents the fair value of SandForce products that had reached technological feasibility and were a part of its product offering. Customer relationships represent the fair values of the underlying relationships with SandForce’s customers.

In-process research and development (“IPR&D”) represents the fair value of incomplete research and development projects that had not reached technological feasibility as of the date of the acquisition. At the time of acquisition, SandForce had IPR&D related to its next generation flash storage processor (the “Griffin project”). At July 1, 2012, expected costs to complete the Griffin project are approximately $24 million through its anticipated completion date in 2013. Total revenues for the Griffin project are expected to extend through 2018. The acquisition date fair value of the Griffin project will be either amortized or impaired depending on whether the project is completed or abandoned.

From January 3, 2012 through July 1, 2012, the Company recognized approximately $77.0 million of revenues related to the SandForce business. In addition, during the six months ended July 1, 2012, the Company recognized $8.4 million of acquisition-related costs included in restructuring of operations and other items, net, related to SandForce. It is impracticable to determine the effect on net income resulting from the SandForce acquisition for the six months ended July 1, 2012, as the Company immediately integrated SandForce into its ongoing operations. As such, the impact of SandForce is not separable from the Company’s consolidated results of operations.

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Historical pro forma results giving effect to the acquisition have not been presented because such effect is not material to the prior period financial results.

Note 6 — Benefit Obligations

In 2007, the Company acquired Agere Systems Inc. (“Agere”). The Company has pension plans covering substantially all former Agere U.S. employees, excluding management employees hired after June 30, 2003. Retirement benefits are provided under defined benefit pension plans, which include a management plan and a represented plan. The payments under the management plan are based on an adjusted career-average-pay formula or a cash-balance program. The cash-balance program provides for annual company contributions based on a participant’s age and compensation and interest on existing balances. It covers employees of certain companies acquired by Agere since 1996 and management employees hired after January 1, 1999 and before July 1, 2003. The payments under the represented plan are based on a dollar-per-month formula. Since February 2009, there have been no active participants under the represented plan. The Company also has a non-qualified supplemental pension plan in the U.S. that principally provides benefits based on compensation in excess of amounts that can be considered under a tax qualified plan. The Company also provides post-retirement life insurance coverage under a group life insurance plan for former Agere employees excluding participants in the cash-balance program and management employees hired after June 30, 2003. The Company also has pension plans covering certain international employees.

Effective April 6, 2009, the Company froze the U.S. management defined benefit pension plan. Participants in the adjusted career-average-pay program will not earn any future service accruals after that date. Participants in the cash-balance program will not earn any future service accruals, but will continue to earn 4% interest per year on their cash-balance accounts.

The following table summarizes the components of the net periodic benefit cost or credit:

	Three Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	116		$	20		$	141		$	21
Interest cost		15,483			643			16,929			621
Expected return on plan assets		(17,030	)		(856	)		(17,000	)		(1,033	)
Amortization of net actuarial loss, prior service cost and transition asset		3,693			490			1,699			85
Total benefit cost/(credit)	$	2,262		$	297		$	1,769		$	(306	)

	Six Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	225		$	45		$	275		$	38
Interest cost		30,735			1,293			33,779			1,246
Expected return on plan assets		(34,053	)		(1,906	)		(33,998	)		(2,065	)
Amortization of net actuarial loss, prior service cost and transition asset		7,162			990			3,385			177
Total benefit cost/(credit)	$	4,069		$	422		$	3,441		$	(604	)

During the six months ended July 1, 2012, the Company contributed $26.2 million to its U.S. defined benefit pension plans and $0.4 million to its non-qualified supplemental pension plan. The Company expects to contribute an additional $68.6 million to its pension plans during the remainder of 2012. The Company does not expect to contribute to its post-retirement benefit plan in 2012.

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Note 7 — Cash Equivalents and Investments

The following tables summarize the Company’s cash equivalents and investments measured at fair value:

	Fair Value Measurements as of July 1, 2012
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	310,545	(a)	$	—		$	310,545
U.S. government and agency securities		—			2,003	(b)		2,003
Total cash equivalents	$	310,545		$	2,003		$	312,548
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	124,603	(b)	$	124,603
Non-agency securities		—			3,135	(b)		3,135
U.S. government and agency securities		13,225	(a)		44,200	(b)		57,425
Corporate debt securities		—			13,777	(b)		13,777
Total short-term investments	$	13,225		$	185,715		$	198,940
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	2,145	(c)	$	—		$	2,145

	Fair Value Measurements as of December 31, 2011
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	674,219	(a)	$	—		$	674,219
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	97,408	(b)	$	97,408
Non-agency securities		—			9,989	(b)		9,989
U.S. government and agency securities		5,403	(a)		30,572	(b)		35,975
Corporate debt securities		—			12,272	(b)		12,272
Total short-term investments	$	5,403		$	150,241		$	155,644
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	1,514	(c)	$	—		$	1,514

(a) The fair value of money-market funds is determined using unadjusted prices in active markets. The fair value of Level 1 U.S. government and agency securities is determined using quoted prices in active markets.

(b) These investments are traded less frequently than Level 1 securities and are valued using inputs that include quoted prices for similar assets in active markets and inputs other than quoted prices that are observable for the asset, such as interest rates, yield curves, prepayment speeds, collateral performance, broker/dealer quotes and indices that are observable at commonly quoted intervals.

(c) The fair value of marketable equity securities is determined using quoted market prices in active markets. These amounts are included within other assets in the condensed consolidated balance sheets.

As of July 1, 2012 and December 31, 2011, the aggregate carrying value of the Company’s non-marketable securities was $41.6 million and $43.9 million, respectively.

Upon the acquisition of SandForce in January 2012, the Company recognized a gain of $5.8 million as a result of re-measuring its pre-acquisition equity interest in SandForce to estimated fair value. There were no other non-marketable securities fair-valued during the three and six months ended July 1, 2012 or July 3, 2011.

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The following tables summarize the Company’s available-for-sale securities:

	July 1, 2012
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	121,466	$	6,764	$	(492	)	$	127,738
U.S. government and agency securities		56,542		888		(5	)		57,425
Corporate debt securities		13,617		161		(1	)		13,777
Total short-term debt securities	$	191,625	$	7,813	$	(498	)	$	198,940
Long-term marketable equity securities	$	669	$	1,476	$	—		$	2,145

	December 31, 2011
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	99,884	$	7,891	$	(378	)	$	107,397
U.S. government and agency securities		35,179		799		(3	)		35,975
Corporate debt securities		12,146		153		(27	)		12,272
Total short-term debt securities	$	147,209	$	8,843	$	(408	)	$	155,644
Long-term marketable equity securities	$	669	$	846	$	(1	)	$	1,514

As of July 1, 2012, there were 94 investments in an unrealized loss position. The following tables summarize the gross unrealized losses and fair values of the Company’s short-term investments that have been in a continuous unrealized loss position for less than and greater than 12 months, aggregated by investment category:

	July 1, 2012
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	33,176	$	(473	)	$	1,247	$	(19	)
U.S. government and agency securities		15,356		(5	)		—		—
Corporate debt securities		4,544		(1	)		503		—
Total	$	53,076	$	(479	)	$	1,750	$	(19	)

	December 31, 2011
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	10,645	$	(286	)	$	1,301	$	(92	)
U.S. government and agency securities		3,872		(3	)		—		—
Corporate debt securities		2,375		(27	)		505		—
Total	$	16,892	$	(316	)	$	1,806	$	(92	)

Net realized gains on sales of available-for-sale securities were not material for the three and six months ended July 1, 2012 or July 3, 2011.

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Contractual maturities of available-for-sale debt securities as of July 1, 2012 were as follows:

	Available-For-Sale Debt Securities
	(In thousands)
Due within one year	$	27,998
Due in 1-5 years		47,794
Due in 5-10 years		10,015
Due after 10 years		113,133
Total	$	198,940

The maturities of asset-backed and mortgage-backed securities were allocated based on contractual principal maturities assuming no prepayments.

Note 8 — Supplemental Financial Information

Inventories

	July 1, 2012		December 31, 2011
	(In thousands)
Raw materials	$	147	$	236
Work-in-process		56,248		78,886
Finished goods		147,618		100,913
Total inventories	$	204,013	$	180,035

Goodwill

The following table summarizes goodwill activity for the six months ended July 1, 2012:

	Goodwill
	(In thousands)
Balance as of December 31, 2011	$	72,377
Addition due to SandForce acquisition		183,461
Balance as of July 1, 2012	$	255,838

There was no impairment charge for goodwill during the six months ended July 1, 2012 or July 3, 2011. The accumulated impairment loss as of July 1, 2012 was $2.4 billion.

Accumulated Other Comprehensive Loss

The following table presents the components of, and changes in, accumulated other comprehensive loss, net of taxes:

	Balance at December 31, 2011			Other Comprehensive Income			Balance at July 1, 2012
	(In thousands)
Accumulated net foreign currency translation adjustments	$	42,138		$	(3,397	)	$	38,741
Accumulated net unrealized gain on investments		5,942			(169	)		5,773
Accumulated net unrealized loss on derivatives		(2,551	)		659			(1,892	)
Accumulated actuarial loss on pension and post-retirement plans		(578,757	)		8,152			(570,605	)
Total accumulated other comprehensive loss	$	(533,228	)	$	5,245		$	(527,983	)

There was no tax effect on any item of other comprehensive income presented in the condensed consolidated statements of comprehensive income for the three and six months ended July 1, 2012 and July 3, 2011.

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Reconciliation of Basic and Diluted Shares

The following table provides a reconciliation of basic and diluted shares:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Basic shares		563,686		594,957		564,945		605,315
Dilutive effect of stock options, employee stock purchase rights and restricted stock unit awards		17,658		16,136		21,486		15,933
Diluted shares		581,344		611,093		586,431		621,248

The weighted-average common share equivalents that were excluded from the computation of diluted shares because their inclusion would have had an anti-dilutive effect on net income per share were as follows:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Anti-dilutive securities:
Stock options		30,540		38,338		24,672		44,130
Restricted stock unit awards		9,743		1,445		5,985		93

Note 9 — Derivative Instruments

The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to changes in foreign-currency exchange rates. The Company utilizes forward contracts to manage its exposure associated with net asset and liability positions denominated in non-functional currencies and to reduce the volatility of earnings and cash flows related to forecasted foreign-currency transactions. The Company does not hold derivative financial instruments for speculative or trading purposes.

Cash-Flow Hedges

The Company enters into forward contracts that are designated as foreign-currency cash-flow hedges of selected forecasted payments denominated in currencies other than U.S. dollars. These forward contracts generally mature within twelve months. The Company evaluates and calculates the effectiveness of each hedge at least quarterly. Changes in fair value attributable to changes in time value are excluded from the assessment of effectiveness and are recognized in interest income and other, net. The effective portion of the forward contracts’ gain or loss is recorded in other comprehensive income and, when the hedged expense is recognized, is subsequently reclassified into earnings within the same line item in the statements of operations as the impact of the hedged transaction. The ineffective portion of the gain or loss is reported in earnings immediately. As of July 1, 2012 and December 31, 2011, the total notional value of the Company’s outstanding forward contracts, designated as foreign-currency cash-flow hedges, was $36.5 million and $36.9 million, respectively.

Other Foreign-Currency Hedges

The Company enters into foreign-exchange forward contracts that are used to hedge certain foreign-currency-denominated assets or liabilities and that do not qualify for hedge accounting. These forward contracts generally mature within three months. Changes in the fair value of these forward contracts are recorded immediately in earnings to offset the changes in fair value of the assets or liabilities being hedged. As of July 1, 2012 and December 31, 2011, the total notional value of the Company’s outstanding forward contracts, not designated as hedges under hedge accounting, was $35.3 million and $37.6 million, respectively. For the three and six months ended July 1, 2012, losses of $2.9 million and $1.7 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. For the three and six months ended July 3, 2011, gains of $0.3 million and $2.1 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. These amounts were substantially offset by the gains and losses on the underlying foreign-currency-denominated assets or liabilities.

Fair Value of Derivative Instruments

As of July 1, 2012 and December 31, 2011, the total fair value of derivative assets was immaterial and was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheets. As of July 1, 2012 and December 31, 2011, the total fair value of derivative liabilities was $2.3 million and $3.0 million, respectively, and was recorded in other accrued liabilities in the condensed consolidated balance sheets.

Note 10 — Segment, Geographic and Product Information

The Company operates in one reportable segment — the Semiconductor segment.

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The Company’s chief executive officer is the chief operating decision maker (“CODM”). The Company’s CODM bears ultimate responsibility for, and is actively engaged in, the allocation of resources and the evaluation of the Company’s operating and financial results.

Information about Geographic Areas

The following table summarizes the Company’s revenues by geography based on the ordering location of the customer. Because the Company sells its products primarily to other sellers of technology products and not to end users, the information in the table below may not accurately reflect geographic end-user demand for its products.

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
North America*	$	154,468	$	122,881	$	313,437	$	243,799
Asia		463,988		330,343		878,010		633,001
Europe and the Middle East		41,117		47,420		90,550		97,108
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

* Primarily the United States.

Information about Product Groups

The following table presents the Company’s revenues by product groups:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Storage products	$	534,697	$	358,961	$	1,023,166	$	695,348
Networking products		98,780		117,383		205,802		229,383
Other		26,096		24,300		53,029		49,177
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

Note 11 — Income Taxes

The Company recorded an income tax provision of $11.8 million and an income tax benefit of $37.3 million for the three and six months ended July 1, 2012, respectively, and income tax provisions of $8.9 million and $4.8 million for the three and six months ended July 3, 2011, respectively.

The income tax benefit for the six months ended July 1, 2012 included a tax benefit of approximately $43.2 million due to the release of valuation allowance resulting from the net deferred tax liabilities recorded as part of the SandForce purchase price allocation. The income tax benefit for the six months ended July 1, 2012 also included a reversal of $10.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $5.2 million and interest and penalties of $5.0 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

The income tax provision for the six months ended July 3, 2011 included a reversal of $8.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $4.8 million and interest and penalties of $3.4 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

The Company computes its tax provision using an estimated annual tax rate. The Company excludes certain loss jurisdictions from the computation of the estimated annual rate when no benefit can be realized on those losses. With the exception of certain foreign jurisdictions, the Company believes it is not more likely than not that the future benefit of the deferred tax assets will be realized.

As of July 1, 2012, the Company had $180.7 million of unrecognized tax benefits, for which the Company is unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority may occur. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months. Such changes could occur based on the normal expiration of statutes of limitations or the possible conclusion of ongoing tax audits in various jurisdictions around the world. If those events occur within the next 12 months, the Company estimates that the unrecognized tax benefits, plus accrued interest and penalties, could decrease by up to $16.7 million.

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Note 12 — Related Party Transactions

A member of the Company’s board of directors is also a member of the board of directors of Seagate Technology (“Seagate”). The Company sells semiconductors used in storage product applications to Seagate for prices comparable to those charged to an unrelated third party. Revenues from sales by the Company to Seagate were $227.6 million and $434.6 million for the three and six months ended July 1, 2012, respectively. Revenues from sales by the Company to Seagate were $118.9 million and $217.5 million for the three and six months ended July 3, 2011, respectively. The Company had accounts receivable from Seagate of $134.8 million and $90.3 million as of July 1, 2012 and December 31, 2011, respectively.

The Company has an equity interest in a joint venture, Silicon Manufacturing Partners Pte Ltd. (“SMP”), with GLOBALFOUNDRIES, a manufacturing foundry for integrated circuits. SMP operates an integrated circuit manufacturing facility in Singapore. The Company owns a 51% equity interest in this joint venture and accounts for its ownership position under the equity method of accounting. The Company is effectively precluded from unilaterally taking any significant action in the management of SMP due to GLOBALFOUNDRIES’ significant participatory rights under the joint venture agreement. Because of GLOBALFOUNDRIES’ approval rights, the Company cannot make any significant decisions regarding SMP without GLOBALFOUNDRIES’ approval, despite the 51% equity interest. In addition, the General Manager, who is responsible for the day-to-day management of SMP, is appointed by GLOBALFOUNDRIES, and GLOBALFOUNDRIES provides day-to-day operational support to SMP.

The Company purchased $11.7 million and $23.9 million of inventory from SMP during the three and six months ended July 1, 2012, respectively. The Company purchased $14.8 million and $25.6 million of inventory from SMP during the three and six months ended July 3, 2011, respectively. As of July 1, 2012 and December 31, 2011, the amounts payable to SMP were $9.5 million and $5.0 million, respectively.

Note 13 — Commitments, Contingencies and Legal Matters

Purchase Commitments

The Company maintains purchase commitments with certain suppliers, primarily for raw materials and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time horizon as mutually agreed upon between the parties. This forecasted time horizon can vary for different suppliers. As of July 1, 2012, the Company had purchase commitments of $446.7 million, which are due through 2016.

The Company has a take-or-pay agreement with SMP under which it has agreed to purchase 51% of the managed wafer capacity from SMP’s integrated circuit manufacturing facility, and GLOBALFOUNDRIES has agreed to purchase the remaining managed wafer capacity. SMP determines its managed wafer capacity each year based on forecasts provided by the Company and GLOBALFOUNDRIES. If the Company fails to purchase its required commitments, it will be required to pay SMP for the fixed costs associated with the unpurchased wafers. GLOBALFOUNDRIES is similarly obligated with respect to the wafers allotted to it. The agreement may be terminated by either party upon two years written notice. The agreement may also be terminated for material breach, bankruptcy or insolvency.

Guarantees

Product Warranties:

The following table sets forth a summary of changes in product warranties:

	Accrued Warranties
	(In thousands)
Balance as of December 31, 2011	$	6,334
Accruals for warranties issued during the period		868
Adjustments to pre-existing accruals (including changes in estimates)		(470	)
Warranty liabilities assumed in SandForce acquisition		426
Settlements made during the period (in cash or in kind)		(1,059	)
Balance as of July 1, 2012	$	6,099

Standby Letters of Credit:

The Company had outstanding obligations relating to standby letters of credit of $4.1 million and $3.5 million, respectively, as of July 1, 2012 and December 31, 2011. Standby letters of credit are financial guarantees provided by third parties for leases, customs and certain self-insured risks. If the guarantees are called, the Company must reimburse the provider of the guarantee. The fair value of the letters of credit approximates the contract amounts. The standby letters of credit generally renew annually.

