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LSI’s Change Artist

Aritra Bhattacharya
Thursday, February 1, 2007
Aritra Bhattacharya
On December 4, 2006, LSI Logic announced its merger with Agere Systems, the erstwhile semiconductor unit of Lucent Technologies, in an all-stock transaction. Valued at approximately $4 billion, it was the biggest ever deal in the semiconductor space.
The merger bolstered Milpitas based LSI Logic Corporation’s position in a big way. All the while, while LSI focused on chips for managing disk drives and communications between computers and data-storage systems, Agere developed data-storage and generic chips used in networking devices and cell phones. The combined entity poses as a “formidable competitor” across all parts of the data-storage, networking and consumer electronics market.

Steering the mega-merger was Abhi Talwalkar, successor to Wilfred Corrigan, the founder of LSI. Corrigan made way for Talwalkar in May 2005 at a time when the going was not too good: LSI Logic had reported GAAP losses of $464 million for 2004, and rumors were rife in the industry circles of the company staring down the barrel.

In 18 months since he took over, Talwalkar has scripted a phenomenal turnaround for the longtime ASIC company. Among key decisions, he has redirected R&D from non-core areas and reduced associated selling, general and administrative expenditures. As a result, some of the old platforms like RapidChip have been phased out, and the company has moved into a fabless mode. The narrowing of its end market focus has given birth to a market-leaning unit prepared to seize the day. Looking ahead, the merged LSI Logic Corporation will focus on franchises in the growth market—in the networking space and the mobility and consumer arena.

Cajole, Communicate, Conquer
For Talwalkar, the most satisfying part of getting LSI back in business has been building a management team that shares ‘a high chemistry’ and is attuned to his vision for the company. Quite a bit of it is done through infusing fresh blood at the upper echelons, as was necessary; much of the erstwhile LSI management knew how to drive operational expertise around a service but the re-emergent LSI needed ‘leaders from the market place’—ones who had the experience and skills in building franchise within focused markets.
“That’s why we brought in people from outside and also elevated certain individuals who demonstrated such expertise in their respective product lines,” notes the CEO. While these changes were taking place at the top, insecurity and suspicion was imperative among the lower cadres.

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