MILPITAS, Calif. -- LSI Logic Corp. said its communications chips and storage systems were in stronger demand than expected during the first quarter of fiscal 2000, driving revenue to a record $615 million -- up 33% compared with the first quarter of fiscal 1999.
Although the chip maker was not held back by capacity constraints, it is ramping its Gresham, Ore., IC-wafer factory ahead of schedule to meet accelerating bookings that are already stretching into the third quarter, said Wilf Corrigan, president and chief executive of the Milpitas company.
"Late last year, we forecast quarter-to-quarter revenue growth in the range of 6% to 8%," Corrigan said in conference call to analysts on Tuesday. "We're now comfortable that we'll see 8% to 10% growth sequentially."
This growth will come less as a result of price inflation on newer products than from the sheer volume of product being shipped, he added.
"About the middle of Q1, it really s unk in that business is strong, and there isn't any Y2K effect," Corrigan said. "We're in an unusually strong period in the semiconductor industry, and it looks to us like it will have a lot of legs to it."
Net income before goodwill and other special items was $88 million, or 26 cents per diluted share, compared with $11.2 million, or 4 cents per share in the same quarter a year ago. Diluted per-share earnings were adjusted to reflect last February's two-for-one common stock split.
The company's higher profits reflect increased revenue, improved gross margin and declining operating expenses, the company said. Gross margins in the first quarter were 42.4%, while operating expenses declined to 24.5% of revenue.
Despite its accelerated factory build-out, LSI is sticking to its earlier target of 48% gross profit margin, and 20% operating margin by the end of 2000. The company's capital spending budget remains at $450 million for the year.
Communications products continued to be the primary r evenue driver, with broadband and networking devices each growing 50% sequentially, although LSI declined to quantify the product segments in terms of dollars. As a whole, communications -- composed of broadband, networking, set-top box decoders, and wireless products -- is still expected to grow 60% over the full year.
LSI also increased its communications venture fund to $75 million, using a $25 million one-time gain from past investments.