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Indemnifications

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party. These obligations arise primarily in connection with sales contracts, license agreements or agreements for the sale of assets, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of warranties, representations and covenants related to such matters as title to assets sold, validity of certain intellectual property rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by the Company is typically subject to the other party making a claim to and cooperating with the Company pursuant to the procedures specified in the particular contract. This usually allows the Company to challenge the other party’s claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, the Company’s obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration and/or amounts. In some instances, the Company may have recourse against third parties covering certain payments made by the Company.

Legal Matters

On December 6, 2006, Sony Ericsson Mobile Communications USA Inc. (“Sony Ericsson”) filed a lawsuit against Agere in Wake County Superior Court in North Carolina, alleging unfair and deceptive trade practices, fraud and negligent misrepresentation in connection with Agere’s engagement with Sony Ericsson to develop a wireless data card for personal computers. The complaint claimed an unspecified amount of damages and sought compensatory damages, treble damages and attorneys’ fees. In August, 2007, the case was dismissed for improper venue. On October 22, 2007, Sony Ericsson filed a lawsuit in the Supreme Court of the State of New York, New York County against LSI, raising substantially the same allegations and seeking substantially the same relief as the North Carolina proceeding. In January 2010, Sony Ericsson amended its complaint by adding claims for fraudulent concealment and gross negligence. On September 10, 2010, LSI filed a motion for summary judgment. On August 4, 2011, the court granted LSI’s motion and ordered the dismissal of all of Sony Ericsson’s claims. Sony Ericsson has appealed this decision. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to this matter.

On March 23, 2007, CIF Licensing, LLC, d/b/a GE Licensing (“GE”) filed a lawsuit against Agere in the United States District Court for the District of Delaware, asserting that Agere products infringe patents in a portfolio of patents GE acquired from Motorola. GE has asserted that four of the patents cover inventions relating to modems. GE is seeking monetary damages. Agere believes it has a number of defenses to the infringement claims in this action, including laches, exhaustion and its belief that it has a license to the patents. The court postponed hearing motions based on these defenses until after the trial, and did not allow Agere to present evidence on these defenses at trial. On February 17, 2009, the jury in this case returned a verdict finding that three of the four patents were invalid and that Agere products infringed the one patent found to be valid and awarding GE $7.6 million for infringement of that patent. The jury also found Agere’s infringement was willful, which means that the judge could increase the amount of damages up to three times its original amount. The court has not scheduled hearings on Agere’s post-trial motions related to its defenses. One of these motions seeks to have a mis-trial declared based on Agere’s belief that GE withheld evidence in discovery, which affected Agere’s ability to present evidence at trial. On October 6, 2010, a special master appointed by the court determined that GE’s actions were not wrongful and that the evidence withheld by GE was not material to the jury’s findings. Agere is challenging this determination. If the jury’s verdict is entered by the court, Agere would also expect to be required to pay interest from the date of infringing sales. If the verdict is entered, Agere intends to appeal the matter. On February 17, 2010, the court issued an order granting GE’s summary judgment motions seeking to bar Agere’s defenses of laches, exhaustion, and license and denying Agere’s summary judgment motions concerning the same defenses. On July 30, 2010, the court held that one of the patents found invalid by the jury was valid. The court also held that the February 17, 2010 order was not inconsistent with its previous ruling that Agere would be permitted to renew its laches, licensing, and exhaustion defenses, and that Agere has not been precluded from asserting them post-trial. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to this matter.

On December 1, 2010, Rambus Inc. (“Rambus”) filed a lawsuit against LSI in the United States District Court for the Northern District of California alleging that LSI products infringe one or more of 19 Rambus patents. These products contain either DDR-type memory controllers or certain high-speed SerDes peripheral interfaces, such as PCI Express interfaces and certain SATA and SAS interfaces. Rambus is seeking unspecified monetary damages, treble damages and costs, expenses and attorneys’ fees due to alleged willfulness, interest and permanent injunctive relief in this action. In addition, on December 1, 2010, Rambus filed an action with the International Trade Commission (“ITC”) against LSI and five of its customers alleging that LSI products infringe six of the 19 patents in the California case. Rambus also named five other companies and a number of their customers in the ITC action. Rambus sought an exclusionary order against LSI and its customers in the ITC action, which, if granted, would preclude LSI and its customers from selling these products in the U.S. The ITC held a hearing on the matter in October 2011. On March 2, 2012, an administrative law judge (“ALJ”) found that LSI infringed Rambus’ patents; however, the ALJ also found the patents invalid or unenforceable or both, and accordingly, found no violation of section 337 of the Tariff Act of 1930. On July 25, 2012, the ITC determined to terminate the investigation with a finding of no violation of section 337 of the Tariff Act of 1930. The ITC affirmed the ALJ’s conclusion that all of the asserted patent claims are invalid under 35 U.S.C. §102 or 103, except for certain asserted claims, for which they found that Rambus has not demonstrated infringement. The ITC reversed the ALJ’s determination that Rambus had demonstrated the existence of a domestic industry under 19 U.S.C. § 1337(a) for the asserted patents. The ITC affirmed the ALJ’s determination that certain patents are unenforceable under the doctrine of unclean hands. The lawsuit against LSI in the United States District Court for the Northern District of California is still pending. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to these proceedings.

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In addition to the foregoing, the Company and its subsidiaries are parties to other litigation matters and claims in the normal course of business. The Company does not believe, based on currently available facts and circumstances, that the final outcome of these other matters, taken individually or as a whole, will have a material adverse effect on the Company’s consolidated results of operations or financial position. However, the pending unsettled lawsuits may involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to defend. From time to time, the Company may enter into confidential discussions regarding the potential settlement of such lawsuits. However, there can be no assurance that any such discussions will occur or will result in a settlement. Moreover, the settlement of any pending litigation could require the Company to incur substantial costs and, in the case of the settlement of any intellectual property proceeding against the Company, may require the Company to obtain a license to a third-party’s intellectual property that could require royalty payments in the future and the Company to grant a license to certain of its intellectual property to a third party under a cross-license agreement. The results of litigation are inherently uncertain, and material adverse outcomes are possible.

The Company has not provided accruals for any legal matters in its financial statements as potential losses for such matters are not considered probable and reasonably estimable. However, because such matters are subject to many uncertainties, the ultimate outcomes are not predictable, and there can be no assurances that the actual amounts required to satisfy any liabilities arising from the matters described above will not have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows.

Note 14 — Discontinued Operations

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp for $480.0 million in cash. The strategic decision to exit the external storage systems business was based on the Company’s expectation that long-term shareholder value could be maximized by becoming a pure-play semiconductor company. Under the terms of the agreement, NetApp purchased substantially all the assets of the Company’s external storage systems business, which developed and delivered external storage systems products and technology to a wide range of partners who provide storage solutions to end customers. As part of the transaction, the Company provided transitional services to NetApp. The purpose of these services was to provide short-term assistance to the buyer in assuming the operations of the purchased business.

Following is selected financial information included in income from discontinued operations for the three and six months ended July 3, 2011:

	Three Months Ended			Six Months Ended
	July 3, 2011			July 3, 2011
	(In thousands)
Revenues	$	51,675		$	207,365
Loss before gain on sale of external storage systems business and income taxes	$	(14,590	)	$	(22,500	)
Gain on sale of external storage systems business		260,066			260,066
Benefit from income taxes		(19,900	)		(19,418	)
Income from discontinued operations	$	265,376		$	256,984

There was no income from discontinued operations for the three and six months ended July 1, 2012.

During the three and six months ended July 3, 2011, the Company recognized $14.1 million and $37.9 million, respectively, of restructuring expense as the Company terminated employees, closed several office locations, terminated certain contracts, discontinued various development projects and wrote off intangible assets and software due to the cancellation of development programs in connection with the exit of the external storage systems business. Further, the Company released $19.7 million of deferred tax liabilities related to tax deductible goodwill in connection with the sale of the external storage systems business during the three months ended July 3, 2011.

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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.”

Where more than one significant factor contributed to changes in results from year to year, we have quantified these factors throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where practicable and material to understanding the discussion.

OVERVIEW

We design, develop and market complex, high-performance storage and networking semiconductors. We offer a broad portfolio of capabilities including custom and standard product integrated circuits that are used in hard disk drives, solid state drives, high-speed communications systems, computer servers, storage systems and personal computers. We deliver our products to our customers as stand-alone integrated circuits as well as incorporated onto circuit boards that offer additional functionality. We also license other entities to use our intellectual property.

Our products are sold primarily to original equipment manufacturer, or OEM, companies in the server, storage and networking industries. We also sell our products through a network of resellers and distributors.

On January 3, 2012, we acquired SandForce, a provider of flash storage processors for enterprise and client flash solutions and solid state drives, for total consideration of approximately $346.4 million, net of cash acquired. This acquisition has enhanced LSI’s position in storage technology solutions.

On May 6, 2011, we sold our external storage systems business for $480.0 million in cash. That business sold external storage systems, primarily to OEMs, who resold these products to end customers under their own brand name. We have reflected the external storage systems business as discontinued operations in our condensed consolidated statements of operations and, as such, the results of that business have been excluded from all line items other than “Income from discontinued operations” for all periods presented.

We derive the majority of our revenues from sales of products for the hard disk drive, server and networking equipment end markets. We believe that these markets offer us attractive opportunities because of the growing demand to create, store, manage and move digital content. We believe that this growth is occurring as a result of a number of trends, including:

• The increasing popularity of mobile devices such as smart phones and media tablets, and the increasing use of the internet for streaming media, such as videos and music, which together are driving the need for more network capacity;

• Consumer and business demand for hard disks to store increasing amounts of digital data, including music, video, pictures and medical and other business records; and

• Enterprises refreshing their data centers to provide higher levels of business support and analytics, which drives demand for new servers and storage systems and associated equipment.

Our revenues depend on market demand for these types of products and our ability to compete in highly competitive markets. We face competition not only from makers of products similar to ours, but also from competing technologies.

During the second quarter of 2012, we reported revenues of $659.6 million, compared to $500.6 million for the second quarter of 2011. For the six months ended July 1, 2012, we reported revenues of $1,282.0 million, compared to $973.9 million for the six months ended July 3, 2011. For the second quarter of 2012, we reported net income of $58.7 million, or $0.10 per diluted share, compared to $293.8 million, or $0.48 per diluted share, for the second quarter of 2011. Net income for the second quarter of 2011 included a $260.1 million gain on the sale of our external storage systems business. For the six months ended July 1, 2012, we reported net income of $133.9 million, or $0.23 per diluted share, compared to $303.9 million, or $0.49 per diluted share, for the six months ended July 3, 2011.

On March 9, 2011, our board of directors authorized a stock repurchase program of up to $750.0 million of our common stock. During the six months ended July 1, 2012, we repurchased 22.5 million shares for $176.2 million under this program. As of July 1, 2012, $75.0 million remained available under this program. On August 1, 2012, our board of directors authorized the repurchase of up to an additional $500.0 million of our common stock. Purchases under the new authorization are expected to be funded with available cash, cash equivalents and short-term investments.

We ended the second quarter of 2012 with cash and cash equivalents, together with short-term investments, of $601.1 million, a decline from $935.5 million at the end of 2011, primarily attributable to the cash we used for the acquisition of SandForce.

In 2011, Thailand experienced significant flooding, which adversely affected the operations of various technology companies, particularly those involved in the hard disk drive industry. In the first half of 2012, our operations and those of many of our customers recovered significantly. However toward the end of the second quarter of 2012, we believe that end demand for hard disk drives declined and that we will experience lower shipments of semiconductors for hard disk drives in the third quarter of 2012.

The prices of certain commodities used in the production of semiconductors have increased in recent periods, adversely affecting our gross margins. For example, we use gold in the production of semiconductors and the market price of gold increased significantly in the second half of 2011 and remained at elevated levels through the first half of 2012. We do not currently enter into hedging transactions to manage our exposure to changes in the prices of gold or other commodities, although we may choose to do so in the future. Further increases in commodity costs or sustained increased prices may continue to have an adverse impact on our gross margins.

As we look forward into the remainder of 2012, we are focused on a number of key objectives, including:

• Successfully delivering products to customers to support share gains and new product ramps we anticipate;

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• Improving our gross margins and controlling operating expenses to drive improved financial performance;

• Meeting or exceeding our development, product quality and delivery commitments to our customers;

• Identifying attractive opportunities for future products, particularly in areas that are adjacent to technologies where we have strong capabilities;

• Developing leading-edge new technologies; and

• Developing the skills of our workforce.

RESULTS OF OPERATIONS

Revenues

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In millions)
Revenues	$	659.6	$	500.6	$	1,282.0	$	973.9

Revenues increased by $159.0 million, or 31.8%, and by $308.1 million, or 31.6%, respectively, for the three and six months ended July 1, 2012 as compared to the three and six months ended July 3, 2011. The increases were primarily attributable to higher unit sales of semiconductors used in storage applications, such as hard disk drives as that industry recovered from the flooding in Thailand in late 2011 and the ramping of new products to existing customers. The increases were also due to higher unit sales of flash storage processors as a result of the acquisition of SandForce. The increases were offset by decreases in unit sales of semiconductors used in older networking product applications.

Significant Customers:

The following table provides information about sales to Seagate, which was our only customer that accounted for 10% or more of our consolidated revenues:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Percentage of revenues		35	%		24	%		34	%		22	%

Revenues by Geography:

The following table summarizes our revenues by geography based on the ordering location of the customer. Because we sell our products primarily to other sellers of technology products and not to end users, the information in the table below may not accurately reflect geographic end-user demand for our products.

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In millions)
North America*	$	154.5	$	122.9	$	313.4	$	243.8
Asia		464.0		330.3		878.0		633.0
Europe and the Middle East		41.1		47.4		90.6		97.1
Total	$	659.6	$	500.6	$	1,282.0	$	973.9

* Primarily the United States.

Revenues in North America and Asia increased by $31.6 million, or 25.7%, and $133.7 million, or 40.5%, respectively, for the three months ended July 1, 2012 as compared to the three months ended July 3, 2011. Revenues in North America and Asia increased by $69.6 million, or 28.5%, and $245.0 million, or 38.7%, respectively, for the six months ended July 1, 2012 as compared to the six months ended July 3, 2011. The increases were primarily attributable to higher unit sales of semiconductors used in storage product applications and higher unit sales of flash storage processors as a result of the acquisition of SandForce. The increases were offset by decreases in unit sales of semiconductors used in older networking product applications.

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Revenues by Product Groups:

The following table presents our revenues by product groups:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In millions)
Storage products	$	534.7	$	358.9	$	1,023.2	$	695.3
Networking products		98.8		117.4		205.8		229.4
Other		26.1		24.3		53.0		49.2
Total	$	659.6	$	500.6	$	1,282.0	$	973.9

Revenues from storage products increased by $175.8 million, or 49.0%, and by $327.9 million, or 47.2%, respectively, for the three and six months ended July 1, 2012 as compared to the three and six months ended July 3, 2011. The increases were primarily attributable to higher unit sales of semiconductors used in hard disk drives as that industry recovered from the flooding in Thailand in late 2011 and the ramping of new products to existing customers. The increases were also the result of higher unit sales of flash storage processors as a result of the acquisition of SandForce.

Revenues from networking products decreased by $18.6 million, or 15.8%, and by $23.6 million, or 10.3%, for the three and six months ended July 1, 2012, respectively, as compared to the three and six months ended July 3, 2011. The decreases were primarily the result of lower unit sales of semiconductors used in older networking product applications.

Other revenues result primarily from the licensing of our intellectual property.

Gross Profit Margin

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(Dollars in millions)
Gross profit margin	$	331.9		$	237.6		$	618.8		$	461.8
Percentage of revenues		50.3	%		47.5	%		48.3	%		47.4	%

Gross profit margin as a percentage of revenues increased by 2.8% for the three months ended July 1, 2012 as compared to the three months ended July 3, 2011. The increase was primarily attributable to favorable product mix, that is, more sales of higher margin products, and higher revenues enabling better absorption of fixed costs. The increases were offset in part by higher commodity costs used in manufacturing our products.

Gross profit margin as a percentage of revenues increased by 0.9% for the six months ended July 1, 2012 as compared to the six months ended July 3, 2011. The increase was primarily attributable to favorable product mix and higher revenues enabling better absorption of fixed costs. The increases were offset in part by a reduction in gross profit margin resulting from fair valuing inventories acquired from SandForce and higher commodity costs used in manufacturing our products.

Research and Development

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(Dollars in millions)
Research and development	$	175.6		$	145.9		$	345.4		$	288.2
Percentage of revenues		26.6	%		29.1	%		26.9	%		29.6	%

R&D expense increased by $29.7 million, or 20.4%, for the three months ended July 1, 2012 as compared to the three months ended July 3, 2011. The increase was primarily attributable to higher compensation-related expense, which includes stock-based compensation, resulting from headcount additions associated with the acquisition of SandForce and headcount additions to support our ongoing product development efforts, higher performance-based compensation expense as a result of improved financial performance and increased information technology costs for R&D projects. As a percentage of revenues, R&D expense declined from 29.1% in the second quarter of 2011 to 26.6% in the second quarter of 2012 as a result of higher revenues for the second quarter of 2012 as compared to the same period in 2011.

R&D expense increased by $57.2 million, or 19.8%, for the six months ended July 1, 2012 as compared to the six months ended July 3, 2011. The increase was primarily attributable to higher compensation-related expense, which includes stock-based compensation, resulting from headcount additions associated with the acquisition of SandForce and headcount additions to support our ongoing product development efforts, higher performance-based compensation expense as a result of improved financial performance and increased information technology costs for R&D projects. As a percentage of revenues, R&D expense declined from 29.6% for the six months ended July 3, 2011 to 26.9% for the six months ended July 1, 2012 as a result of higher revenues for the first half of 2012 as compared to the same period in 2011.

