|Welcome to the presentation for LSI Logic Corporation. With me here today is Phil Brace, Senior Vice President for the company.
|A quick update on the transaction overview. On December 4th, we announced the intent to merge with Agere Systems. Im not going to go through this specifically. A couple of key highlights of the terms of the deal, a strategic rationale, and then some updates on the progress in terms of what weve been making.
|I think thatwe looked at a stock-for-stock transaction ___ at the time of about $4 billion. The strategic rationale for that, you see, is really around three areas meant(?) to grow our revenue businesses, really extend our footprint in the industry via scale, and improve our financial position. In a second Ill talk about some of the metrics that we use to judge success there. I think one of the key elements is we have progress we made, scheduled the shareholder vote for March 29, 2007, and expect to close the transaction shortly thereafter.
|At the time, we also announced a stock repurchase program, a $500 million stock repurchase. Its our intent to actually exercise the majority of that within 12 months, subject to market conditions and what sort of regulatory restrictions we have in terms of our ability to get in the market. But that is a strong commitment, I think, of our goal and desire to continue to increase shareholder value. And if we look out in time, our position and our cash flow capability of the business certainly gives us the opportunity to look at a number of alternatives, including continued share repurchases.
|Ill mention quickly the strategic rationale for the combination grow our revenue engines. Clearly in storage, the combination gives us the opportunity to really grow within and beyond the enterprise. The product lines, mostly in storage, are extremely complementary between Agere and LSI. LSI is
|predominantly in the enterprise space. We dont have a lot of presence outside of the enterprise. Agere is not in the enterprise today, so we have a number of not only integration opportunities but cross-selling opportunities to expand our footprint in numerous segments of the market going forward.
|The networking space really gives us the opportunity to combine our businesses there. Agere is much more of a standard products business, where historically LSIs business has predominantly been a custom silicon capability. The opportunity to combine some of that high-speed signal expertise and connection capability, we believe that weve got an opportunity to build a second franchise business in that space.
|And then mobility and entertainment CE(?). Really these are looking at opportunities to expand, if we can, from the strong base that both have there. Really the mobility business from Agere is very strong and the GPRS(?) Edge space, particularly Samsung, theyve got a very good position with a tier 1 customer there, and certainly our focus is at least to continue to win and grow that business and have it deliver shareholder value. Im sure youll have some questions about that when we get into the Q&A portion. Ill be happy to answer that going forward.
|If we look at extending our customer base, really one of the things this allows us to do in our focused markets storage and networking are good examples really allows us to increase and focus our R&D in areas that deliver more value to our key customers. And I think the customer response of the proposed merger has been exceptionally positive. I get asked in terms of, what are some of the biggest challenges you have? Shorter term, one of the biggest challenges we had is ourthe customers desire to have us operate as a combined company sooner than were able to do so, and so that represents some good opportunity in terms of revenue potential as we go out in time.
|We look at our patent portfolio, and I think youll have north of 10,000 issued and pending US patents combined. We look forward to the opportunity for combining the LSI patents along with the Agere patents to put that into a more revenue-generating mode, similar to what Agere has done in the past. And we think that the combined engineer base of over 4200 engineers is a significant innovation for us going forward.
|From a financial perspective, we think this gives us the opportunity to have multiple revenue streams and markets that have sustainable, competitive advantage. We think the synergies of $125 million a year are very achievable,
|2008 number, what we expect to achieve in 2008, and we expect this to be meaningfully accretive to our non-GAAP EPS in 2008.
|If we look at where we are from an update perspective, on the 4th of December, 2006, we announced the merger. The 18th we actually clearedor we submitted our US antitrust filing. The 22nd we filed the preliminary joint proxy. The 17th of January, the applicable waiting period, expired without any US antitrust authorities raising any objection to the merger. On the 5th of February, we filed the S-4 and the proxy. We scheduled our shareholder vote on March 29th, and we expect to close the transaction very shortly thereafter. The management team, certainly in this quarter, is spending a lot of time working with some of the employees, working through the organization issues, spending a lot of time back and forth both in Allentown and Milpitas, to get that done. You may have seen some of the filings where Abhi has announced his go-forward leadership team, and we continue to look at building the organization in a way thats going to be the most successful for the company going forward.