LSI Agrees To Sell External Storage Systems Unit To NetApp For $480 Million

LSI Corp. (LSI) agreed to sell its external storage systems business to NetApp Inc. (NTAP) for $480 million, as the storage-chip maker also said its board authorized a new stock-repurchase program of up to $750 million.

Under the terms of the all-cash deal, data-storage company NetApp will purchase substantially all of the assets of LSI's external storage systems business, which develops and delivers Engenio external storage system products and technologies. The business being purchased generated $705 million in revenue last year.

LSI's RAID adapter business, which develops storage controllers and software for direct-attached storage environments, will remain with LSI. LSI said upon closing, most LSI external storage systems employees are expected to join NetApp. NetApp President and Chief Executive Tom Georgens said the deal will expand the company's market reach.

For its part, LSI said it moved to sell the business so it could focus on becoming a pure-play semiconductor company, a strategy LSI said can maximize long-term shareholder value.

LSI has returned to the black in recent quarters after a string of losses on a rebound in business spending on information technology. The company has gone through a transformation in recent years, turning itself from a diversified chip maker with handset and manufacturing operations, and now focuses on pure-play storage and networking semiconductors.

Shares of LSI closed down 1.9% to $6.13 and were inactive in after-hours trading. NetApp's shares were down 0.3% at $51.40 after hours.

-By John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]