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Selling, General and Administrative

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(Dollars in millions)
Selling, general and administrative	$	88.9		$	71.8		$	179.0		$	140.7
Percentage of revenues		13.5	%		14.3	%		14.0	%		14.4	%

SG&A expense increased by $17.1 million, or 23.8%, for the three months ended July 1, 2012 as compared to the three months ended July 3, 2011. The increase was primarily attributable to higher compensation related expense, which includes stock-based compensation, resulting from headcount additions associated with the acquisition of SandForce and headcount additions to support revenue growth, along with higher performance-based compensation expense as a result of improved financial performance. As a percentage of revenues, SG&A expense declined from 14.3% in the second quarter of 2011 to 13.5% in the second quarter of 2012 as a result of higher revenues for the second quarter of 2012 as compared to the same period in 2011.

SG&A expense increased by $38.3 million, or 27.2%, for the six months ended July 1, 2012 as compared to the six months ended July 3, 2011. The increase was primarily attributable to higher compensation related expense, which includes stock-based compensation, resulting from headcount additions associated with the acquisition of SandForce and headcount additions to support revenue growth, along with higher performance-based compensation expense as a result of improved financial performance. As a percentage of revenues, SG&A expense remained relatively flat for the first half of 2012 compared to the same period in 2011 as the impact of higher revenues was offset by increased SG&A expense.

Restructuring of Operations and Other Items, net

The following table summarizes items included in restructuring of operations and other items, net:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(In millions)
Lease terminations (a)	$	1.2		$	1.9		$	2.8		$	3.6
Employee severance and benefits (b)		1.0			0.3			1.5			1.9
Total restructuring expense		2.2			2.2			4.3			5.5
Other items, net		4.3	(c)		(13.1	)(d)		17.7	(e)		(13.6	)(d)
Total restructuring of operations and other items, net	$	6.5		$	(10.9	)	$	22.0		$	(8.1	)

(a) Includes changes in time value, on-going operating expense and changes in estimates related to previously vacated facilities.

(b) Relates to restructuring actions taken as we continued to streamline operations.

(c) Primarily consists of $2.4 million of property and equipment write-downs and $1.9 million of transition service agreement costs related to the sale of the external storage systems business.

(d) Primarily relates to the reversal of a $14.5 million sales and use tax related liability as a result of concluding various audits, partially offset by $1.3 million of transition service agreement costs related to the sale of the external storage systems business.

(e) Primarily consists of $8.4 million of SandForce acquisition-related costs and $6.5 million of transition service agreement costs related to the sale of the external storage systems business.

Interest Income and Other, net

The following table summarizes components of interest income and other, net:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In millions)
Interest income	$	1.6	$	3.3	$	3.2	$	6.7
Other income, net		8.0		3.2		21.1		4.0
Total	$	9.6	$	6.5	$	24.3	$	10.7

Interest income decreased by $1.7 million and $3.5 million, respectively, for the three and six months ended July 1, 2012 as compared to the three and six months ended July 3, 2011. The decrease was primarily due to the absence of interest income in 2012 on a note we received in connection with the sale of a business in 2007 and lower interest rates in 2012 as compared to 2011.

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Other income, net, for the six months ended July 1, 2012 primarily included $6.1 million of income for transition services related to the sale of the external storage systems business, a $5.8 million gain as a result of re-measuring our pre-acquisition equity interest in SandForce to estimated fair value and $4.7 million of proceeds from insurance claims covering a portion of our losses that resulted from the Thailand flooding in late 2011.

Provision for/Benefit from Income Taxes

We recorded an income tax provision of $11.8 million and an income tax benefit of $37.3 million for the three and six months ended July 1, 2012, respectively, and income tax provisions of $8.9 million and $4.8 million for the three and six months ended July 3, 2011, respectively.

The income tax benefit for the six months ended July 1, 2012 included a tax benefit of approximately $43.2 million due to the release of valuation allowance resulting from the net deferred tax liabilities recorded as part of the SandForce purchase price allocation. The income tax benefit for the six months ended July 1, 2012 also included a reversal of $10.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $5.2 million and interest and penalties of $5.0 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

The income tax provision for the six months ended July 3, 2011 included a reversal of $8.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $4.8 million and interest and penalties of $3.4 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

We compute our tax provision using an estimated annual tax rate. We exclude certain loss jurisdictions from the computation of the estimated annual rate when no benefit can be realized on those losses. With the exception of certain foreign jurisdictions, we believe it is not more likely than not that the future benefit of the deferred tax assets will be realized.

Discontinued Operations

Following is selected financial information included in income from discontinued operations:

	Three Months Ended			Six Months Ended
	July 3, 2011			July 3, 2011
	(In millions)
Revenues	$	51.7		$	207.4
Loss before gain on sale of external storage systems business and income taxes	$	(14.6	)	$	(22.5	)
Gain on sale of external storage systems business		260.1			260.1
Benefit from income taxes		(19.9	)		(19.4	)
Income from discontinued operations	$	265.4		$	257.0

There was no income from discontinued operations for the three and six months ended July 1, 2012.

During the three and six months ended July 3, 2011, we recognized $14.1 million and $37.9 million, respectively, of restructuring expense as we terminated employees, closed several office locations, terminated certain contracts, discontinued various development projects and wrote off intangible assets and software due to the cancellation of development programs in connection with the exit of the external storage systems business. Further, we released $19.7 million of deferred tax liabilities related to tax deductible goodwill in connection with the sale of the external storage systems business during the three months ended July 3, 2011.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Cash, cash equivalents and short-term investments are our primary source of liquidity. We believe that our existing liquid resources and cash generated from operations will be adequate to meet our operating and capital requirements and other obligations for more than the next 12 months. We may, however, find it desirable to obtain additional debt or equity financing. Such financing may not be available to us at all or on acceptable terms if we determine that it would be desirable to obtain additional financing.

Cash, cash equivalents and short-term investments decreased to $601.1 million as of July 1, 2012 from $935.5 million as of December 31, 2011. The decrease was mainly due to $319.2 million of cash used in connection with the acquisition of SandForce and cash outflows for other investing activities and financing activities, offset in part by cash inflows generated from operating activities, as described below.

Working Capital

Working capital decreased by $264.9 million to $696.9 million as of July 1, 2012 from $961.8 million as of December 31, 2011. The decrease was primarily attributable to the following:

• Cash, cash equivalents and short-term investments decreased by $334.4 million primarily due to the use of $319.2 million in connection with the acquisition of SandForce in January 2012, the use of $176.2 million to repurchase our common stock, and the use of $77.4 million for purchases of property and equipment, net of proceeds from sales, offset in part by net cash provided by operating activities of $167.5 million; and

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• Accounts payable increased by $30.9 million primarily due to an increase in inventory purchases to support new product introductions and the normal timing of invoice receipts and payments.

These decreases in working capital were offset in part by the following:

• Accounts receivable increased by $50.3 million primarily as a result of increased revenues in the second quarter of 2012 as compared to the fourth quarter of 2011;

• Other accrued liabilities decreased by $25.0 million primarily due to the utilization of restructuring reserves, payments of taxes and decreases in other accruals related to our operations, offset in part by an increase in deferred revenues; and

• Inventories increased by $24.0 million as a result of increased inventory purchases to support new product introductions and higher revenues in 2012 as compared to 2011.

Working capital increased by $199.9 million to $979.1 million as of July 3, 2011 from $779.2 million as of December 31, 2010. The increase was primarily attributable to the following:

• Cash, cash equivalents and short-term investments increased by $229.8 million primarily due to $475.2 million of proceeds from the sale of our external storage systems business in May 2011 and net cash provided by operating activities of $146.3 million, offset in part by the use of $396.8 million to repurchase our common stock.

• Accrued salaries, wages and benefits decreased by $38.6 million primarily as a result of the timing of payments for salaries, benefits and performance-based compensation, and the payout of accrued compensation-related costs to employees transferred to NetApp as part of the sale of the external storage systems business;

• Assets held for sale increased by $18.1 million primarily as a result of the reclassification of $16.2 million of land in Gresham, Oregon from held and used to held for sale because the held for sale criteria were met during the quarter ended July 3, 2011;

• Other accrued liabilities decreased by $9.9 million due to a reduction in accruals as a result of the sale of the external storage systems business; and

• Inventories increased by $7.0 million primarily due to increased inventory purchases during the second quarter of 2011 in anticipation of expected increases in product demand in the second half of 2011, offset in part by inventory sold to NetApp as part of the sale of the external storage systems business.

These increases in working capital were offset in part by the following:

• Accounts receivable decreased by $92.5 million primarily as a result of lower revenues from discontinued operations due to the sale of the external storage systems business; and

• Accounts payable increased by $11.5 million primarily due to increased inventory purchases, as inventory purchased to support continuing operations exceeded the reduction in inventory purchases resulting from the sale of the external storage systems business.

Cash Provided by Operating Activities

During the six months ended July 1, 2012, we generated $167.5 million of cash from operating activities as a result of the following:

• Net income adjusted for non-cash items and other non-operating adjustments, which are quantified in our condensed consolidated statements of cash flows included in Item 1;

• Offset in part by a net decrease of $66.5 million in assets and liabilities, including changes in working capital components, from December 31, 2011 to July 1, 2012, as discussed above.

During the six months ended July 3, 2011, we generated $146.3 million of cash from operating activities as a result of the following:

• Net income adjusted for non-cash items and other non-operating adjustments, which are quantified in our condensed consolidated statements of cash flows included in Item 1;

• Offset in part by a net decrease of $30.2 million in assets and liabilities, including changes in working capital components, from December 31, 2010 to July 3, 2011, as discussed above.

26

Cash Used in/Provided by Investing Activities

Cash used in investing activities for the six months ended July 1, 2012 was $451.2 million. The investing activities during the first half of 2012 were the following:

• Acquisition of SandForce, net of cash acquired, for $319.2 million;

• Purchases of property and equipment, net of proceeds from sales, totaling $77.4 million, including $45.5 million for an office building that we intend to be our new headquarters; and

• Purchases of available-for-sale debt securities, net of proceeds from maturities and sales, of $54.6 million.

Cash provided by investing activities for the six months ended July 3, 2011 was $434.2 million. The investing activities during the first half of 2011 were the following:

• Proceeds from the sale of our external storage systems business, net of transaction fees, of $475.2 million;

• Purchases of property and equipment, net of proceeds from sales, totaling $36.3 million; and

• Purchases of available-for-sale debt securities and other investments, net of proceeds from maturities and sales, of $4.7 million.

We expect capital expenditures to be approximately $130.0 million in 2012, a significant portion of which relates to the office building that we intend to be our new headquarters. In recent years, we have reduced our manufacturing-related capital expenditures as a result of our focus on establishing strategic supplier alliances with foundry semiconductor manufacturers and with third-party assembly and test operations, which enables us to have access to advanced manufacturing capacity while reducing our capital spending requirements.

Cash Used in Financing Activities

Cash used in financing activities for the six months ended July 1, 2012 was $94.1 million. Cash used in financing activities during the first half of 2012 was to repurchase $176.2 million of our common stock, offset in part by $82.1 million cash received from issuances of common stock under our employee stock plans.

Cash used in financing activities for the six months ended July 3, 2011 was $345.9 million. The financing activities during the first half of 2011 were the use of $396.8 million to repurchase our common stock, offset in part by proceeds of $50.9 million from issuances of common stock under our employee stock plans.

We do not currently pay any cash dividends to our stockholders.

CONTRACTUAL OBLIGATIONS

The following table summarizes our contractual obligations as of July 1, 2012:

	Payments Due by Period
	Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years		Other			Total
	(In millions)
Operating lease obligations	$	39.8	$	39.8	$	10.5	$	6.6	$	—		$	96.7
Purchase commitments		411.9		24.8		10.0		—		—			446.7
Pension contributions		68.6		*		*		*		*			68.6
Uncertain tax positions		—		—		—		—		94.3	**		94.3
Total	$	520.3	$	64.6	$	20.5	$	6.6	$	94.3		$	706.3

* We have pension plans covering substantially all former Agere U.S. employees, excluding management employees hired after June 30, 2003. We also have pension plans covering certain international employees. Although additional future contributions will be required, the amount and timing of these contributions will be affected by actuarial assumptions, the actual rate of return on plan assets, the level of market interest rates, legislation changes and the amount of voluntary contributions to the plans. The amount shown in the table represents our planned contributions to our pension plans during the remainder of 2012. Because any contributions for 2013 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 2013 and beyond in the above table.

** This amount 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.

Operating Lease Obligations

We lease real estate and certain non-manufacturing equipment under non-cancellable operating leases. We also include non-cancellable obligations under certain software licensing arrangements in this category.

27

Purchase Commitments

We maintain purchase commitments with certain suppliers, primarily for raw materials and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time horizon as mutually agreed upon between the parties. This forecasted time horizon can vary for different suppliers.

Uncertain Tax Positions

As of July 1, 2012, we had $180.7 million of unrecognized tax benefits, for which we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority may occur. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months. Such changes could occur based on the normal expiration of statutes of limitations or the possible conclusion of ongoing tax audits in various jurisdictions around the world. If those events occur within the next 12 months, we estimate that the unrecognized tax benefits, plus accrued interest and penalties, could decrease by up to $16.7 million.

Standby Letters of Credit

We had outstanding obligations relating to standby letters of credit of $4.1 million and $3.5 million, respectively, as of July 1, 2012 and December 31, 2011. Standby letters of credit are financial guarantees provided by third parties for leases, customs and certain self-insured risks. If the guarantees are called, we must reimburse the provider of the guarantee. The fair value of the letters of credit approximates the contract amounts. The standby letters of credit generally renew annually.

CRITICAL ACCOUNTING POLICIES

There have been no significant changes in our critical accounting estimates or significant accounting policies during the six months ended July 1, 2012 as compared to the discussion in Part II, Item 7 and in Note 2 to our financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2011.

RECENT ACCOUNTING PRONOUNCEMENTS

The information contained in Note 1 to our financial statements in Item 1 under the heading “Recent Accounting Pronouncements” is incorporated by reference into this Item 2.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no significant changes in the market risk disclosures during the six months ended July 1, 2012 as compared to the discussion in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures: The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required or necessary disclosures. Our chief executive officer and chief financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management with the participation of our chief executive officer and chief financial officer, as of the end of the period covered by this report, that our disclosure controls and procedures were effective for this purpose.

Changes in Internal Control: During the second quarter of 2012, we did not make any change in our internal control over financial reporting that materially affected or is reasonably likely to materially affect our internal control over financial reporting.

28

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

This information is included under the caption “Legal Matters” in Note 13 to our financial statements in Item 1 of Part I.

Item 1A. Risk Factors

Set forth below are risks and uncertainties, many of which are discussed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2011, that, if they were to occur, could materially adversely affect our business or could cause our actual results to differ materially from the results contemplated by the forward-looking statements in this report and other public statements we make:

• We depend on a small number of customers. The loss of, or a significant reduction in revenues from, any of these customers would harm our results of operations.

• 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.

• We depend on outside suppliers to manufacture, assemble, package and test our products; accordingly, any failure to secure and maintain sufficient manufacturing capacity at attractive prices 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.

• 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.

• Any defects in our products could harm our reputation, customer relationships and results of operations.

• Our pension plans are underfunded, and may require significant future contributions, which could have an adverse impact on our business.

• 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.

• Increases in the price of commodities used in the production of our products or lack of availability of these materials could negatively impact our operating results.

• 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.

• Laws and regulations to which we are subject, as well as customer requirements in the area of environmental protection and social responsibility, could impose substantial costs on us and may adversely affect 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 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table contains information about the repurchases of our common stock during the quarter ended July 1, 2012.

29

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 2 — May 1, 2012		—	$	—		—	$	213,007,356
May 2 — June 1, 2012		15,934,768	$	7.84		15,934,768	$	88,013,739
June 2 — July 1, 2012		1,984,501	$	6.54		1,984,501	$	75,028,406
Total		17,919,269	$	7.70		17,919,269

On March 9, 2011, our board of directors authorized the repurchase of up to $750 million of our common stock. The repurchases reported in the table above were made pursuant to this authorization. In addition, on August 1, 2012, our board of directors authorized the repurchase of up to an additional $500 million of our common stock. Information about the new program is not included in the table above.

Item 6. Exhibits

See the Exhibit Index, which follows the signature page to this report.

30

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 thereunto duly authorized.

		LSI CORPORATION
		(Registrant)
Date: August 9, 2012	By	/s/ Bryon Look
		Bryon Look
		Executive Vice President, Chief Financial Officer and Chief Administrative Officer

31

EXHIBIT INDEX

10.1	LSI Corporation 2003 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 14, 2012.
10.2	LSI Corporation 2003 Equity Incentive Plan Form of Notice of Grant of Stock Option for Employees. Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 14, 2012.
10.3	LSI Corporation 2003 Equity Incentive Plan Form of Nonqualifed Stock Option Agreement for Employees. Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on May 14, 2012.
10.4	LSI Corporation 2003 Equity Incentive Plan Form of Notice of Grant of Stock Option for Non-Employee Directors. Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on May 14, 2012.
10.5	LSI Corporation 2003 Equity Incentive Plan Form of Nonqualifed Stock Option Agreement for Non-Employee Directors. Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on May 14, 2012.
10.6	LSI Corporation 2003 Equity Incentive Plan Form of Notice of Grant of Restricted Stock Units for Employees. Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on May 14, 2012.
10.7	LSI Corporation 2003 Equity Incentive Plan Form of Restricted Stock Unit Agreement for Employees. Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on May 14, 2012.
10.8	LSI Corporation 2003 Equity Incentive Plan Form of Notice of Grant of Restricted Stock Units for Non-Employee Directors. Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on May 14, 2012.
10.9	LSI Corporation 2003 Equity Incentive Plan Form of Restricted Stock Unit Agreement for Non-Employee Directors. Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on May 14, 2012.
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. 1350
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350
101.INS	XBRL instance document
101.SCH	XBRL taxonomy extension schema document
101.CAL	XBRL taxonomy extension calculation linkbase document
101.DEF	XBRL taxonomy extension definition linkbase document
101.LAB	XBRL taxonomy extension label linkbase document
101.PRE	XBRL taxonomy extension presentation linkbase document

32

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Abhijit Y. Talwalkar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LSI Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

By:	/s/ Abhijit Y. Talwalkar
	Name: Abhijit Y. Talwalkar
	Title: President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Bryon Look, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LSI Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012

By:	/s/ Bryon Look
	Name:	Bryon Look
	Title:	Executive Vice President, Chief Financial Officer
		and Chief Administrative Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Abhijit Y. Talwalkar, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of LSI Corporation on Form 10-Q for the quarterly period ended July 1, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of LSI Corporation.

By:	/s/ Abhijit Y. Talwalkar
	Name:	Abhijit Y. Talwalkar
	Title:	President and Chief Executive Officer
	Date:	August 9, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Bryon Look, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of LSI Corporation on Form 10-Q for the quarterly period ended July 1, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of LSI Corporation.

By:	/s/ Bryon Look
	Name:	Bryon Look
	Title:	Executive Vice President, Chief Financial Officer and Chief Administrative Officer
	Date:	August 9, 2012

XML

Restructuring and Other Items (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Restructuring of operations and other items net
Total restructuring expenses	$ 2,209	$ 2,154	$ 4,274	$ 5,485
Other items, net	4,282	(13,058)	17,679	(13,583)
Total restructuring of operations and other items, net	6,491	(10,904)	21,953	(8,098)
Lease terminations [Member]
Restructuring of operations and other items net
Total restructuring expenses	1,181	1,865	2,815	3,553
Employee severance and benefits [Member]
Restructuring of operations and other items net
Total restructuring expenses	$ 1,028	$ 289	$ 1,459	$ 1,932

XML

Supplemental Financial Information (Details 1) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Goodwill
Balance as of December 31, 2011	$ 255,838	$ 72,377
Addition due to Sand Force acquisition	183,461
Balance as of July 1, 2012	$ 255,838	$ 72,377

XML

Cash Equivalents and Investments (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	$ 312,548
Investments measured at fair value	198,940	155,644
Money Market Funds [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	310,545	674,219
Agency Securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	124,603	97,408
Non-agency securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	3,135	9,989
U.S. government and agency securities [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	2,003
Investments measured at fair value	57,425	35,975
Corporate debt securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	13,777	12,272
Long-term marketable equity securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	2,145	1,514
Fair Value Measurements Level 1 [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	310,545
Investments measured at fair value	13,225	5,403
Fair Value Measurements Level 1 [Member] | Money Market Funds [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	310,545	674,219
Fair Value Measurements Level 1 [Member] | U.S. government and agency securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	13,225	5,403
Fair Value Measurements Level 1 [Member] | Long-term marketable equity securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	2,145	1,514
Fair Value Measurements Level 2 [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	2,003
Investments measured at fair value	185,715	150,241
Fair Value Measurements Level 2 [Member] | Agency Securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	124,603	97,408
Fair Value Measurements Level 2 [Member] | Non-agency securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	3,135	9,989
Fair Value Measurements Level 2 [Member] | U.S. government and agency securities [Member]
Company's cash equivalents and investments measured at fair value
Cash equivalents measured at fair value	2,003
Investments measured at fair value	44,200	30,572
Fair Value Measurements Level 2 [Member] | Corporate debt securities [Member]
Company's cash equivalents and investments measured at fair value
Investments measured at fair value	$ 13,777	$ 12,272

XML

Supplemental Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Accumulated Other Comprehensive Loss, net of taxes
Accumulated net foreign currency translation adjustments, Beginning Balance			$ 42,138
Accumulated net foreign currency translation adjustments, Other Comprehensive Income			(3,397)
Accumulated net foreign currency translation adjustments, Ending Balance	38,741		38,741
Accumulated net unrealized (loss)/gain on investments, Beginning Balance			5,942
Accumulated net unrealized (loss)/gain on investments, Other Comprehensive Income			(169)
Accumulated net unrealized (loss)/gain on investments, Ending Balance	5,773		5,773
Accumulated net unrealized (loss)/gain on derivatives, Beginning Balance			(2,551)
Accumulated net unrealized (loss)/gain on derivatives, Other Comprehensive Income			659
Accumulated net unrealized (loss)/gain on derivatives, Ending Balance	(1,892)		(1,892)
Accumulated actuarial loss on pension and post-retirement plans, Beginning Balance			(578,757)
Accumulated actuarial loss on pension and post-retirement plans, Other Comprehensive Income			8,152
Accumulated actuarial loss on pension and post-retirement plans, Ending Balance	(570,605)		(570,605)
Total accumulated other comprehensive income, Beginning Balance			(533,228)
Total accumulated other comprehensive income, Other Comprehensive Income	(1,680)	1,196	5,245	5,110
Total accumulated other comprehensive income, Ending Balance	$ (527,983)		$ (527,983)

XML

Benefit Obligations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Pension Benefits [Member]
Components of the net periodic benefit cost/(credit)
Service cost	$ 116	$ 141	$ 225	$ 275
Interest cost	15,483	16,929	30,735	33,779
Expected return on plan assets	(17,030)	(17,000)	(34,053)	(33,998)
Amortization of net actuarial loss, prior service cost and transition asset	3,693	1,699	7,162	3,385
Total benefit cost/(credit)	2,262	1,769	4,069	3,441
Post-retirement Benefits [Member]
Components of the net periodic benefit cost/(credit)
Service cost	20	21	45	38
Interest cost	643	621	1,293	1,246
Expected return on plan assets	(856)	(1,033)	(1,906)	(2,065)
Amortization of net actuarial loss, prior service cost and transition asset	490	85	990	177
Total benefit cost/(credit)	$ 297	$ (306)	$ 422	$ (604)

XML

Stock-Based Compensation Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Stock-based compensation expense
Total stock-based compensation expense	$ 25,318	$ 13,652	$ 56,152	$ 27,319
Cost of revenues [Member]
Stock-based compensation expense
Total stock-based compensation expense	3,003	2,051	6,515	3,864
Research and development [Member]
Stock-based compensation expense
Total stock-based compensation expense	11,973	6,653	24,281	12,876
Selling, general and administrative [Member]
Stock-based compensation expense
Total stock-based compensation expense	$ 10,342	$ 4,948	$ 25,356	$ 10,579

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Supplemental Financial Information (Details 4) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Stock options [Member]
Weighted-average common share equivalents excluded from the computation of diluted shares
Anti-dilutive securities	30,540	38,338	24,672	44,130
Restricted stock unit awards [Member]
Weighted-average common share equivalents excluded from the computation of diluted shares
Anti-dilutive securities	9,743	1,445	5,985	93

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Business Combination (Tables)

6 Months Ended

Jul. 01, 2012

Business Combinations [Abstract]

Cost consideration

Cash paid, net of cash acquired	$	319,231
Fair value of partially vested equity awards		19,089
Fair value of LSI’s previous investment in SandForce		8,120
Total	$	346,440

Primarily allocation and other details acquisition

Accounts receivable	$	10,711
Inventory		24,268
Identified intangible assets		172,400
Goodwill		183,461
Net deferred tax liabilities		(43,198	)
Other, net		(1,202	)
Total	$	346,440

Identified intangible assets

	Fair Value		Weighted- Average  Life
	(In thousands)		(In years)
Current technology	$	73,400		4.0
Customer relationships		41,700		7.0
Order backlog		4,500		0.5
Trade names		1,500		3.0
Total identified intangible assets subject to amortization		121,100		4.9
In-process research and development		51,300
Total identified intangible assets	$	172,400

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Cash Equivalents and Investments (Details 2) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Gross unrealized losses and fair values of the Company's short-term investments
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	$ 53,076	$ 16,892
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	(479)	(316)
Available-for-sale Securities, Continuous Unrealized Loss Position, Greater than 12 Months, Fair Value	1,750	1,806
Available-for-sale Securities, Continuous Unrealized Loss Position, Greater than 12 Months, Unrealized Losses	(19)	(92)
Asset-backed and mortgage-backed securities [Member]
Gross unrealized losses and fair values of the Company's short-term investments
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	33,176	10,645
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	(473)	(286)
Available-for-sale Securities, Continuous Unrealized Loss Position, Greater than 12 Months, Fair Value	1,247	1,301
Available-for-sale Securities, Continuous Unrealized Loss Position, Greater than 12 Months, Unrealized Losses	(19)	(92)
U.S. government and agency securities [Member]
Gross unrealized losses and fair values of the Company's short-term investments
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	15,356	3,872
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	(5)	(3)
Corporate debt securities [Member]
Gross unrealized losses and fair values of the Company's short-term investments
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	4,544	2,375
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	(1)	(27)
Available-for-sale Securities, Continuous Unrealized Loss Position, Greater than 12 Months, Fair Value	$ 503	$ 505

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Business Combination (Details) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Jan. 03, 2012
Cost consideration
Cash paid, net of cash acquired	$ 319,231
Fair value of partially vested equity awards	19,089
Fair value of LSI's previous investment in Sand Force	8,120
Total	$ 346,440	$ 346,400

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Stock-Based Compensation Expense (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Stock based compensation expense (Textual) [Abstract]
Description of share based payment award				In May 2012, stockholders approved an amendment of the Company's 2003 Equity Incentive Plan to increase the shares available for issuance of new awards to a total of 25 million shares, with 15 million shares for restricted stock and/or restricted stock units ("RSUs"). In addition, extend the period during which incentive stock options can be granted to February 9, 2022, and a maximum of 25 million shares may be issued upon the exercise of incentive stock options.
Shares available for issuance of new awards	25,000,000		25,000,000
Maximum shares issued upon exercise of incentive stock options	25,000,000		25,000,000
Expenses related to stock options and RSUs assumed	$ 3,300,000		$ 5,700,000
Shares issued under ESPP	2,800,000	2,900,000
Common shares reserved for issuance upon exercise of outstanding options and RSUs assumed from acquisitions, shares	9,117,372		9,117,372
Terms of stock options assumed from acquisition			10 years
Stock-based compensation expense	25,318,000	13,652,000	56,152,000	27,319,000
Restricted stock and/or restricted stock units [Member]
Stock based compensation expense (Textual) [Abstract]
Shares available for issuance of new awards	15,000,000		15,000,000
Stock options [Member]
Stock based compensation expense (Textual) [Abstract]
Total unrecognized compensation expense relating to unvested stock options, net of estimated forfeitures	46,800,000		46,800,000
Period of total unrecognized compensation expense related to stock awards, net of estimated forfeitures			2 years 3 months 18 days
Performance-based Restricted Stock Units [Member]
Stock based compensation expense (Textual) [Abstract]
Expenses related to additional vesting	1,600,000		6,000,000
Recognition period for unrecognized compensation expense related to performance-based restricted stock units net of estimated forfeitures			3 years
Total unrecognized compensation expense related to performance based awards, net of estimated forfeitures	30,000,000		30,000,000
Service-based Restricted Stock Units [Member]
Stock based compensation expense (Textual) [Abstract]
Total unrecognized compensation expense related to service-based awards, net of estimated forfeitures	98,700,000		98,700,000
Period of total unrecognized compensation expense related to stock awards, net of estimated forfeitures			2 years 10 months 24 days
Options assumed from acquisition [Member]
Stock based compensation expense (Textual) [Abstract]
Vesting period of related options			4 years
RSUs assumed from acquisition [Member] | Maximum [Member]
Stock based compensation expense (Textual) [Abstract]
Vesting period of related options			4 years
RSUs assumed from acquisition [Member] | Minimum [Member]
Stock based compensation expense (Textual) [Abstract]
Vesting period of related options			1 year
Executive officer performance grants [Member]
Stock based compensation expense (Textual) [Abstract]
Stock-based compensation expense	1,600,000	0	4,000,000	0
Stock options and RSU's assumed from acquisition [Member]
Stock based compensation expense (Textual) [Abstract]
Stock-based compensation expense			$ 4,500,000

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Cash Equivalents and Investments (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011	Dec. 31, 2011
Cash Equivalents And Investments (Textual) [Abstract]
Carrying value of the company's non-marketable equity securities		$ 41.6		$ 43.9
Gain Recognized from remeasurement of pre-acquisition equity interest to estimated fair value		$ 5.8
Number of investments in an unrealized loss position		94
Non Marketable Securities Fair Valued	0		0

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Segment, Geographic and Product Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Company's revenues by product groups
Revenues	$ 659,573	$ 500,644	$ 1,281,997	$ 973,908
Storage Products [Member]
Company's revenues by product groups
Revenues	534,697	358,961	1,023,166	695,348
Networking Products [Member]
Company's revenues by product groups
Revenues	98,780	117,383	205,802	229,383
Others [Member]
Company's revenues by product groups
Revenues	$ 26,096	$ 24,300	$ 53,029	$ 49,177

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Benefit Obligations (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 01, 2012
Benefit Obligations (Textual) [Abstract]
Interest on cash-balance accounts for participants in the cash-balance program	4.00%
Expected pension plan contributions for remainder of 2012	$ 68.6
Expected contributions to post-retirement benefit plan in 2012	0
Domestic pension plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's contribution to pension plans	26.2
Non-qualified supplemental pension plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's contribution to pension plans	$ 0.4

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Stock-Based Compensation Expense

6 Months Ended

Jul. 01, 2012

Stock-Based Compensation Expense [Abstract]

Stock-Based Compensation Expense

Note 2 — Stock-Based Compensation Expense

In May 2012, the Company’s 2003 Equity Incentive Plan was amended to increase the number of shares available for new awards to a total of 25 million, of which 15 million shares were available for restricted stock and/or restricted stock units (“RSUs”). In addition, the period during which incentive stock options can be granted was extended to February 9, 2022, and the maximum number of shares that may be issued upon exercise of incentive stock options was set at 25 million.

Stock-based compensation expense included in continuing operations, net of estimated forfeitures, related to the Company’s stock options, Employee Stock Purchase Plan (“ESPP”) and restricted stock unit awards by expense category was as follows:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Cost of revenues	$	3,003	$	2,051	$	6,515	$	3,864
Research and development		11,973		6,653		24,281		12,876
Selling, general and administrative		10,342		4,948		25,356		10,579
Total stock-based compensation expense	$	25,318	$	13,652	$	56,152	$	27,319

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce. Stock-based compensation expense for the six months ended July 1, 2012 included $4.5 million of expense related to the accelerated vesting of stock options and RSUs for certain SandForce employees in January 2012. Stock-based compensation expense for the three and six months ended July 1, 2012 also includes $3.3 million and $5.7 million, respectively, related to stock options and RSUs assumed.

The Company has issued RSUs that will not vest unless specified performance criteria are met. In the first quarter of 2012, the compensation committee of the board of directors authorized additional vesting of performance-based RSUs where the Company’s performance had been adversely affected as a result of the flooding that occurred in Thailand in the fourth quarter of 2011 and as a result, vesting levels would have been lower. The Company recognized $1.6 million and $6.0 million of stock-based compensation expense related to the additional vesting for the three and six months ended July 1, 2012, respectively. No executive officers were included in the group of employees that received additional vesting. Executive officers hold RSUs, the vesting of which depends on the Company’s performance compared to specified peer companies over a three-year period. Based on the Company’s latest available financial performance, the Company recognized $1.6 million and $4.0 million of stock-based compensation expense related to the executive officer performance grants for the three and six months ended July 1, 2012, respectively. There was no stock-based compensation expense related to the executive officer performance grants for the three or six months ended July 3, 2011.

Stock Options

The fair value of each option grant is estimated as of the date of grant using a reduced-form calibrated binomial lattice model (“lattice model”). The following table summarizes the weighted-average assumptions that the Company applied in the lattice model:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.64		$	2.65		$	2.86		$	2.14
Expected life (years)		4.52			5.01			4.46			4.51
Risk-free interest rate		1	%		2	%		1	%		2	%
Volatility		49	%		47	%		47	%		47	%

The following table summarizes changes in stock options outstanding:

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding at December 31, 2011		64,245		$	6.19
Assumed in SandForce acquisition		7,542		$	0.75
Granted		5,033		$	8.50
Exercised		(11,942	)	$	5.69
Canceled		(2,757	)	$	9.32
Options outstanding at July 1, 2012		62,121		$	5.67		4.09	$	91,608
Options exercisable at July 1, 2012		37,288		$	6.15		2.81	$	43,806

As of July 1, 2012, the total unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, was $46.8 million and is expected to be recognized over the next 2.3 years on a weighted-average basis.

Restricted Stock Units

The cost of service-based and performance-based RSUs is determined using the fair value of the Company’s common stock on the date of grant. For performance-based RSU expense, the Company also considers the probability that those RSUs will vest.

Service-based:

The vesting of service-based RSUs requires that the employees remain employed by the Company for a specified period of time.

The following table summarizes changes in service-based RSUs outstanding:

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested service-based RSUs at December 31, 2011		12,085		$	5.94
Assumed in SandForce acquisition		1,576		$	6.17
Granted		7,012		$	8.32
Vested		(3,035	)	$	5.90
Forfeited		(464	)	$	6.32
Unvested service-based RSUs at July 1, 2012		17,174		$	6.93

As of July 1, 2012, the total unrecognized compensation expense related to service-based RSUs, net of estimated forfeitures, was $98.7 million and will be recognized over the next 2.9 years on a weighted-average basis.

Performance-based:

The vesting of performance-based RSUs is contingent upon the Company meeting specified performance criteria and requires that the employees remain employed by the Company for a specified period of time.

The following table summarizes changes in performance-based RSUs outstanding:

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested performance-based RSUs at December 31, 2011		4,729		$	5.98
Granted		2,986		$	8.52
Vested		(1,446	)	$	5.85
Forfeited		(535	)	$	6.41
Unvested performance-based RSUs at July 1, 2012		5,734		$	7.30

As of July 1, 2012, the total unrecognized compensation expense related to performance-based RSUs, net of estimated forfeitures, was $30.0 million and, if the performance conditions are fully met, will be recognized over the next 3 years.

A total of 9,117,372 shares of common stock were reserved for future issuance upon exercise of options and RSUs assumed in the SandForce acquisition. Those options and RSUs are included in the preceding tables. The options vest over four years and have ten year terms. The RSUs vest over one to four years.

Employee Stock Purchase Plan

Compensation expense for the Company’s ESPP is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Under the ESPP, rights to purchase shares are granted during the second and fourth quarters of each year. The Company issued 2.8 million and 2.9 million shares under the ESPP during the three months ended July 1, 2012 and July 3, 2011, respectively. The following table summarizes the weighted-average assumptions that the Company applied in the calculation of the fair value for the May 2012 and May 2011 grants:

	Three Months Ended
	July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.19		$	2.10
Expected life (years)		0.8			0.8
Risk-free interest rate		0.17	%		0.02	%
Volatility		41	%		37	%

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Income Taxes (Textual) [Abstract]
Provision for/(benefit from) income taxes	$ 11,800,000	$ 8,900,000	$ (37,262,000)	$ 4,796,000
Reversal in liabilities for uncertain tax positions			10,200,000	8,200,000
Portion of income tax benefit due to release of valuation allowance			43,200,000
Unrecognized tax benefits related to uncertain tax positions			5,200,000	4,800,000
Interest and penalties related to uncertain tax positions			5,000,000	3,400,000
Unrecognized tax benefits	180,700,000		180,700,000
Estimated decrease in unrecognized tax benefits, plus accrued interest and penalties			$ 16,700,000

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Business Combination (Details 1) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Jan. 03, 2012
Primarily allocation and other details acquisition
Accounts receivable	$ 10,711
Inventory	24,268
Identified intangible assets	172,400
Goodwill	183,461
Net deferred tax liabilities	(43,198)
Other, net	(1,202)
Total	$ 346,440	$ 346,400

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Segment and Geographic Information (Tables)

6 Months Ended

Jul. 01, 2012

Segment, Geographic and Product Information [Abstract]

Company's revenues by geography based on the ordering location of the customer

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
North America*	$	154,468	$	122,881	$	313,437	$	243,799
Asia		463,988		330,343		878,010		633,001
Europe and the Middle East		41,117		47,420		90,550		97,108
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

* Primarily the United States.

Company's revenues by product groups

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Storage products	$	534,697	$	358,961	$	1,023,166	$	695,348
Networking products		98,780		117,383		205,802		229,383
Other		26,096		24,300		53,029		49,177
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

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Supplemental Financial Information (Tables)

6 Months Ended

Jul. 01, 2012

Supplemental Financial Information [Abstract]

Inventories

	July 1, 2012		December 31, 2011
	(In thousands)
Raw materials	$	147	$	236
Work-in-process		56,248		78,886
Finished goods		147,618		100,913
Total inventories	$	204,013	$	180,035

Goodwill

	Goodwill
	(In thousands)
Balance as of December 31, 2011	$	72,377
Addition due to SandForce acquisition		183,461
Balance as of July 1, 2012	$	255,838

Accumulated other comprehensive loss, net of taxes

	Balance at December 31, 2011			Other Comprehensive Income			Balance at July 1, 2012
	(In thousands)
Accumulated net foreign currency translation adjustments	$	42,138		$	(3,397	)	$	38,741
Accumulated net unrealized gain on investments		5,942			(169	)		5,773
Accumulated net unrealized loss on derivatives		(2,551	)		659			(1,892	)
Accumulated actuarial loss on pension and post-retirement plans		(578,757	)		8,152			(570,605	)
Total accumulated other comprehensive loss	$	(533,228	)	$	5,245		$	(527,983	)

Reconciliation of basic and diluted shares

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Basic shares		563,686		594,957		564,945		605,315
Dilutive effect of stock options, employee stock purchase rights and restricted stock unit awards		17,658		16,136		21,486		15,933
Diluted shares		581,344		611,093		586,431		621,248

Weighted-average common share equivalents excluded from computation of diluted shares

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Anti-dilutive securities:
Stock options		30,540		38,338		24,672		44,130
Restricted stock unit awards		9,743		1,445		5,985		93

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Supplemental Financial Information (Details 3) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Reconciliation of basic and diluted shares:
Basic Shares	563,686	594,957	564,945	605,315
Dilutive effect of stock options, employee stock purchase rights and restricted stock unit awards	17,658	16,136	21,486	15,933
Diluted Shares	581,344	611,093	586,431	621,248

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Business Combination (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 01, 2012
Identified intangible assets
Fair Value	$ 121,100
Weighted Average Life	4 years 10 months 24 days
In-process research and development	51,300
Total identified intangible assets	172,400
Current Technology [Member]
Identified intangible assets
Fair Value	73,400
Weighted Average Life	4 years
Customer Relationships [Member]
Identified intangible assets
Fair Value	41,700
Weighted Average Life	7 years
Order Backlog [Member]
Identified intangible assets
Fair Value	4,500
Weighted Average Life	6 months
Trade Names [Member]
Identified intangible assets
Fair Value	$ 1,500
Weighted Average Life	3 years

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Commitments, Contingencies and Legal Matters (Tables)

6 Months Ended

Jul. 01, 2012

Commitments, Contingencies and Legal Matters [Abstract]

Summary of changes in product warranties

	Accrued Warranties
	(In thousands)
Balance as of December 31, 2011	$	6,334
Accruals for warranties issued during the period		868
Adjustments to pre-existing accruals (including changes in estimates)		(470	)
Warranty liabilities assumed in SandForce acquisition		426
Settlements made during the period (in cash or in kind)		(1,059	)
Balance as of July 1, 2012	$	6,099

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Discontinued Operations (Tables)

6 Months Ended

Jul. 01, 2012

Discontinued Operations [Abstract]

Income/(loss) from discontinued operations for the external storage systems business

	Three Months Ended			Six Months Ended
	July 3, 2011			July 3, 2011
	(In thousands)
Revenues	$	51,675		$	207,365
Loss before gain on sale of external storage systems business and income taxes	$	(14,590	)	$	(22,500	)
Gain on sale of external storage systems business		260,066			260,066
Benefit from income taxes		(19,900	)		(19,418	)
Income from discontinued operations	$	265,376		$	256,984

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Basis of Presentation

6 Months Ended

Jul. 01, 2012

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 — Basis of Presentation

For financial reporting purposes, LSI Corporation (“LSI” or the “Company”) reports on a 13- or 14-week quarter with the year ending December 31. The second quarter of 2012 and 2011 consisted of 13 weeks each and ended on July 1, 2012 and July 3, 2011, respectively. The results of operations for the quarter ended July 1, 2012 are not necessarily indicative of the results to be expected for the full year.

On January 3, 2012, the Company completed the acquisition of SandForce, Inc. (“SandForce”) for total consideration of approximately $346.4 million, net of cash acquired. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The acquisition was accounted for under the purchase method of accounting. Accordingly, the results of operations of SandForce and the estimated fair value of assets acquired and liabilities assumed were included in the Company’s condensed consolidated financial statements from January 3, 2012.

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp, Inc. (“NetApp”). The results of the external storage systems business are presented as discontinued operations in the Company’s condensed consolidated statements of operations and, as such, have been excluded from all line items other than “Income from discontinued operations” for all periods presented.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, comprehensive income and cash flows for the interim periods presented. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Recent Accounting Pronouncements

Pronouncements adopted:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued additional guidance on fair value measurements and related disclosures. The new guidance clarifies the application of existing guidance on fair value measurement for non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

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Basis of Presentation (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 01, 2012	Jan. 03, 2012
Basis of Presentation [Abstract]
Date of completion of acquisition of business	Jan. 03, 2012
Total consideration of the acquisition	$ 346,440	$ 346,400
Date of completion of sale of business	May 06, 2011
Number of weeks in a quarter for financial reporting purposes	13- or 14-week quarter

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Restructuring and Other Items (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Activities affecting the restructuring obligations
Beginning balance at December 31, 2011			$ 22,196
Expense	2,209	2,154	4,274	5,485
Utilized			(15,654)
Ending balance at July 1, 2012	10,816		10,816
Lease terminations [Member]
Activities affecting the restructuring obligations
Beginning balance at December 31, 2011			11,752
Expense	1,181	1,865	2,815	3,553
Utilized			(4,844)
Ending balance at July 1, 2012	9,723		9,723
Employee severance and benefits [Member]
Activities affecting the restructuring obligations
Beginning balance at December 31, 2011			10,444
Expense	1,028	289	1,459	1,932
Utilized			(10,810)
Ending balance at July 1, 2012	$ 1,093		$ 1,093

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Supplemental Financial Information (Details) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Inventories
Raw materials	$ 147	$ 236
Work-in-process	56,248	78,886
Finished goods	147,618	100,913
Total inventories	$ 204,013	$ 180,035

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 402,144	$ 779,811
Short-term investments	198,940	155,644
Accounts receivable, less allowances of $7,375 and $6,950, respectively	296,840	246,539
Inventories	204,013	180,035
Prepaid expenses and other current assets	63,394	60,659
Total current assets	1,165,331	1,422,688
Property and equipment, net	235,669	180,589
Identified intangible assets, net	546,118	433,790
Goodwill	255,838	72,377
Other assets	107,647	122,604
Total assets	2,310,603	2,232,048
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	206,041	175,093
Accrued salaries, wages and benefits	108,555	106,948
Other accrued liabilities	153,804	178,830
Total current liabilities	468,400	460,871
Pension and post-retirement benefit obligations	566,811	597,183
Income taxes payable - non-current	94,314	91,791
Other non-current liabilities	17,676	23,263
Total liabilities	1,147,201	1,173,108
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $.01 par value: 2,000 shares authorized; none outstanding
Common stock, $.01 par value: 1,300,000 shares authorized; 557,065 and 561,767 shares outstanding, respectively	5,571	5,618
Additional paid-in capital	5,588,935	5,623,581
Accumulated deficit	(3,903,121)	(4,037,031)
Accumulated other comprehensive loss	(527,983)	(533,228)
Total stockholders' equity	1,163,402	1,058,940
Total liabilities and stockholders' equity	$ 2,310,603	$ 2,232,048

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Business Combination (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jul. 01, 2012
Business Combinations (Textual) [Abstract]
Acquisition Date	Jan. 03, 2012
Acquisition related costs	$ 8.4
Gain recognized from re-measurement of the pre-acquisition equity	5.8
Maximum [Member]
Business Combinations (Textual) [Abstract]
Discount rate applied to projects	17.90%
Minimum [Member]
Business Combinations (Textual) [Abstract]
Discount rate applied to projects	12.90%
Sand Force acquisition [Member]
Business Combinations (Textual) [Abstract]
Revenue recognized related to SandForce business since date of acquisition	77.0
Griffin project [Member]
Business Combinations (Textual) [Abstract]
Expected costs to complete	$ 24
Anticipated completion date of Griffin project	2013
Revenues for Griffin project is expected through	2018

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 58,713	$ 293,784	$ 133,910	$ 303,938
Other comprehensive (loss)/income before tax:
Foreign currency translation adjustments	(4,844)	190	(3,397)	1,591
Unrealized gain on investments for the period	553	384	1,244	1,421
Reclassification adjustments for gain on investments included in net income	(918)	(802)	(1,413)	(1,513)
Unrealized loss on investments	(365)	(418)	(169)	(92)
Unrealized (loss)/gain on derivatives for the period	(1,989)	399	(1,349)	1,021
Reclassification adjustments for loss/(gain) on derivatives included in net income	1,335	(759)	2,008	(972)
Unrealized (loss)/gain on derivatives	(654)	(360)	659	49
Amortization of transition asset, prior service cost and net actuarial loss	4,183	1,784	8,152	3,562
Other comprehensive (loss)/income before tax	(1,680)	1,196	5,245	5,110
Income tax expense related to items of other comprehensive (loss)/income
Other comprehensive (loss)/income, net of tax	(1,680)	1,196	5,245	5,110
Comprehensive income	$ 57,033	$ 294,980	$ 139,155	$ 309,048

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Derivative Instruments (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011	Dec. 31, 2011
Derivative Instruments (Textual) [Abstract]
Total fair value of derivative liabilities	$ 2.3		$ 2.3		$ 3.0
Cash Flow Hedging [Member]
Derivative Instruments (Textual) [Abstract]
Total notional value of the Company's outstanding forward contracts, designated as foreign-currency cash-flow hedges	36.5		36.5		36.9
Maturity period of forward contract			within 12 months
Period to calculate and evaluate the effectiveness of each hedge			Quarterly
Other Foreign Currency Hedges [Member]
Derivative Instruments (Textual) [Abstract]
Total notional value of the Company's outstanding forward contracts, not designated as hedges under hedge accounting	35.3		35.3		37.6
(Loss)/gain related to other foreign-currency hedges	$ (2.9)	$ 0.3	$ (1.7)	$ 2.1
Maturity period of forward contract			within 3 months

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Stock-Based Compensation Expense (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jul. 01, 2012
Changes in stock options outstanding
Options outstanding at December 31, 2011, Number of Shares	64,245
Assumed in Sand Force acquisition, Number of shares	7,542
Options granted, Number of shares	5,033
Options exercised, Number of shares	(11,942)
Options cancelled, Number of shares	(2,757)
Options outstanding at July 1,2012, Number of Shares	62,121
Options exercisable at July 1,2012, Number of shares	37,288
Options outstanding at December 31, 2011, Weighted-Average Exercise Price Per Share	$ 6.19
Assumed in Sand Force acquisition, Weighted Average Exercise Price Per Share	$ 0.75
Options granted, Weighted-Average Exercise Price Per Share	$ 8.50
Options exercised, Weighted-Average Exercise Price Per Share	$ 5.69
Options cancelled, Weighted-Average Exercise Price Per Share	$ 9.32
Options outstanding at July 1,2012, Weighted-Average Exercise Price Per Share	$ 5.67
Options exercisable at July 1, 2012, Weighted-Average Exercise Price Per Share	$ 6.15
Options outstanding at July 1,2012, Weighted-Average Remaining Contractual Term	4 years 1 month 2 days
Options exercisable at July 1,2012, Weighted-Average Remaining Contractual Term	2 years 9 months 22 days
Options outstanding at July 1,2012, Aggregate Intrinsic Value	$ 91,608
Options exercisable at July 1,2012, Aggregate Intrinsic Value	$ 43,806

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Discontinued Operations (Details) (USD $)	0 Months Ended	3 Months Ended		6 Months Ended
	May 06, 2011	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
(Loss)/income from discontinued operations for the external storage systems business
Revenues			$ 51,675,000		$ 207,365,000
Loss before gain on sale of external storage systems business and income taxes			(14,590,000)		(22,500,000)
Gain on sale of external storage systems business			260,066,000		260,066,000
Benefit from income taxes			(19,900,000)		(19,418,000)
Income from discontinued operations		0	265,376,000	0	256,984,000
Discontinued Operations (Textual) [Abstract]
Cash consideration received for sale of ESG business	480,000,000
Date of completion of sale of business				May 06, 2011
Income from discontinued operations		0	265,376,000	0	256,984,000
Restructuring expenses related to the exit of the ESG business			14,100,000		37,900,000
Released deferred tax liabilities related to sale of external storage systems business			$ 19,700,000		$ 19,700,000

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Basis of Presentation (Policies)

6 Months Ended

Jul. 01, 2012

Basis of Presentation [Abstract]

Basis of presentation

For financial reporting purposes, LSI Corporation (“LSI” or the “Company”) reports on a 13- or 14-week quarter with the year ending December 31. The second quarter of 2012 and 2011 consisted of 13 weeks each and ended on July 1, 2012 and July 3, 2011, respectively. The results of operations for the quarter ended July 1, 2012 are not necessarily indicative of the results to be expected for the full year.

On January 3, 2012, the Company completed the acquisition of SandForce, Inc. (“SandForce”) for total consideration of approximately $346.4 million, net of cash acquired. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The acquisition was accounted for under the purchase method of accounting. Accordingly, the results of operations of SandForce and the estimated fair value of assets acquired and liabilities assumed were included in the Company’s condensed consolidated financial statements from January 3, 2012.

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp, Inc. (“NetApp”). The results of the external storage systems business are presented as discontinued operations in the Company’s condensed consolidated statements of operations and, as such, have been excluded from all line items other than “Income from discontinued operations” for all periods presented.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, comprehensive income and cash flows for the interim periods presented. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued additional guidance on fair value measurements and related disclosures. The new guidance clarifies the application of existing guidance on fair value measurement for non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The Company adopted this guidance in the first quarter of 2012. The adoption did not impact the Company’s results of operations or financial position.

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Stock-Based Compensation Expense (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jul. 01, 2012
Service-Based Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted stock units, Beginning Balance	12,085
Assumed in Sand Force acquisition, Number of Units	1,576
Granted, Number of units	7,012
Vested, Number of Units	(3,035)
Forfeited, Number of Units	(464)
Unvested restricted stock units, Ending Balance	17,174
Unvested RSUs, Weighted-Average Grant Date Fair Value per Share, Beginning balance	$ 5.94
Assumed in Sand Force acquisition, Weighted-Average Grant Date Fair Value per Share	$ 6.17
Granted, Weighted-Average Grant Date Fair Value Per Share	$ 8.32
Vested, Weighted-Average Grant Date Fair Value per Share	$ 5.90
Forfeited, Weighted-Average Grant Date Fair Value per Share	$ 6.32
Unvested RSUs, Weighted-Average Grant Date Fair Value per Share, Ending of period	$ 6.93
Performance-based Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested restricted stock units, Beginning Balance	4,729
Granted, Number of units	2,986
Vested, Number of Units	(1,446)
Forfeited, Number of Units	(535)
Unvested restricted stock units, Ending Balance	5,734
Unvested RSUs, Weighted-Average Grant Date Fair Value per Share, Beginning balance	$ 5.98
Granted, Weighted-Average Grant Date Fair Value Per Share	$ 8.52
Vested, Weighted-Average Grant Date Fair Value per Share	$ 5.85
Forfeited, Weighted-Average Grant Date Fair Value per Share	$ 6.41
Unvested RSUs, Weighted-Average Grant Date Fair Value per Share, Ending of period	$ 7.30

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Restructuring and Other Items (Tables)

6 Months Ended

Jul. 01, 2012

Restructuring and Other Items [Abstract]

Restructuring of operations and other items net

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(In thousands)
Lease terminations (a)	$	1,181		$	1,865		$	2,815		$	3,553
Employee severance and benefits (b)		1,028			289			1,459			1,932
Total restructuring expense		2,209			2,154			4,274			5,485
Other items, net		4,282	(c)		(13,058	)(d)		17,679	(e)		(13,583	)(d)
Total restructuring of operations and other items, net	$	6,491		$	(10,904	)	$	21,953		$	(8,098	)

(a) Includes changes in time value, on-going operating expense and changes in estimates related to previously vacated facilities.

(b) Relates to restructuring actions taken as the Company continued to streamline operations.

(c) Primarily consists of $2.4 million of property and equipment write-downs and $1.9 million of transition service agreement costs related to the sale of the external storage systems business.

(d) Primarily relates to the reversal of a $14.5 million sales and use tax related liability as a result of concluding various audits, partially offset by $1.3 million of transition service agreement costs related to the sale of the external storage systems business.

(e) Primarily consists of $8.4 million of SandForce acquisition-related costs and $6.5 million of transition service agreement costs related to the sale of the external storage systems business.

Activities affecting the restructuring obligations

	Lease Terminations			Employee Severance and Benefits			Total
	(In thousands)
Balance at December 31, 2011	$	11,752		$	10,444		$	22,196
Expense		2,815			1,459			4,274
Utilized(a)		(4,844	)		(10,810	)		(15,654	)
Balance at July 1, 2012 (b)	$	9,723		$	1,093		$	10,816

(a) Represents cash payments.

(b) The balance remaining for lease terminations is expected to be paid during the remaining terms of the leases, which extend through 2013. The balance remaining for employee severance and benefits is expected to be paid by the end of 2013.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011
Operating activities:
Net income	$ 133,910	$ 303,938
Adjustments:
Depreciation and amortization	90,647	102,310
Stock-based compensation expense	56,152	27,112
Non-cash restructuring of operations and other items, net	5,041	20,964
Gain on re-measurement of a pre-acquisition equity interest to fair value	(5,765)
Gain on sale of business		(260,066)
Gain on sale of property and equipment	(70)	(508)
Unrealized foreign exchange (gain)/loss	(2,735)	2,581
Deferred taxes	(43,174)	(19,766)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combination:
Accounts receivable	(39,417)	92,477
Inventories	227	(43,140)
Prepaid expenses, assets held for sale and other assets	(1,830)	(10,991)
Accounts payable	29,521	9,290
Accrued and other liabilities	(55,010)	(77,878)
Net cash provided by operating activities	167,497	146,323
Investing activities:
Purchases of debt securities available-for-sale	(72,369)	(24,131)
Proceeds from maturities and sales of debt securities available-for-sale	17,756	23,445
Purchases of other investments		(4,000)
Purchases of property and equipment	(77,618)	(37,198)
Proceeds from sale of property and equipment	252	896
Acquisition of business, net of cash acquired	(319,231)
Proceeds from sale of business, net of transaction costs		475,150
Net cash (used in)/provided by investing activities	(451,210)	434,162
Financing activities:
Issuances of common stock	82,128	50,931
Purchases of common stock under repurchase program	(176,185)	(396,792)
Net cash used in financing activities	(94,057)	(345,861)
Effect of exchange rate changes on cash and cash equivalents	103	(968)
Net change in cash and cash equivalents	(377,667)	233,656
Cash and cash equivalents at beginning of period	779,811	521,786
Cash and cash equivalents at end of period	$ 402,144	$ 755,442

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Allowances for accounts receivable	$ 7,375	$ 6,950
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	1,300,000	1,300,000
Common stock, shares outstanding	557,065	561,767

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Segment, Geographic and Product Information

6 Months Ended

Jul. 01, 2012

Segment, Geographic and Product Information [Abstract]

Segment, Geographic and Product Information

Note 10 — Segment, Geographic and Product Information

The Company operates in one reportable segment — the Semiconductor segment.

The Company’s chief executive officer is the chief operating decision maker (“CODM”). The Company’s CODM bears ultimate responsibility for, and is actively engaged in, the allocation of resources and the evaluation of the Company’s operating and financial results.

Information about Geographic Areas

The following table summarizes the Company’s revenues by geography based on the ordering location of the customer. Because the Company sells its products primarily to other sellers of technology products and not to end users, the information in the table below may not accurately reflect geographic end-user demand for its products.

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
North America*	$	154,468	$	122,881	$	313,437	$	243,799
Asia		463,988		330,343		878,010		633,001
Europe and the Middle East		41,117		47,420		90,550		97,108
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

* Primarily the United States.

Information about Product Groups

The following table presents the Company’s revenues by product groups:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Storage products	$	534,697	$	358,961	$	1,023,166	$	695,348
Networking products		98,780		117,383		205,802		229,383
Other		26,096		24,300		53,029		49,177
Total	$	659,573	$	500,644	$	1,281,997	$	973,908

XML

Document and Entity Information	6 Months Ended
	Jul. 01, 2012	Aug. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	LSI CORP
Entity Central Index Key	0000703360
Document Type	10-Q
Document Period End Date	Jul. 01, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		557,562,166

XML

Income Taxes

6 Months Ended

Jul. 01, 2012

Income Taxes [Abstract]

Income Taxes

Note 11 — Income Taxes

The Company recorded an income tax provision of $11.8 million and an income tax benefit of $37.3 million for the three and six months ended July 1, 2012, respectively, and income tax provisions of $8.9 million and $4.8 million for the three and six months ended July 3, 2011, respectively.

The income tax benefit for the six months ended July 1, 2012 included a tax benefit of approximately $43.2 million due to the release of valuation allowance resulting from the net deferred tax liabilities recorded as part of the SandForce purchase price allocation. The income tax benefit for the six months ended July 1, 2012 also included a reversal of $10.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $5.2 million and interest and penalties of $5.0 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

The income tax provision for the six months ended July 3, 2011 included a reversal of $8.2 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $4.8 million and interest and penalties of $3.4 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

The Company computes its tax provision using an estimated annual tax rate. The Company excludes certain loss jurisdictions from the computation of the estimated annual rate when no benefit can be realized on those losses. With the exception of certain foreign jurisdictions, the Company believes it is not more likely than not that the future benefit of the deferred tax assets will be realized.

As of July 1, 2012, the Company had $180.7 million of unrecognized tax benefits, for which the Company is unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority may occur. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months. Such changes could occur based on the normal expiration of statutes of limitations or the possible conclusion of ongoing tax audits in various jurisdictions around the world. If those events occur within the next 12 months, the Company estimates that the unrecognized tax benefits, plus accrued interest and penalties, could decrease by up to $16.7 million.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Condensed Consolidated Statements of Operations [Abstract]
Revenues	$ 659,573	$ 500,644	$ 1,281,997	$ 973,908
Cost of revenues	327,685	263,024	663,197	512,114
Gross profit	331,888	237,620	618,800	461,794
Research and development	175,564	145,873	345,435	288,220
Selling, general and administrative	88,914	71,793	179,014	140,660
Restructuring of operations and other items, net	6,491	(10,904)	21,953	(8,098)
Income from operations	60,919	30,858	72,398	41,012
Interest income and other, net	9,594	6,450	24,250	10,738
Income from continuing operations before income taxes	70,513	37,308	96,648	51,750
Provision for/(benefit from) income taxes	11,800	8,900	(37,262)	4,796
Income from continuing operations	58,713	28,408	133,910	46,954
Income from discontinued operations (including a gain on disposal of $260,066 for the three and six months ended July 3, 2011), net of taxes	0	265,376	0	256,984
Net income	$ 58,713	$ 293,784	$ 133,910	$ 303,938
Basic income per share:
Income from continuing operations	$ 0.10	$ 0.05	$ 0.24	$ 0.08
Income from discontinued operations		$ 0.44		$ 0.42
Net income	$ 0.10	$ 0.49	$ 0.24	$ 0.50
Diluted income per share:
Income from continuing operations	$ 0.10	$ 0.05	$ 0.23	$ 0.08
Income from discontinued operations		$ 0.43		$ 0.41
Net income	$ 0.10	$ 0.48	$ 0.23	$ 0.49
Shares used in computing per share amounts:
Basic	563,686	594,957	564,945	605,315
Diluted	581,344	611,093	586,431	621,248

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Business Combination

6 Months Ended

Jul. 01, 2012

Business Combinations [Abstract]

Business Combination

Note 5 — Business Combination

Acquisition of SandForce

On January 3, 2012, the Company completed the acquisition of SandForce. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The Company acquired SandForce to enhance its position in storage technology solutions.

Total consideration consisted of the following (in thousands):

Cash paid, net of cash acquired	$	319,231
Fair value of partially vested equity awards		19,089
Fair value of LSI’s previous investment in SandForce		8,120
Total	$	346,440

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce and converted them into LSI stock options and RSUs. The portion of the fair value of partially vested equity awards associated with prior service of SandForce employees represents a component of the total consideration for the SandForce acquisition, as presented above. Stock options assumed were valued using a binomial lattice model calibrated to the exercise behavior of LSI’s employees. RSUs were valued based on LSI’s stock price as of the acquisition date.

Prior to the acquisition, the Company held an equity interest in SandForce. The Company determined the fair value by applying the per share value of the contractual cash consideration to the SandForce shares held by the Company immediately prior to the acquisition. The fair value of the Company’s pre-acquisition investment in SandForce represents a component of total consideration, as presented above. As a result of re-measuring the pre-acquisition equity interest in SandForce to fair value, the Company recognized a gain of $5.8 million, which was included in interest income and other, net, for the six month period ended July 1, 2012.

The allocation of the purchase price to SandForce’s tangible and identified intangible assets acquired and liabilities assumed was based on their estimated fair values.

The purchase price has been allocated as follows (in thousands):

Accounts receivable	$	10,711
Inventory		24,268
Identified intangible assets		172,400
Goodwill		183,461
Net deferred tax liabilities		(43,198	)
Other, net		(1,202	)
Total	$	346,440

The goodwill is primarily attributable to the assembled workforce of SandForce and synergies and economies of scale expected from combining the operations of LSI and SandForce. The goodwill recognized is not deductible for tax purposes.

Identified intangible assets were comprised of the following:

	Fair Value		Weighted- Average  Life
	(In thousands)		(In years)
Current technology	$	73,400		4.0
Customer relationships		41,700		7.0
Order backlog		4,500		0.5
Trade names		1,500		3.0
Total identified intangible assets subject to amortization		121,100		4.9
In-process research and development		51,300
Total identified intangible assets	$	172,400

The allocation of the purchase price to identified intangible assets acquired was based on the Company’s best estimate of the fair value of such assets. Fair value for acquired identified intangible assets is determined based on inputs that are unobservable and significant to the overall fair value measurement. As such, acquired intangible assets are classified as Level 3 assets.

The fair value of each of the acquired identified intangible assets was determined using a discounted cash flow methodology. The cash flows for each category of identified intangible assets represent the estimated incremental effect on the Company’s cash flows directly attributable to that intangible asset over its estimated remaining life. Estimated cash flows represent expected incremental revenues, net of returns on contributory assets and after considering estimated incremental operating costs and income taxes. Discount rates ranging from 12.9% to 17.9% were used based on the cost of capital, adjusted to reflect the specific risk associated with each of the cash flows.

Current technology represents the fair value of SandForce products that had reached technological feasibility and were a part of its product offering. Customer relationships represent the fair values of the underlying relationships with SandForce’s customers.

In-process research and development (“IPR&D”) represents the fair value of incomplete research and development projects that had not reached technological feasibility as of the date of the acquisition. At the time of acquisition, SandForce had IPR&D related to its next generation flash storage processor (the “Griffin project”). At July 1, 2012, expected costs to complete the Griffin project are approximately $24 million through its anticipated completion date in 2013. Total revenues for the Griffin project are expected to extend through 2018. The acquisition date fair value of the Griffin project will be either amortized or impaired depending on whether the project is completed or abandoned.

From January 3, 2012 through July 1, 2012, the Company recognized approximately $77.0 million of revenues related to the SandForce business. In addition, during the six months ended July 1, 2012, the Company recognized $8.4 million of acquisition-related costs included in restructuring of operations and other items, net, related to SandForce. It is impracticable to determine the effect on net income resulting from the SandForce acquisition for the six months ended July 1, 2012, as the Company immediately integrated SandForce into its ongoing operations. As such, the impact of SandForce is not separable from the Company’s consolidated results of operations.

Historical pro forma results giving effect to the acquisition have not been presented because such effect is not material to the prior period financial results.

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Restructuring and Other Items

6 Months Ended

Jul. 01, 2012

Restructuring and Other Items [Abstract]

Restructuring and Other Items

Note 4 — Restructuring and Other Items

The following table summarizes items included in restructuring of operations and other items, net:

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
	(In thousands)
Lease terminations (a)	$	1,181		$	1,865		$	2,815		$	3,553
Employee severance and benefits (b)		1,028			289			1,459			1,932
Total restructuring expense		2,209			2,154			4,274			5,485
Other items, net		4,282	(c)		(13,058	)(d)		17,679	(e)		(13,583	)(d)
Total restructuring of operations and other items, net	$	6,491		$	(10,904	)	$	21,953		$	(8,098	)

(a) Includes changes in time value, on-going operating expense and changes in estimates related to previously vacated facilities.

(b) Relates to restructuring actions taken as the Company continued to streamline operations.

(c) Primarily consists of $2.4 million of property and equipment write-downs and $1.9 million of transition service agreement costs related to the sale of the external storage systems business.

(d) Primarily relates to the reversal of a $14.5 million sales and use tax related liability as a result of concluding various audits, partially offset by $1.3 million of transition service agreement costs related to the sale of the external storage systems business.

(e) Primarily consists of $8.4 million of SandForce acquisition-related costs and $6.5 million of transition service agreement costs related to the sale of the external storage systems business.

The following table summarizes the significant activity within, and components of, the Company’s restructuring obligations:

	Lease Terminations			Employee Severance and Benefits			Total
	(In thousands)
Balance at December 31, 2011	$	11,752		$	10,444		$	22,196
Expense		2,815			1,459			4,274
Utilized(a)		(4,844	)		(10,810	)		(15,654	)
Balance at July 1, 2012 (b)	$	9,723		$	1,093		$	10,816

(a) Represents cash payments.

(b) The balance remaining for lease terminations is expected to be paid during the remaining terms of the leases, which extend through 2013. The balance remaining for employee severance and benefits is expected to be paid by the end of 2013.

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Stock-Based Compensation Expense (Tables)

6 Months Ended

Jul. 01, 2012

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Stock-based compensation expense

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Cost of revenues	$	3,003	$	2,051	$	6,515	$	3,864
Research and development		11,973		6,653		24,281		12,876
Selling, general and administrative		10,342		4,948		25,356		10,579
Total stock-based compensation expense	$	25,318	$	13,652	$	56,152	$	27,319

Changes in stock options outstanding

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding at December 31, 2011		64,245		$	6.19
Assumed in SandForce acquisition		7,542		$	0.75
Granted		5,033		$	8.50
Exercised		(11,942	)	$	5.69
Canceled		(2,757	)	$	9.32
Options outstanding at July 1, 2012		62,121		$	5.67		4.09	$	91,608
Options exercisable at July 1, 2012		37,288		$	6.15		2.81	$	43,806

Unvested service-based restricted stock

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested service-based RSUs at December 31, 2011		12,085		$	5.94
Assumed in SandForce acquisition		1,576		$	6.17
Granted		7,012		$	8.32
Vested		(3,035	)	$	5.90
Forfeited		(464	)	$	6.32
Unvested service-based RSUs at July 1, 2012		17,174		$	6.93

Unvested performance-based restricted stock

	Number of Units			Weighted-Average Grant Date Fair Value per Share
	(In thousands)
Unvested performance-based RSUs at December 31, 2011		4,729		$	5.98
Granted		2,986		$	8.52
Vested		(1,446	)	$	5.85
Forfeited		(535	)	$	6.41
Unvested performance-based RSUs at July 1, 2012		5,734		$	7.30

Employee Stock Option [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Weighted average assumptions in fair value of option grant

	Three Months Ended						Six Months Ended
	July 1, 2012			July 3, 2011			July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.64		$	2.65		$	2.86		$	2.14
Expected life (years)		4.52			5.01			4.46			4.51
Risk-free interest rate		1	%		2	%		1	%		2	%
Volatility		49	%		47	%		47	%		47	%

Employee Stock Purchase Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Weighted average assumptions in fair value of option grant

	Three Months Ended
	July 1, 2012			July 3, 2011
Estimated grant date fair value per share	$	2.19		$	2.10
Expected life (years)		0.8			0.8
Risk-free interest rate		0.17	%		0.02	%
Volatility		41	%		37	%

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Related Party Transactions

6 Months Ended

Jul. 01, 2012

Related Party Transactions [Abstract]

Related Party Transactions

Note 12 — Related Party Transactions

A member of the Company’s board of directors is also a member of the board of directors of Seagate Technology (“Seagate”). The Company sells semiconductors used in storage product applications to Seagate for prices comparable to those charged to an unrelated third party. Revenues from sales by the Company to Seagate were $227.6 million and $434.6 million for the three and six months ended July 1, 2012, respectively. Revenues from sales by the Company to Seagate were $118.9 million and $217.5 million for the three and six months ended July 3, 2011, respectively. The Company had accounts receivable from Seagate of $134.8 million and $90.3 million as of July 1, 2012 and December 31, 2011, respectively.

The Company has an equity interest in a joint venture, Silicon Manufacturing Partners Pte Ltd. (“SMP”), with GLOBALFOUNDRIES, a manufacturing foundry for integrated circuits. SMP operates an integrated circuit manufacturing facility in Singapore. The Company owns a 51% equity interest in this joint venture and accounts for its ownership position under the equity method of accounting. The Company is effectively precluded from unilaterally taking any significant action in the management of SMP due to GLOBALFOUNDRIES’ significant participatory rights under the joint venture agreement. Because of GLOBALFOUNDRIES’ approval rights, the Company cannot make any significant decisions regarding SMP without GLOBALFOUNDRIES’ approval, despite the 51% equity interest. In addition, the General Manager, who is responsible for the day-to-day management of SMP, is appointed by GLOBALFOUNDRIES, and GLOBALFOUNDRIES provides day-to-day operational support to SMP.

The Company purchased $11.7 million and $23.9 million of inventory from SMP during the three and six months ended July 1, 2012, respectively. The Company purchased $14.8 million and $25.6 million of inventory from SMP during the three and six months ended July 3, 2011, respectively. As of July 1, 2012 and December 31, 2011, the amounts payable to SMP were $9.5 million and $5.0 million, respectively.

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Supplemental Financial Information

6 Months Ended

Jul. 01, 2012

Supplemental Financial Information [Abstract]

Supplemental Financial Information

Note 8 — Supplemental Financial Information

Inventories

	July 1, 2012		December 31, 2011
	(In thousands)
Raw materials	$	147	$	236
Work-in-process		56,248		78,886
Finished goods		147,618		100,913
Total inventories	$	204,013	$	180,035

Goodwill

The following table summarizes goodwill activity for the six months ended July 1, 2012:

	Goodwill
	(In thousands)
Balance as of December 31, 2011	$	72,377
Addition due to SandForce acquisition		183,461
Balance as of July 1, 2012	$	255,838

There was no impairment charge for goodwill during the six months ended July 1, 2012 or July 3, 2011. The accumulated impairment loss as of July 1, 2012 was $2.4 billion.

Accumulated Other Comprehensive Loss

The following table presents the components of, and changes in, accumulated other comprehensive loss, net of taxes:

	Balance at December 31, 2011			Other Comprehensive Income			Balance at July 1, 2012
	(In thousands)
Accumulated net foreign currency translation adjustments	$	42,138		$	(3,397	)	$	38,741
Accumulated net unrealized gain on investments		5,942			(169	)		5,773
Accumulated net unrealized loss on derivatives		(2,551	)		659			(1,892	)
Accumulated actuarial loss on pension and post-retirement plans		(578,757	)		8,152			(570,605	)
Total accumulated other comprehensive loss	$	(533,228	)	$	5,245		$	(527,983	)

There was no tax effect on any item of other comprehensive income presented in the condensed consolidated statements of comprehensive income for the three and six months ended July 1, 2012 and July 3, 2011.

Reconciliation of Basic and Diluted Shares

The following table provides a reconciliation of basic and diluted shares:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Basic shares		563,686		594,957		564,945		605,315
Dilutive effect of stock options, employee stock purchase rights and restricted stock unit awards		17,658		16,136		21,486		15,933
Diluted shares		581,344		611,093		586,431		621,248

The weighted-average common share equivalents that were excluded from the computation of diluted shares because their inclusion would have had an anti-dilutive effect on net income per share were as follows:

	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Anti-dilutive securities:
Stock options		30,540		38,338		24,672		44,130
Restricted stock unit awards		9,743		1,445		5,985		93

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Segment, Geographic and Product Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Company's revenues by geography based on the ordering location of the customer
Revenues	$ 659,573	$ 500,644	$ 1,281,997	$ 973,908
North America [Member]
Company's revenues by geography based on the ordering location of the customer
Revenues	154,468	122,881	313,437	243,799
Asia [Member]
Company's revenues by geography based on the ordering location of the customer
Revenues	463,988	330,343	878,010	633,001
Europe and the Middle East [Member]
Company's revenues by geography based on the ordering location of the customer
Revenues	$ 41,117	$ 47,420	$ 90,550	$ 97,108

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Benefit Obligations

6 Months Ended

Jul. 01, 2012

Benefit Obligations [Abstract]

Benefit Obligations

Note 6 — Benefit Obligations

In 2007, the Company acquired Agere Systems Inc. (“Agere”). The Company has pension plans covering substantially all former Agere U.S. employees, excluding management employees hired after June 30, 2003. Retirement benefits are provided under defined benefit pension plans, which include a management plan and a represented plan. The payments under the management plan are based on an adjusted career-average-pay formula or a cash-balance program. The cash-balance program provides for annual company contributions based on a participant’s age and compensation and interest on existing balances. It covers employees of certain companies acquired by Agere since 1996 and management employees hired after January 1, 1999 and before July 1, 2003. The payments under the represented plan are based on a dollar-per-month formula. Since February 2009, there have been no active participants under the represented plan. The Company also has a non-qualified supplemental pension plan in the U.S. that principally provides benefits based on compensation in excess of amounts that can be considered under a tax qualified plan. The Company also provides post-retirement life insurance coverage under a group life insurance plan for former Agere employees excluding participants in the cash-balance program and management employees hired after June 30, 2003. The Company also has pension plans covering certain international employees.

Effective April 6, 2009, the Company froze the U.S. management defined benefit pension plan. Participants in the adjusted career-average-pay program will not earn any future service accruals after that date. Participants in the cash-balance program will not earn any future service accruals, but will continue to earn 4% interest per year on their cash-balance accounts.

The following table summarizes the components of the net periodic benefit cost or credit:

	Three Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	116		$	20		$	141		$	21
Interest cost		15,483			643			16,929			621
Expected return on plan assets		(17,030	)		(856	)		(17,000	)		(1,033	)
Amortization of net actuarial loss, prior service cost and transition asset		3,693			490			1,699			85
Total benefit cost/(credit)	$	2,262		$	297		$	1,769		$	(306	)

	Six Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	225		$	45		$	275		$	38
Interest cost		30,735			1,293			33,779			1,246
Expected return on plan assets		(34,053	)		(1,906	)		(33,998	)		(2,065	)
Amortization of net actuarial loss, prior service cost and transition asset		7,162			990			3,385			177
Total benefit cost/(credit)	$	4,069		$	422		$	3,441		$	(604	)

During the six months ended July 1, 2012, the Company contributed $26.2 million to its U.S. defined benefit pension plans and $0.4 million to its non-qualified supplemental pension plan. The Company expects to contribute an additional $68.6 million to its pension plans during the remainder of 2012. The Company does not expect to contribute to its post-retirement benefit plan in 2012.

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Cash Equivalents and Investments

6 Months Ended

Jul. 01, 2012

Cash Equivalents and Investments [Abstract]

Cash Equivalents and Investments

Note 7 — Cash Equivalents and Investments

The following tables summarize the Company’s cash equivalents and investments measured at fair value:

	Fair Value Measurements as of July 1, 2012
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	310,545	(a)	$	—		$	310,545
U.S. government and agency securities		—			2,003	(b)		2,003
Total cash equivalents	$	310,545		$	2,003		$	312,548
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	124,603	(b)	$	124,603
Non-agency securities		—			3,135	(b)		3,135
U.S. government and agency securities		13,225	(a)		44,200	(b)		57,425
Corporate debt securities		—			13,777	(b)		13,777
Total short-term investments	$	13,225		$	185,715		$	198,940
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	2,145	(c)	$	—		$	2,145

	Fair Value Measurements as of December 31, 2011
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	674,219	(a)	$	—		$	674,219
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	97,408	(b)	$	97,408
Non-agency securities		—			9,989	(b)		9,989
U.S. government and agency securities		5,403	(a)		30,572	(b)		35,975
Corporate debt securities		—			12,272	(b)		12,272
Total short-term investments	$	5,403		$	150,241		$	155,644
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	1,514	(c)	$	—		$	1,514

(a) The fair value of money-market funds is determined using unadjusted prices in active markets. The fair value of Level 1 U.S. government and agency securities is determined using quoted prices in active markets.

(b) These investments are traded less frequently than Level 1 securities and are valued using inputs that include quoted prices for similar assets in active markets and inputs other than quoted prices that are observable for the asset, such as interest rates, yield curves, prepayment speeds, collateral performance, broker/dealer quotes and indices that are observable at commonly quoted intervals.

(c) The fair value of marketable equity securities is determined using quoted market prices in active markets. These amounts are included within other assets in the condensed consolidated balance sheets.

As of July 1, 2012 and December 31, 2011, the aggregate carrying value of the Company’s non-marketable securities was $41.6 million and $43.9 million, respectively.

Upon the acquisition of SandForce in January 2012, the Company recognized a gain of $5.8 million as a result of re-measuring its pre-acquisition equity interest in SandForce to estimated fair value. There were no other non-marketable securities fair-valued during the three and six months ended July 1, 2012 or July 3, 2011.

The following tables summarize the Company’s available-for-sale securities:

	July 1, 2012
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	121,466	$	6,764	$	(492	)	$	127,738
U.S. government and agency securities		56,542		888		(5	)		57,425
Corporate debt securities		13,617		161		(1	)		13,777
Total short-term debt securities	$	191,625	$	7,813	$	(498	)	$	198,940
Long-term marketable equity securities	$	669	$	1,476	$	—		$	2,145

	December 31, 2011
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	99,884	$	7,891	$	(378	)	$	107,397
U.S. government and agency securities		35,179		799		(3	)		35,975
Corporate debt securities		12,146		153		(27	)		12,272
Total short-term debt securities	$	147,209	$	8,843	$	(408	)	$	155,644
Long-term marketable equity securities	$	669	$	846	$	(1	)	$	1,514

As of July 1, 2012, there were 94 investments in an unrealized loss position. The following tables summarize the gross unrealized losses and fair values of the Company’s short-term investments that have been in a continuous unrealized loss position for less than and greater than 12 months, aggregated by investment category:

	July 1, 2012
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	33,176	$	(473	)	$	1,247	$	(19	)
U.S. government and agency securities		15,356		(5	)		—		—
Corporate debt securities		4,544		(1	)		503		—
Total	$	53,076	$	(479	)	$	1,750	$	(19	)

	December 31, 2011
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	10,645	$	(286	)	$	1,301	$	(92	)
U.S. government and agency securities		3,872		(3	)		—		—
Corporate debt securities		2,375		(27	)		505		—
Total	$	16,892	$	(316	)	$	1,806	$	(92	)

Net realized gains on sales of available-for-sale securities were not material for the three and six months ended July 1, 2012 or July 3, 2011.

Contractual maturities of available-for-sale debt securities as of July 1, 2012 were as follows:

	Available-For-Sale Debt Securities
	(In thousands)
Due within one year	$	27,998
Due in 1-5 years		47,794
Due in 5-10 years		10,015
Due after 10 years		113,133
Total	$	198,940

The maturities of asset-backed and mortgage-backed securities were allocated based on contractual principal maturities assuming no prepayments.

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Derivative Instruments

6 Months Ended

Jul. 01, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note 9 — Derivative Instruments

The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to changes in foreign-currency exchange rates. The Company utilizes forward contracts to manage its exposure associated with net asset and liability positions denominated in non-functional currencies and to reduce the volatility of earnings and cash flows related to forecasted foreign-currency transactions. The Company does not hold derivative financial instruments for speculative or trading purposes.

Cash-Flow Hedges

The Company enters into forward contracts that are designated as foreign-currency cash-flow hedges of selected forecasted payments denominated in currencies other than U.S. dollars. These forward contracts generally mature within twelve months. The Company evaluates and calculates the effectiveness of each hedge at least quarterly. Changes in fair value attributable to changes in time value are excluded from the assessment of effectiveness and are recognized in interest income and other, net. The effective portion of the forward contracts’ gain or loss is recorded in other comprehensive income and, when the hedged expense is recognized, is subsequently reclassified into earnings within the same line item in the statements of operations as the impact of the hedged transaction. The ineffective portion of the gain or loss is reported in earnings immediately. As of July 1, 2012 and December 31, 2011, the total notional value of the Company’s outstanding forward contracts, designated as foreign-currency cash-flow hedges, was $36.5 million and $36.9 million, respectively.

Other Foreign-Currency Hedges

The Company enters into foreign-exchange forward contracts that are used to hedge certain foreign-currency-denominated assets or liabilities and that do not qualify for hedge accounting. These forward contracts generally mature within three months. Changes in the fair value of these forward contracts are recorded immediately in earnings to offset the changes in fair value of the assets or liabilities being hedged. As of July 1, 2012 and December 31, 2011, the total notional value of the Company’s outstanding forward contracts, not designated as hedges under hedge accounting, was $35.3 million and $37.6 million, respectively. For the three and six months ended July 1, 2012, losses of $2.9 million and $1.7 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. For the three and six months ended July 3, 2011, gains of $0.3 million and $2.1 million, respectively, on other foreign-currency hedges were recognized in interest income and other, net. These amounts were substantially offset by the gains and losses on the underlying foreign-currency-denominated assets or liabilities.

Fair Value of Derivative Instruments

As of July 1, 2012 and December 31, 2011, the total fair value of derivative assets was immaterial and was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheets. As of July 1, 2012 and December 31, 2011, the total fair value of derivative liabilities was $2.3 million and $3.0 million, respectively, and was recorded in other accrued liabilities in the condensed consolidated balance sheets.

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Commitments, Contingencies and Legal Matters (Details) (USD $)	1 Months Ended	6 Months Ended
	Feb. 28, 2009	Jul. 01, 2012	Dec. 31, 2011
Summary of changes in product warranties
Balance as of December 31, 2011		$ 6,334,000
Accruals for warranties issued during the period		868,000
Adjustments to pre-existing accruals (including changes in estimates)		(470,000)
Warranty liabilities assumed in Sand Force acquisition		426,000
Settlements made during the period (in cash or in kind)		(1,059,000)
Balance as of July 1, 2012		6,099,000
Commitments, Contingencies and Legal Matters (Textual) [Abstract]
Total purchase commitments due through 2016		446,700,000
Company's percentage of take-or-pay agreement with SMP		51.00%
Terms in which take-or-pay agreement may be terminated by either party		Upon two years written notice
Jury award to GE for patent infringement	7,600,000
Outstanding obligation related to standby letters of credit		$ 4,100,000	$ 3,500,000
Period of renewal for standby letter of credit		Annually

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Related Party Transactions (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011	Dec. 31, 2011
Silicon Manufacturing Partners Pte Ltd. [Member]
Related Party Transactions (Textual) [Abstract]
Company's equity interest in SMP joint venture	51.00%		51.00%
Purchase of inventory from SMP	$ 11.7	$ 14.8	$ 23.9	$ 25.6
Amounts payable to SMP	9.5		9.5		5.0
Seagate Technology [Member]
Related Party Transactions (Textual) [Abstract]
Revenues from sales to Seagate	227.6	118.9	434.6	217.5
Accounts receivable from Seagate	$ 134.8		$ 134.8		$ 90.3

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Stock-Based Compensation Expense (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Employee Stock Option [Member]
Weighted average assumptions in fair value of option grant
Estimated grant date fair value per share	$ 2.64	$ 2.65	$ 2.86	$ 2.14
Expected life (years)	4 years 6 months 7 days	5 years 4 days	4 years 5 months 16 days	4 years 6 months 4 days
Risk-free interest rate	1.00%	2.00%	1.00%	2.00%
Volatility	49.00%	47.00%	47.00%	47.00%
Employee Stock Purchase Plan [Member]
Weighted average assumptions in fair value of option grant
Estimated grant date fair value per share	$ 2.19	$ 2.10
Expected life (years)	9 months 18 days	9 months 18 days
Risk-free interest rate	0.17%	0.02%
Volatility	41.00%	37.00%

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Cash Equivalents and Investments (Details 3) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Contractual maturities of available-for-sale debt securities
Due within one year	$ 27,998
Due in 1-5 years	47,794
Due in 5-10 years	10,015
Due after 10 years	113,133
Total	$ 198,940	$ 155,644

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Discontinued Operations

6 Months Ended

Jul. 01, 2012

Discontinued Operations [Abstract]

Discontinued Operations

Note 14 — Discontinued Operations

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp for $480.0 million in cash. The strategic decision to exit the external storage systems business was based on the Company’s expectation that long-term shareholder value could be maximized by becoming a pure-play semiconductor company. Under the terms of the agreement, NetApp purchased substantially all the assets of the Company’s external storage systems business, which developed and delivered external storage systems products and technology to a wide range of partners who provide storage solutions to end customers. As part of the transaction, the Company provided transitional services to NetApp. The purpose of these services was to provide short-term assistance to the buyer in assuming the operations of the purchased business.

Following is selected financial information included in income from discontinued operations for the three and six months ended July 3, 2011:

	Three Months Ended			Six Months Ended
	July 3, 2011			July 3, 2011
	(In thousands)
Revenues	$	51,675		$	207,365
Loss before gain on sale of external storage systems business and income taxes	$	(14,590	)	$	(22,500	)
Gain on sale of external storage systems business		260,066			260,066
Benefit from income taxes		(19,900	)		(19,418	)
Income from discontinued operations	$	265,376		$	256,984

There was no income from discontinued operations for the three and six months ended July 1, 2012.

During the three and six months ended July 3, 2011, the Company recognized $14.1 million and $37.9 million, respectively, of restructuring expense as the Company terminated employees, closed several office locations, terminated certain contracts, discontinued various development projects and wrote off intangible assets and software due to the cancellation of development programs in connection with the exit of the external storage systems business. Further, the Company released $19.7 million of deferred tax liabilities related to tax deductible goodwill in connection with the sale of the external storage systems business during the three months ended July 3, 2011.

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Benefit Obligations (Tables)

6 Months Ended

Jul. 01, 2012

Benefit Obligations [Abstract]

Components of net periodic benefit cost/(credit)

	Three Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	116		$	20		$	141		$	21
Interest cost		15,483			643			16,929			621
Expected return on plan assets		(17,030	)		(856	)		(17,000	)		(1,033	)
Amortization of net actuarial loss, prior service cost and transition asset		3,693			490			1,699			85
Total benefit cost/(credit)	$	2,262		$	297		$	1,769		$	(306	)

	Six Months Ended
	July 1, 2012						July 3, 2011
	Pension Benefits			Post-retirement Benefits			Pension Benefits			Post-retirement Benefits
	(In thousands)
Service cost	$	225		$	45		$	275		$	38
Interest cost		30,735			1,293			33,779			1,246
Expected return on plan assets		(34,053	)		(1,906	)		(33,998	)		(2,065	)
Amortization of net actuarial loss, prior service cost and transition asset		7,162			990			3,385			177
Total benefit cost/(credit)	$	4,069		$	422		$	3,441		$	(604	)

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Cash Equivalents and Investments (Details 1) (USD $) In Thousands, unless otherwise specified	Jul. 01, 2012	Dec. 31, 2011
Short-term Debt [Member]
Company's available-for-sale securities
Available-for-sale Securities, Amortized Cost	$ 191,625	$ 147,209
Available-for-sale Securities, Gross Unrealized Gain	7,813	8,843
Available-for-sale Securities, Gross Unrealized Loss	(498)	(408)
Available-for-sale Securities, Fair Value	198,940	155,644
Asset-backed and mortgage-backed securities [Member]
Company's available-for-sale securities
Available-for-sale Securities, Amortized Cost	121,466	99,884
Available-for-sale Securities, Gross Unrealized Gain	6,764	7,891
Available-for-sale Securities, Gross Unrealized Loss	(492)	(378)
Available-for-sale Securities, Fair Value	127,738	107,397
U.S. government and agency securities [Member]
Company's available-for-sale securities
Available-for-sale Securities, Amortized Cost	56,542	35,179
Available-for-sale Securities, Gross Unrealized Gain	888	799
Available-for-sale Securities, Gross Unrealized Loss	(5)	(3)
Available-for-sale Securities, Fair Value	57,425	35,975
Corporate debt securities [Member]
Company's available-for-sale securities
Available-for-sale Securities, Amortized Cost	13,617	12,146
Available-for-sale Securities, Gross Unrealized Gain	161	153
Available-for-sale Securities, Gross Unrealized Loss	(1)	(27)
Available-for-sale Securities, Fair Value	13,777	12,272
Long-term marketable equity securities [Member]
Company's available-for-sale securities
Available-for-sale Equity Securities, Amortized Cost	669	669
Available-for-sale Securities, Gross Unrealized Gain	1,476	846
Available-for-sale Securities, Gross Unrealized Loss		(1)
Available-for-sale Securities, Fair Value	$ 2,145	$ 1,514

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Restructuring and Other Items (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Restructuring Cost and Reserve [Line Items]
Acquisition related costs			$ 8.4
Restructuring and Other Items (Textual) [Abstract]
Costs of transition service agreements	1.9	1.3	6.5	1.3
Property write down charges	2.4
Sales and use tax liability		14.5		14.5
Lease terminations [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring and Related Activities, Completion Date			Dec. 31, 2013
Employee severance and benefits [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring and Related Activities, Completion Date			Dec. 31, 2013
Sand Force acquisition [Member] | Other items, net [Member]
Restructuring Cost and Reserve [Line Items]
Acquisition related costs			$ 8.4

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Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jul. 03, 2011	Jul. 03, 2011
Condensed Consolidated Statements of Operations [Abstract]
Gain on sale of business	$ (260,066)	$ (260,066)

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Common Stock Repurchases

6 Months Ended

Jul. 01, 2012

Common Stock Repurchases/Comprehensive Income [Abstract]

Common Stock Repurchases

Note 3 — Common Stock Repurchases

On March 9, 2011, the Company’s board of directors authorized a stock repurchase program of up to $750.0 million of the Company’s common stock. As of July 1, 2012, $75.0 million remained available under this stock repurchase program. The Company repurchased 17.9 million shares for $138.0 million during the three months ended July 1, 2012 and 22.5 million shares for $176.2 million during the six months ended July 1, 2012. The Company repurchased 41.6 million shares for $300.0 million during the three months ended July 3, 2011 and 56.3 million shares for $396.8 million during the six months ended July 3, 2011. Repurchased shares are retired immediately after the repurchases are completed. Retirement of repurchased shares is recorded as a reduction of common stock and additional paid-in capital. On August 1, 2012, the Company’s board of directors authorized the repurchase of up to an additional $500.0 million of the Company’s common stock.

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Supplemental Financial Information (Details Texual) (USD $)	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Supplemental financial information (Textual) [Abstract]
Impairment of goodwill			$ 0	$ 0
Accumulated impairment losses	2,400,000,000		2,400,000,000
Income tax expense related to items of other comprehensive (loss)/income

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Cash Equivalents and Investments (Tables)

6 Months Ended

Jul. 01, 2012

Cash Equivalents and Investments [Abstract]

Company's cash equivalents and investments measured at fair value

	Fair Value Measurements as of July 1, 2012
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	310,545	(a)	$	—		$	310,545
U.S. government and agency securities		—			2,003	(b)		2,003
Total cash equivalents	$	310,545		$	2,003		$	312,548
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	124,603	(b)	$	124,603
Non-agency securities		—			3,135	(b)		3,135
U.S. government and agency securities		13,225	(a)		44,200	(b)		57,425
Corporate debt securities		—			13,777	(b)		13,777
Total short-term investments	$	13,225		$	185,715		$	198,940
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	2,145	(c)	$	—		$	2,145

	Fair Value Measurements as of December 31, 2011
	Level 1			Level 2			Total
	(In thousands)
Cash equivalents:
Money-market funds	$	674,219	(a)	$	—		$	674,219
Available-for-sale debt securities:
Asset-backed and mortgage-backed securities:
Agency securities	$	—		$	97,408	(b)	$	97,408
Non-agency securities		—			9,989	(b)		9,989
U.S. government and agency securities		5,403	(a)		30,572	(b)		35,975
Corporate debt securities		—			12,272	(b)		12,272
Total short-term investments	$	5,403		$	150,241		$	155,644
Long-term investments in equity securities:
Marketable available-for-sale equity securities	$	1,514	(c)	$	—		$	1,514

(a) The fair value of money-market funds is determined using unadjusted prices in active markets. The fair value of Level 1 U.S. government and agency securities is determined using quoted prices in active markets.

(b) These investments are traded less frequently than Level 1 securities and are valued using inputs that include quoted prices for similar assets in active markets and inputs other than quoted prices that are observable for the asset, such as interest rates, yield curves, prepayment speeds, collateral performance, broker/dealer quotes and indices that are observable at commonly quoted intervals.

(c) The fair value of marketable equity securities is determined using quoted market prices in active markets. These amounts are included within other assets in the condensed consolidated balance sheets.

Company's available-for-sale securities

	July 1, 2012
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	121,466	$	6,764	$	(492	)	$	127,738
U.S. government and agency securities		56,542		888		(5	)		57,425
Corporate debt securities		13,617		161		(1	)		13,777
Total short-term debt securities	$	191,625	$	7,813	$	(498	)	$	198,940
Long-term marketable equity securities	$	669	$	1,476	$	—		$	2,145

	December 31, 2011
	Amortized Cost		Gross  Unrealized Gain		Gross  Unrealized Loss			Fair Value
	(In thousands)
Short-term debt securities:
Asset-backed and mortgage-backed securities	$	99,884	$	7,891	$	(378	)	$	107,397
U.S. government and agency securities		35,179		799		(3	)		35,975
Corporate debt securities		12,146		153		(27	)		12,272
Total short-term debt securities	$	147,209	$	8,843	$	(408	)	$	155,644
Long-term marketable equity securities	$	669	$	846	$	(1	)	$	1,514

Gross unrealized losses and fair values of the Company's short-term investments

	July 1, 2012
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	33,176	$	(473	)	$	1,247	$	(19	)
U.S. government and agency securities		15,356		(5	)		—		—
Corporate debt securities		4,544		(1	)		503		—
Total	$	53,076	$	(479	)	$	1,750	$	(19	)

	December 31, 2011
	Less than 12 Months					Greater than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Asset-backed and mortgage-backed securities	$	10,645	$	(286	)	$	1,301	$	(92	)
U.S. government and agency securities		3,872		(3	)		—		—
Corporate debt securities		2,375		(27	)		505		—
Total	$	16,892	$	(316	)	$	1,806	$	(92	)

Contractual maturities of available-for-sale debt securities

	Available-For-Sale Debt Securities
	(In thousands)
Due within one year	$	27,998
Due in 1-5 years		47,794
Due in 5-10 years		10,015
Due after 10 years		113,133
Total	$	198,940

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Common Stock Repurchases (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jul. 01, 2012	Jul. 03, 2011	Jul. 01, 2012	Jul. 03, 2011
Common Stock Repurchases (Textual) [Abstract]
Date the Company's board of directors authorized a stock repurchase program			Mar. 09, 2011
Maximum amount authorized under stock repurchase program			$ 750.0
Value of shares remaining under stock repurchase program			75.0
Repurchase of shares, shares	17.9	41.6	22.5	56.3
Repurchase of shares, value	138.0	300.0	176.2	396.8
Date the Company's board of directors authorized an additional stock repurchase program	August 1,2012		August 1,2012
Additional repurchase of common stock, authorized amount			$ 500.0

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Commitments, Contingencies and Legal Matters

6 Months Ended

Jul. 01, 2012

Commitments, Contingencies and Legal Matters [Abstract]

Commitments, Contingencies and Legal Matters

Note 13 — Commitments, Contingencies and Legal Matters

Purchase Commitments

The Company maintains purchase commitments with certain suppliers, primarily for raw materials and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time horizon as mutually agreed upon between the parties. This forecasted time horizon can vary for different suppliers. As of July 1, 2012, the Company had purchase commitments of $446.7 million, which are due through 2016.

The Company has a take-or-pay agreement with SMP under which it has agreed to purchase 51% of the managed wafer capacity from SMP’s integrated circuit manufacturing facility, and GLOBALFOUNDRIES has agreed to purchase the remaining managed wafer capacity. SMP determines its managed wafer capacity each year based on forecasts provided by the Company and GLOBALFOUNDRIES. If the Company fails to purchase its required commitments, it will be required to pay SMP for the fixed costs associated with the unpurchased wafers. GLOBALFOUNDRIES is similarly obligated with respect to the wafers allotted to it. The agreement may be terminated by either party upon two years written notice. The agreement may also be terminated for material breach, bankruptcy or insolvency.

Guarantees

Product Warranties:

The following table sets forth a summary of changes in product warranties:

	Accrued Warranties
	(In thousands)
Balance as of December 31, 2011	$	6,334
Accruals for warranties issued during the period		868
Adjustments to pre-existing accruals (including changes in estimates)		(470	)
Warranty liabilities assumed in SandForce acquisition		426
Settlements made during the period (in cash or in kind)		(1,059	)
Balance as of July 1, 2012	$	6,099

Standby Letters of Credit:

The Company had outstanding obligations relating to standby letters of credit of $4.1 million and $3.5 million, respectively, as of July 1, 2012 and December 31, 2011. Standby letters of credit are financial guarantees provided by third parties for leases, customs and certain self-insured risks. If the guarantees are called, the Company must reimburse the provider of the guarantee. The fair value of the letters of credit approximates the contract amounts. The standby letters of credit generally renew annually.

Indemnifications

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party. These obligations arise primarily in connection with sales contracts, license agreements or agreements for the sale of assets, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of warranties, representations and covenants related to such matters as title to assets sold, validity of certain intellectual property rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by the Company is typically subject to the other party making a claim to and cooperating with the Company pursuant to the procedures specified in the particular contract. This usually allows the Company to challenge the other party’s claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, the Company’s obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration and/or amounts. In some instances, the Company may have recourse against third parties covering certain payments made by the Company.

Legal Matters

On December 6, 2006, Sony Ericsson Mobile Communications USA Inc. (“Sony Ericsson”) filed a lawsuit against Agere in Wake County Superior Court in North Carolina, alleging unfair and deceptive trade practices, fraud and negligent misrepresentation in connection with Agere’s engagement with Sony Ericsson to develop a wireless data card for personal computers. The complaint claimed an unspecified amount of damages and sought compensatory damages, treble damages and attorneys’ fees. In August, 2007, the case was dismissed for improper venue. On October 22, 2007, Sony Ericsson filed a lawsuit in the Supreme Court of the State of New York, New York County against LSI, raising substantially the same allegations and seeking substantially the same relief as the North Carolina proceeding. In January 2010, Sony Ericsson amended its complaint by adding claims for fraudulent concealment and gross negligence. On September 10, 2010, LSI filed a motion for summary judgment. On August 4, 2011, the court granted LSI’s motion and ordered the dismissal of all of Sony Ericsson’s claims. Sony Ericsson has appealed this decision. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to this matter.

On March 23, 2007, CIF Licensing, LLC, d/b/a GE Licensing (“GE”) filed a lawsuit against Agere in the United States District Court for the District of Delaware, asserting that Agere products infringe patents in a portfolio of patents GE acquired from Motorola. GE has asserted that four of the patents cover inventions relating to modems. GE is seeking monetary damages. Agere believes it has a number of defenses to the infringement claims in this action, including laches, exhaustion and its belief that it has a license to the patents. The court postponed hearing motions based on these defenses until after the trial, and did not allow Agere to present evidence on these defenses at trial. On February 17, 2009, the jury in this case returned a verdict finding that three of the four patents were invalid and that Agere products infringed the one patent found to be valid and awarding GE $7.6 million for infringement of that patent. The jury also found Agere’s infringement was willful, which means that the judge could increase the amount of damages up to three times its original amount. The court has not scheduled hearings on Agere’s post-trial motions related to its defenses. One of these motions seeks to have a mis-trial declared based on Agere’s belief that GE withheld evidence in discovery, which affected Agere’s ability to present evidence at trial. On October 6, 2010, a special master appointed by the court determined that GE’s actions were not wrongful and that the evidence withheld by GE was not material to the jury’s findings. Agere is challenging this determination. If the jury’s verdict is entered by the court, Agere would also expect to be required to pay interest from the date of infringing sales. If the verdict is entered, Agere intends to appeal the matter. On February 17, 2010, the court issued an order granting GE’s summary judgment motions seeking to bar Agere’s defenses of laches, exhaustion, and license and denying Agere’s summary judgment motions concerning the same defenses. On July 30, 2010, the court held that one of the patents found invalid by the jury was valid. The court also held that the February 17, 2010 order was not inconsistent with its previous ruling that Agere would be permitted to renew its laches, licensing, and exhaustion defenses, and that Agere has not been precluded from asserting them post-trial. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to this matter.

On December 1, 2010, Rambus Inc. (“Rambus”) filed a lawsuit against LSI in the United States District Court for the Northern District of California alleging that LSI products infringe one or more of 19 Rambus patents. These products contain either DDR-type memory controllers or certain high-speed SerDes peripheral interfaces, such as PCI Express interfaces and certain SATA and SAS interfaces. Rambus is seeking unspecified monetary damages, treble damages and costs, expenses and attorneys’ fees due to alleged willfulness, interest and permanent injunctive relief in this action. In addition, on December 1, 2010, Rambus filed an action with the International Trade Commission (“ITC”) against LSI and five of its customers alleging that LSI products infringe six of the 19 patents in the California case. Rambus also named five other companies and a number of their customers in the ITC action. Rambus sought an exclusionary order against LSI and its customers in the ITC action, which, if granted, would preclude LSI and its customers from selling these products in the U.S. The ITC held a hearing on the matter in October 2011. On March 2, 2012, an administrative law judge (“ALJ”) found that LSI infringed Rambus’ patents; however, the ALJ also found the patents invalid or unenforceable or both, and accordingly, found no violation of section 337 of the Tariff Act of 1930. On July 25, 2012, the ITC determined to terminate the investigation with a finding of no violation of section 337 of the Tariff Act of 1930. The ITC affirmed the ALJ’s conclusion that all of the asserted patent claims are invalid under 35 U.S.C. §102 or 103, except for certain asserted claims, for which they found that Rambus has not demonstrated infringement. The ITC reversed the ALJ’s determination that Rambus had demonstrated the existence of a domestic industry under 19 U.S.C. § 1337(a) for the asserted patents. The ITC affirmed the ALJ’s determination that certain patents are unenforceable under the doctrine of unclean hands. The lawsuit against LSI in the United States District Court for the Northern District of California is still pending. The Company is unable to estimate the possible loss or range of loss, if any, that may be incurred with respect to these proceedings.

In addition to the foregoing, the Company and its subsidiaries are parties to other litigation matters and claims in the normal course of business. The Company does not believe, based on currently available facts and circumstances, that the final outcome of these other matters, taken individually or as a whole, will have a material adverse effect on the Company’s consolidated results of operations or financial position. However, the pending unsettled lawsuits may involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to defend. From time to time, the Company may enter into confidential discussions regarding the potential settlement of such lawsuits. However, there can be no assurance that any such discussions will occur or will result in a settlement. Moreover, the settlement of any pending litigation could require the Company to incur substantial costs and, in the case of the settlement of any intellectual property proceeding against the Company, may require the Company to obtain a license to a third-party’s intellectual property that could require royalty payments in the future and the Company to grant a license to certain of its intellectual property to a third party under a cross-license agreement. The results of litigation are inherently uncertain, and material adverse outcomes are possible.

The Company has not provided accruals for any legal matters in its financial statements as potential losses for such matters are not considered probable and reasonably estimable. However, because such matters are subject to many uncertainties, the ultimate outcomes are not predictable, and there can be no assurances that the actual amounts required to satisfy any liabilities arising from the matters described above will not have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows.