UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

December 31, 2011 For the Fiscal Year Ended December 31, 20112013

OR

For the transition period from              to             .

Commission File No. 1-10317

LSI CORPORATION

(Exact name of registrant as specified in its charter)

1621 Barber Lane1320 Ridder Park Drive

Milpitas,San Jose, California 9503595131

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(408) 433-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ      No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨      No  þ

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

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):

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of July 3, 2011June 30, 2013 was approximately $4.1$3.9 billion, based on the reported last sale price on the New YorkThe NASDAQ Stock ExchangeMarket of such equity on the last business day of the fiscal quarter ending on such date.

As of February 22, 2012, 566,775,84519, 2014, 558,329,719 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

CertainUnless provided in an amendment to this Annual Report on Form 10-K, the information required by Part III of this report is incorporated by reference fromto the registrant’s proxy statement to be filed pursuant to Regulation 14A, with respect to the registrant’s 20122014 annual meeting of stockholders.

LSI Corporation

Form 10-K

For the Year Ended December 31, 20112013

Index

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 I, Item 1A-“Risk Factors” a number of factors thatFactors which could cause our actual results to differ materially from those projected or contemplated in any such forward-looking statements include, but are not limited to, the following factors: (1) the risk that the conditions to the proposed transactions contemplated by the Agreement and Plan of Merger, by and among us, Avago Technologies Limited, Avago Technologies Wireless (U.S.A.) Manufacturing Inc., and Leopold Merger Sub, Inc., pursuant to which, subject to certain conditions, Leopold Merger Sub will merge with and into us, are not satisfied (including a failure of our projectionsstockholders to approve, on a timely basis or estimates.otherwise, the merger and the risk that regulatory approvals required for the merger, including clearance from the Committee on Foreign Investment in the United States, are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated);

(2) litigation relating to the merger; (3) uncertainties as to the timing of the consummation of the merger and the ability of each of us and Avago to consummate the merger; (4) risks that the proposed transaction disrupts our current plans and operations; (5) our ability to retain and hire key personnel; (6) competitive responses to the proposed merger; (7) unexpected costs, charges or expenses resulting from the merger; (8) the failure by Avago to obtain the necessary debt financing arrangements set forth in the commitment letters received in connection with the signing of the merger agreement; (9) potential adverse reactions or changes to business relationships resulting from the announcement of the merger; and (10) legislative, regulatory and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein, including the risk factors included in the subsection entitled “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. We can give no assurance that the conditions to the merger will be satisfied. Except as required by applicable law, we undertake no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. 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.

LSI, LSI & Design logo, 3ware, Axxia, Fusion-MPT, MegaRAID, Tarari,Nytro, SandForce, Syncro, TrueStore, Virtual Pipeline and WarpDrive Fusion-MPT, 3ware and Axxia are trademarks or registered trademarks of LSI Corporation. All other brand or product names may be trademarks or registered trademarks of their respective companies.

PART I

General

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.property to other entities.

Integrated circuits, also called semiconductors or chips, are made using semiconductor wafers imprinted with a network of electronic components. They are designed to perform various functions such as processing electronic signals, controlling electronic system functions and processing and storing data. We provide products for leading original equipment manufacturer,manufacturers, or OEM, companies,OEMs, in the server, storage and networking industries. We also sell some of our products through a network of resellers and distributors.

You can find segment financial information and geographic financial information in Note 11 to our financial statements in Item 8 of Part II, which information is incorporated herein by reference. See Item 1A — “Risk Factors” for information about risks we face as a result of our operations outside the United States, which information is also incorporated herein by reference.

Recent Developments

In May 2011,On December 15, 2013, we sold our external storage systems business, which designedentered into an Agreement and sold entry-levelPlan of Merger by and mid-range storage systems to OEMsamong us, Avago Technologies Limited, Avago Technologies Wireless (U.S.A.) Manufacturing Inc., and channel customers. By selling that business, we areLeopold Merger Sub, Inc., providing for the merger of Leopold Merger Sub with and into us, with LSI surviving the merger as an indirect wholly owned subsidiary of Avago. The merger will only be able to focusbe consummated after our developmentstockholders have adopted the merger agreement and sales effortsfollowing the satisfaction or waiver of a number of conditions set forth in the merger agreement. If the merger is completed, each outstanding share of our common stock (except for shares of common stock held in treasury immediately prior to the effective time of the merger, shares owned by Avago USA or Leopold Merger Sub and shares owned by our stockholders who have properly demanded appraisal rights) will be converted into the right to receive $11.15 in cash, without interest, less any required tax withholding.

The respective obligations of us, Avago USA and Leopold Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including (i) the adoption of the merger agreement by our stockholders, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, (iii) the receipt of affirmative approval or clearance required under the antitrust laws of the People’s Republic of China, the Russian Federation and the Federal Republic of Germany, (iv) the absence of any restraining orders, injunctions or other legal restraints prohibiting or preventing the merger, (v) the accuracy of the representations and warranties of the parties, and (vi) compliance by the parties with their respective obligations under the merger agreement. The obligation of Avago USA and Leopold Merger Sub to consummate the merger is also subject to (i) the absence of any event, change or occurrence that has had, individually or in the aggregate, a material adverse effect on our semiconductor businessus, as defined and believedescribed in the merger agreement, and (ii) either (a) the receipt of written notice by the parties that storage OEMsa determination by the Committee on Foreign Investment in the United States, or CFIUS, has been made that there are no unresolved issues of national security in connection with which we may have competed may now be more willingthe transactions contemplated by the merger agreement, or (b) a determination by the President of the United States not to buy our semiconductor products.take any action under the Defense Protection Act of 1950.

On January 3, 2012,17, 2014, the Bundeskartellamt (Federal Cartel Office) of the Federal Republic of Germany approved the merger and on January 29, 2014, the Federal Antimonopoly Service of the Russian Federation approved the merger.

Sixteen purported class action complaints have been filed by alleged stockholders of LSI against us, our individual directors, and, in fifteen of the cases, against Avago. Nine lawsuits were filed in the Delaware Court of Chancery and the seven other lawsuits were filed in the Superior Court of the State of California, County of Santa Clara. The Delaware Court of Chancery has entered an order consolidating the Delaware actions into a single action. These actions generally allege that the members of our board of directors breached their fiduciary duties in connection with the merger because the merger was not in the best interest of the company, the merger consideration is unfair, and certain other terms of the merger agreement are unfair. Among other remedies, the lawsuits seek to enjoin the merger, or in the event that an injunction is not entered and the merger closes, to rescind the merger or obtain unspecified money damages, costs and attorneys’ fees. We and our board of directors believe these claims are entirely without merit, and intend to vigorously defend these actions.

We expect to close the merger during the first half of 2014. Following completion of the merger, we acquired SandForce, Inc.,will become a providerwholly owned subsidiary of flash storage processors, or FSPs, for enterpriseAvago, our common stock will be delisted from The NASDAQ Stock Market and client flash solutionsderegistered under the Securities Exchange Act of 1934, and solid state drives, or SSDs.as such, we will no longer file periodic reports with the Securities and Exchange Commission.

Company Information

We were incorporated in California on November 6, 1980 and reincorporated in Delaware on June 11, 1987.

We maintain an Internet website atwww.lsi.com. We make available free of charge on our website our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission. You can read any materials that we file with the Commission at the Commission’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at (800) 732-0330. Information on our website is not incorporated by reference into this report.

Products

STORAGE PRODUCTS

Our storage products enable secure movement of digital data to and from host machines such as servers, personal computers and storage systems to the underlying storage devices such as hard disk drives, tape drives and flash solutions.solid state drives. Our storage products can be embedded in storage devices, host computers or adapters and in switches, which move data on a storage area network, or SAN.

Our storage product portfolio includes:

In 2011, 20102013, 2012 and 2009,2011, we had $1,847 million, $1,994 million and $1,487 million $1,302 million and $1,133 million of revenuerevenues from sales of our storage semiconductor products representing approximately 72.7%77.9%, 69.6%79.6% and 71.9%72.7% of our total revenues.

Hard Disk and Tape Drive Electronics

We sell integrated circuits for hard disk drives and tape drive solutionsdrives that are used to store and retrieve data in personal computers, corporate network servers, archive/back-up devices and consumer electronics products such

as digital video recorders, game consoles and external storage devices. A hard disk drive, or HDD, contains physical media, one or more “platters” that store data, a motor that spins the media, drive heads that read data from and write data to the media and electronics that process the data and control the disk drive. Tape drives store data on magnetic tape and provide a high-capacity, cost-effective tiered data storage back-up solution.

Our TrueStore^® family of storage electronics products includes systems-on-a-chip, or SoCs, read channels, pre-amplifiers, serial physical interfaces and hard disk controllers as well as custom firmware. These are the critical chips required to read, write and protect data. An SoC is an integrated circuit that combines the functionality of a read channel, serial interface, memory and a hard disk controller in a small, high-performance, low-power and cost-effective package. Read channels convert analog signals that are generated by reading the stored data on the physical media into digital signals. We also sell pre-amplifiers, or preamps, which are used to amplify the initial signal to and from the drive disk heads so the signal can be processed by the read channel. We provide similar technology for tape drives. Our hard disk controllers are used to control signal processing and communications functions within the disk drive.

In 2013, we introduced our TrueStore PA5200 series of preamplifiers that enable HDD designers to increase areal density, delivering greater storage within each square inch of disk surface. The superior noise performance of the PA5200 provides signal-to-noise ratio gains that can be leveraged by HDD manufacturers to achieve greater manufacturing yield resulting in lower manufacturing costs. In addition, these preamplifiers are designed such that a common chip can be deployed by HDD manufacturers across all major hard disk applications leading to lower development costs, simplified inventory management and accelerated time-to-market.

Flash Storage Applications

Flash, or solid state memory, stores data in non-volatile semiconductors that retain data even when power is switched off. Storage devices using flash memory can typically store and retrieve data faster than hard disk drives, but cost more than hard disk drives with the same capacity. As a result of its speed advantage, flash-based storage has become a fast growing storage medium, especially for applications that can benefit from very fast access to data such as mission critical enterprise applications, as well as consumer products such as laptops. We address this market opportunity with custom and standard FSPsproduct flash storage processors as well as PCIe^® based SSDflash adapters.

Flash Storage Processors.    AnA solid state drive, or SSD, stores data in flash memory instead of on a hard disk, providing high speed access to the data. SSDs use FSPs toFlash storage processors manage the underlying flash memory in SSDs, performing critical functions such as reading and writing data to and from the flash chipsmemory and performing error correction, wear leveling and bad block management.

In 2011,2013, we began sellingintroduced our WarpDrive^® PCIe-based solution.third generation flash storage processors, the LSI SandForce SF3700 flash controller family. The SF3700 family supports both native PCIe and SATA host interfaces in a single device. This product, whichcapability simplifies SSD designs and helps to significantly reduce development and manufacturing costs for SSD developers, as well as offering a solution that is an extension of our existing adapterthree times faster than prior SATA-based solutions.

PCIe Flash Adapters.    These products incorporates flash memoryallow servers and our FSPs, SAS controller chips and software on an industry-standard size adapter board. The product allowsstorage systems to store frequently-used data to be stored in flash memory, allowing for faster access and better performance for that data than if it had been stored on a traditional hard disk, and isare aimed at the Webweb serving, data warehousing, data mining, online transaction processing and high-performance computing fields. Our PCIe flash adapters are an extension of our existing adapter products, incorporating flash memory, FSPs, SAS controller chips and software on an industry-standard size adapter board.

Our Nytro™ family of products expands upon our existing PCIe-based solution and allows us to offer a full range of enterprise application acceleration solutions. The Nytro family adds caching and RAID, or redundant array of independent disk, protection to our WarpDrive^® offerings, making it the first product to incorporate flash memory onto an industry standard RAID adapter board. These products address high capacity flash used for primary storage where the entire application resides in flash. Nytro XD addresses mid-capacity flash with seamless caching and acceleration in shared storage environments where primary storage remains on low cost

HDDs and our caching software identifies and stores frequently used data onto flash. Nytro MegaRAID^® addresses low capacity flash in lower cost direct attached storage environments where primary storage consists of RAID protected hard disks directly connected to a server and onboard caching software identifies and stores frequently used data onto flash.

In 2013, we extended our Nytro portfolio of PCIe flash cards to include the Nytro XP6200 series, targeted at the large and fast growing hyperscale cloud datacenter market segment. The Nytro XP6200 series provides hyperscale cloud datacenters with accelerated performance for read-intensive applications, optimized power and heat dissipation, and an overall lower cost per gigabyte PCIe flash solution. The Nytro XP6200 series requires up to 30 percent less power than existing Nytro flash cards.

Server Storage Connectivity Products

We also offer solutions that enable data transmission between a host computer, such as a server, and storage peripheral devices, such as hard disk, solid state and optical disk drives and disk and tape-based storage systems. Some of these solutions are delivered as stand-alone semiconductors. Other solutions are delivered as circuit boards, known as adapter products, which incorporate our semiconductors onto a circuit board with other features. These products include:

Server Storage Semiconductor Products.    Our product line includes integrated circuits such as input/output controllers and RAID-on-Chip integrated circuits, or ROCs, that support the SAS, SATA and PCIe protocol

standards combined with our Fusion-MPT^™Fusion-MPT™ firmware and drivers to form intelligent storage interface solutions primarily for server, workstation and storage systems motherboard applications. Additionally, our product line includes SAS and SATA bus expander integrated circuits, SAS switches and disk drive bridging or interposer circuits used primarily in storage systems. The majority of our SAS products in production during 20112013 supported the 3 and 6 gigabits per second SAS standards. In 2011, we started sampling the next generation of SAS products which will support the 12 gigabits per second standard.

Server RAID Adapters and Software.    We offer a variety of direct-attach RAID solutions as part of our MegaRAID^® and 3ware^® product families, which store data using multiple drives and various data replication strategies to minimize the impact of the failure of any one drive. Our MegaRAID and 3ware products include single-chip RAID-on-motherboard solutions, a broad family of PCIe RAID controller boards featuring SAS and SATA interfaces, and software-only RAID products for entry level RAID data protection. All of these solutions utilize our fully featured RAID software and management utilities for robust storage configuration and deployment. In addition to the OEM channel, we offer MegaRAID and 3ware branded products through a network of distributors and resellers.

Our Syncro™ products are designed to allow multiple servers to share storage. Our Syncro CS offerings provide small and medium size enterprises with redundancy for mission critical applications by allowing servers to share storage, allowing increased application uptime and availability without the cost and complexity of traditional high availability solutions. In 2013, we started Syncro shipments to our channel and OEM customers.

In 2013, we introduced RAID-on-Chip solutions, I/O controller solutions, host bus adapters and expanders based on the next generation of SAS technology, 12 gigabits per second SAS, which is designed to enable double the data transfer rate of six gigabits per second SAS technology.

Custom Storage Solutions

We also offer custom solutions to customers who develop Fibre Channel and Fibre Channel over Ethernet SAN switches and host bus adapters, storage systems, hard disk drives and tape peripherals. We have developed a full portfolio of high-speed interface intellectual property that we combine with our customers’ intellectual property to form custom solutions that provide a connection to the SAN, memory systems and host buses. Using these pre-verified interfaces, we believe our customers can reduce development risk and achieve quicker time to market. Our intellectual property offerings include high performance SerDes cores supporting Fibre Channel, SAS, SATA, 10-Gigabit Ethernet, Gigabit Ethernet, Infiniband^®, SAS, Serial RapidIO^® and PCIe industry standards and a family of high-performance Fibre Channel, Ethernet, RapidIO, PCIe, SAS and SATA protocol

controllers. In 2013, we introduced our next generation of SerDes technology, our 28-Gigabit SerDes transceiver, which can support serial data rates up to 28 gigabits per second. This solution will enable next-generation datacenters to keep up with networking workload demands at an affordable cost.

NETWORKING PRODUCTS

We offer networking products principally targeting the wireless infrastructure, enterprise and data center markets. Our solutions allow service providers and enterprises to accelerate data and deliver differentiated communications services over mobile broadband and packet-based networks. Our networking solutions are designed to enable wireless and Internet Protocol, or IP, networks to provide reliability similar to that of traditional circuit-based networks by incorporating quality-of-service features which enable data intensive applications such as streaming video.

We design and sell enterprise networking devices for applications such as Ethernet switches and routers. Our networking portfolio also includes solutions for multi-service wired and wireless access systems found in carrier networks, as well as solutions typically used in small office, home office and small-to-medium business applications. We also design and sell enterprise networking devices for applications such as Ethernet switches and routers. Our networking solutions include communication processors, network processors, media processors, content-inspection processors and physical layer devices, as well as software tools and segment specific applications, evaluation systems and reference designs.

We offer both custom and standard networking product solutions to meet the needs of our broad customer base.customers. Our custom networking products are developed for a specific application defined by the customer while our standard networking products are developed for market applications that we define and then sell to multiple customers.

In 2011, 20102013, 2012 and 2009,2011, we had $398 million, $407 million and $454 million $473 million and $385 million of revenuerevenues from sales of our networking semiconductor products representing approximately 22.2%16.8%, 25.3%16.2% and 24.4%22.2% of our total revenues.

Custom Networking Products

These integrated circuits incorporate our intellectual property or combine our intellectual property with the intellectual property of our customers or other third parties to create a customized solution for these customers.

For some customers, we design and manufacture the integrated circuit while the key intellectual property belongs solely to our customers. Our 28nm silicon platform with anmost technically advanced design methodology offersplatforms offer power savings at increased density and higher performance. This platform allowsThese platforms allow our wireless infrastructure and enterprise networking customers to meet performance demands while simultaneously reducing product and cooling costs.

Communication Processors and Network Processors

Communication processors handle the setup and operation of a network. Network processors are typically used in switching and routing systems to classify, prioritize and forward packets as they move through a carrier’s network. We offer communication processors and network processors with the ability to handle a range of data rates. We believe doing so gives customers the ability to re-use software applications across our product line, thereby reducing cost and time-to-market.

In 2011, we introduced theCommunication processors in our Axxia^® Communications Processor, which providesfamily of products provide packet processing, traffic management, deep packet inspection and security capabilities, and is aimed at wireless network access systems and enterprise gateways. We offer a family of Axxia products with different price-points and throughput capabilities to meet various carrier requirements. We offer network processors that can be used in a variety of locations in a carrier’s network, from low-bandwidth locations, such as between an end-customer and the carrier’s central office, to high-bandwidth locations such as the core of the carrier’s network.

In 2013, we introduced two new Axxia communications processor product families, the Axxia 4500 and the Axxia 5500 series communication processors, both incorporating low power ARM cores. The Axxia 4500 series of products is our first ARM technology-based communication processor family designed for enterprise and datacenter networking applications as well as evolving Software Defined Networks. By combining LSI networking accelerators and Virtual Pipeline™ technology with ARM’s power-efficient cores and scalable

interconnect, the new Axxia processors are specifically designed to address the performance challenges facing next-generation networks. The Axxia 5500 product family of communication processors is designed to accelerate performance and increase power efficiency for multi-radio base stations and 4G/LTE-capable wireless networks. The Axxia 5500 product family is the first processor family to combine 16 ARM cores with our specialized networking accelerators to optimize performance and power efficiency. The Axxia 5500 product family allows networking service providers enhanced intelligent wireless capabilities through base stations, cell site routers, gateways and mobile backhaul equipment.

Media Processors

Media processors use digital signal processing technology and perform advanced algorithms on analog signals that have been transformed into digitally-encoded bitstreams. Our media processors perform audio, video and speech signal processing, compression, transcoding and transrating and can be used in applications including Voice-over-IP, or VoIP, communications, business and enterprise gateways, access routers, video delivery, media gateways and wired and wireless access network equipment.

Content Inspection Processors

We offer a family of content inspection processors, which are available as integrated circuits, boards and software acceleration components designed for network equipment, appliance and server vendors. Our Tarari^® content inspection processors perform deep packet inspection at wire speeds, ranging from 100 megabits per second to over 10 gigabits per second. These products offload and accelerate applications such as anti-virus, anti-spam, intrusion prevention/detection systems, compliance, content-based routing and XML processing.

Multi-Service Processors

In addition to the networking products described above, we offer integrated circuits and supporting software designed for equipment used in access, metropolitan and wide-area backbone telecommunications and packet networks. Our products can be used in equipment in both wired and wireless networks to aggregate and manage voice and data traffic.

Personal Connectivity Solutions

We sell high speed input/output products that transfer data within and between computers, peripheral equipment, such as printers, scanners and digital cameras, and data networks. Our products, which support established connectivity and transmission standards known as Gigabit Ethernet, IEEE^®1394, and Universal Serial Bus or USB, are sold primarily to manufacturers of computers, peripheral equipment and communications equipment. In addition, we sell integrated circuits and associated software for analog modem and firewireIEEE 1394 products, primarily to manufacturers of personal computers, notebook computers, point-of-sale terminals, facsimile machines, multi-function printers, cable and satellite set-top boxes and other electronic equipment.

Marketing and Distribution

The semiconductor industry is highly competitive and is characterized by rapidly changing technology. Our marketing strategy requires that we forecast trends in the evolution of products and technology. We must then act upon this knowledge in a timely manner to develop competitively priced products offering superior features, performance or levels of integration.

Our products are sold primarily to OEM customers through our network of direct sales, marketing and field engineering offices located in North America, Europe, Japan and elsewhere in Asia. We also work with independent industrial and commercial distributors and manufacturers’ representatives or other channel partners in North America, Europe, Japan and elsewhere in Asia. Some of our distributors possess engineering capabilities, and design and purchase both custom solutions and standard products from us for resale to their customers. Other distributors focus solely on the sale of standard products.

Our marketing efforts support our OEM customers, as well as our distributors and reseller channels, with programs targeted at developing differentiated go-to-market strategies and increasing sales effectiveness. Depending on the nature of our channel customer engagement, our marketing teams offer various levels of assistance in assessing and analyzing the competitive landscape, defining product strategy and roadmaps, developing product positioning and pricing, creating product launch support materials and closing sales. These marketing teams carefully coordinate joint product development and marketing efforts with our customers to ensure that we address and effectively target enterprise requirements. We maintain sales and marketing organizations in the United States and internationally in Canada, China, Germany, Italy, Japan, Singapore, Sweden, Taiwan and the United Kingdom.

Customers

In 2011,2013, Seagate Technology accounted for approximately 25.0%25% of our total revenue.revenues. No other customer accounted for more than 10% of our total revenuerevenues in 2011.2013. We currently have a highly concentrated customer base as a result of our strategy to focus our marketing and sales efforts on select, large-volume customers. Our top 10 end customers in 2011,2013, based on revenue,revenues, accounted for approximately 61.9%63% of our revenue.revenues. We typically sell products pursuant to purchase orders that customers can generally cancel, change or defer up to a specified point in time without incurring a significant penalty. While we may have contracts with customers that outline general terms and conditions, we do not typically have contracts that commit our customers to buy specified quantities of products from us. The loss of any of our significant customers, any substantial decline in sales to these customers, or any significant change in the timing or volume of purchases by these customers could result in substantially lower revenues and could materially harm our business, financial condition and results of operations.

Manufacturing

The semiconductor manufacturing process begins with wafer fabrication, where a design is transferred to silicon wafers through a series of processes, including photolithography, ion implantation, deposition of numerous films and the etching of these various films and layers. Each circuit on the wafer is tested in the wafer sort operation. The good circuits are identified and the wafer is then separated into individual die. Each good die is then assembled into a package that encapsulates the integrated circuit for protection and allows for electrical connection to a printed circuit board. The final step in the manufacturing process is final test, where the finished devices undergo stringent and comprehensive testing.

Wafer fabrication is very complex and costly, and the industry trend has been towards outsourcing all or a portion of this operation to silicon foundries located throughout the world. Our wafer fabrication is performed by third-party foundries, including Taiwan Semiconductor Manufacturing Corporation, our primary foundry partner, and other foundries such as IBMInternational Business Machines Corporation and Silicon Manufacturing Partners, a joint venture owned by us and GLOBALFOUNDRIES. We also use third-party suppliers, including STATS ChipPAC, Siliconware Precision Industries and Amkor Technology, to perform final assembly and test operations for us.

We believe that using third-party manufacturing services allows us to focus on product development and increases our operational flexibility by improving our ability to adjust manufacturing capacity in response to customer demand and to introduce new products rapidly. It also reduces our capital requirements as we do not need to spend large amounts to build and upgrade manufacturing facilities, particularly in the area of wafer fabrication, where facilities must be upgraded periodically and each upgrade tends to cost significantly more than the preceding upgrade.

Our board-level products incorporate a variety of standard industry components and LSI-designed components, mounted on printed circuit board assemblies. The manufacturing, assembly and test operations for these products are all fully outsourced to third-party suppliers to take advantage of the scale, quality and cost benefits afforded by third-party manufacturing services. Our RAID serveradapter, Nytro PCIe flash adapter and interposer boards are produced in configurations ranging from bulk packaging of multiple units sold to major server and workstation OEMs, to individual products for indirect channels featuring retail packaging with software media, documentation and interconnect cables. LSI’s adapters are shipped from our third-party suppliers to our worldwide inventory hubs, directly to OEM factories, or to distributors who supply them to a variety of indirect channels in the market.

Backlog

We generally do not have long-term volume purchase contracts with our customers. Instead, the majority of our customers place purchase orders that are subject to acceptance by us. With our integrated circuit products, there could be a significant time lag between our commencement of design work and the receipt of a purchase

order and resulting revenue. Lead times for delivery of our board-level products are relatively short, meaning we must build products in advance of orders which subjects us to certain risks, most notably the possibility that expected sales will not materialize, thereby leading to excess inventory that we may be unable to sell to our customers. Also, customers may from time to time revise delivery quantities or delivery schedules to reflect their changing needs. For these reasons, we do not believe that our backlog as of any particular date is a meaningful indicator of future annual sales.

Competition

The semiconductor industry is intensely competitive and characterized by continuing technological change, rapid product obsolescence, evolving industry standards and price erosion. Some of our competitors are larger, diversified companies with substantially greater financial resources than us. Some of our competitors are also customers of ours whocompanies that make products for which we could supply parts have internal semiconductor design capacity who mustproduct development capability and may choose whether to develop products internally orrather than obtain them from companies such as LSI. We also compete with smaller and emerging companies whose strategy is to sell products into specialized markets or to provide only a portion of the range of products and services that we offer.

We compete with Marvell Technology Group, Ltd., PMC-Sierra, Inc. and Texas Instruments, Inc. with respect to both storage and networking products. Additional competitors for our storage products include Fusion-io, Inc., Promise Technology Inc., STEC, Inc. and STMicroelectronics N.V. With respect to our networkingstorage products, we also compete with companies such asFusion-io, Inc. Additional competitors for our networking products include Avago Technologies Limited, Broadcom Corporation, Cavium Networks, Inc., Freescale, Inc. and International Business Machines Corporation.

The principal competitive factors in our business are:

While we believe we are competitive on the basis of all the factors listed above, our competitors may be able to compete more favorably on the basis of price and may have the resources to bring new products to market more quickly. However, we feel we are particularly strong in offering integrated solutions, broad product lines, product performance, customer support and logistics and planning systems. In addition, incumbent suppliers tend to have an advantage when competing for designs, which can make it difficult for us to win designs at new customers, even if we compete favorably on the factors identified above. However, we feel we are particularly strong in offering integrated solutions, broad product lines, product performance, customer support and logistics and planning systems.

The markets into which we sell our products are subject to intense price competition. We expect to continue to experience declines in the selling prices of many of our products over their life cycle. In order to offset or partially offset declines in the selling prices of our products, we continually strive to reduce the costs of products through product design changes, manufacturing process changes, yield improvements and procurement of wafers from outsourced manufacturing partners.

Patents, Trademarks and Licenses

We own or have rights to a number of patents, trademarks, copyrights, trade secrets and other intellectual property directly related to and important to our business. As of December 31, 2011,2013, we had approximately 11,000

11,500 U.S. patents and patent applications and a number of related foreign patents and patent applications. These patents include patents related to the following technologies:

We have patents of all ages ranging from pending applications, which, if awarded, will have a duration of 20 years from their earliest filing dates, through patents soon to expire.

We typicallyIn some cases we indemnify our customers for some of the costs and damages of patent infringement in circumstances where our product is the primary factor creatingdirect cause of the customer’s infringement exposure. We generally exclude coverage where infringement arises out of the combination of our products with products of others.

We protect our products and processes by asserting our intellectual property rights where appropriate and prudent. We also obtain licenses to patents, copyrights and other intellectual property rights used in connection with our business when practicable and appropriate.

Companies in the technology industry are often subject to claims of intellectual property infringement. You can find information about the impact of these types of claims in Item 1A — “Risk Factors”, which information is incorporated herein by reference. You can also find information about legal proceedings against us that involve intellectual property claims in Note 16 to our financial statements in Item 8 of Part II, which information is incorporated herein by reference.

Research and Development

Our industry experiences rapid change and we must continually develop new products to remain competitive. Our research and development expenditures were $576$692 million, $563$690 million and $509$576 million for the years ended December 31, 2011, 20102013, 2012 and 2009,2011, respectively. We anticipate that we will continue to make significant research and development expenditures to maintain our competitive position with a continuing flow of innovative products and technology.

Working Capital

Information about our working capital practices is included in Item 7 of Part II — “Management’s Discussion and Analysis of Financial Condition and Results of Operation”Operations” under the heading “Financial Condition, Capital Resources and Liquidity” and is incorporated herein by reference.

Environmental Regulation

Federal, state and local regulations, in addition to those of other nations, impose various environmental controls on certain chemicals and substances used in the manufacture of semiconductor products. To comply with these regulations, we have implemented environmental, health and safety management system processes. We offer products that comply with the requirements of the European Union Directive 2011/65/EU on the Restriction of the use of certain Hazardous Substances in Electrical and Electronic Equipment (RoHS Directive 2002/95/EC (RoHS Directive) that was implemented on July 1, 2006Recast) and other international environmental regulations impacting electronic equipment and components. We also work internally and with our suppliers and customers to develop a pro-active approach to emerging concerns such as those associated with climate change.

While to date we have not experienced any material adverse impact on our business from environmental regulations, regulations of this type might be adopted or amended that impose expensive obligations on us in the future. In addition, responsibility for cleaning up alleged historic chemical releases into the environment or future regulation of substances in products we sell could result in the need for changes in products, additional capital or other material improvements and/or business interruptions.

Employees

As of December 31, 2011,2013, we had 4,5885,272 full-time employees.

Our future success depends upon the continued service of our key technical and management personnel and upon our ability to continue to attract and retain qualified employees, particularly highly skilled design, process and test engineers involved in the development of new products and processes. We currently have favorable employee relations, but the competition for technical personnel is intense, and the loss of key employees or the inability to hire such employees when needed could have a material adverse impact on our business and financial condition.

Seasonality

Our business is largely focused on the information technology industry. Due to seasonality in this industry, we typically expect to see stronger revenues in the second half of the year.

Set forth below are risks and uncertainties 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.

The announcement and pendency of our agreement to be acquired by Avago may have an adverse effect on our business.

Our pending acquisition by Avago could have an adverse effect on our revenue in the near term if our customers delay, defer or cancel purchases pending completion of the merger. While we are attempting to address this risk through communications with our customers, current and prospective customers may be reluctant to purchase our products due to potential uncertainty about the direction of our product offerings and the support and service of our products after the merger is consummated. Additionally, we are subject to additional risks in connection with the announcement and pendency of the merger, including:

We have filed with the Securities and Exchange Commission a preliminary proxy statement and intend to file a definitive proxy statement and other relevant materials in connection with the merger agreement and the merger. The definitive proxy statement will be sent or given to our stockholders. We urge our investors and stockholders to read the proxy statement and the other relevant materials because they contain important information about the merger.

The failure to complete the merger with Avago may adversely affect our business.

The respective obligations of us, Avago USA and Leopold Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including (i) adoption of the merger agreement by our stockholders, (ii) the expiration or termination of the waiting period under the HSR Act, (iii) the receipt of affirmative approval or clearance required under the antitrust laws of the People’s Republic of China, the Russian Federation and the Federal Republic of Germany, (iv) the absence of any restraining orders, injunctions or other legal restraints prohibiting or preventing the merger, (v) the accuracy of the representations and warranties of the parties, and (vi) compliance by the parties with their respective obligations under the merger agreement. Further, the obligation of Avago USA and Leopold Merger Sub to consummate the merger is also subject to (i) the absence of any event, change or occurrence that has had, individually or in the aggregate, a material adverse effect on us, as defined and described in the merger agreement, and (ii) either (a) the receipt of written notice by the parties that a determination by CFIUS has been made that there are no unresolved issues of national security in connection with the transactions contemplated by the merger agreement, or (b) a determination by the President of the United States not to take any action under the Defense Protection Act of 1950. On January 17, 2014, the Bundeskartellamt (Federal Cartel Office) of the Federal Republic of Germany approved the merger and on January 29, 2014, the Federal Antimonopoly Service of the Russian Federation approved the merger. There is no assurance that the remaining conditions to the merger will be satisfied in a timely manner or at all. Other factors may affect when and whether the merger will occur, such as the failure by Avago to obtain the necessary debt financing arrangements set forth in commitment letters received in connection with the signing of the merger agreement. If the proposed merger is not completed, the price per share of our common stock could fall to the extent that the current price of our common stock reflects an assumption that the merger will be completed. Additionally, if the merger is not completed, we may suffer a number of consequences that could adversely affect our business, results of operations and stock price, including the following:

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

A limited number of customers accountaccounts for a substantial portion of our revenues. In 2011,2013, Seagate, our largest customer, represented approximately 25.0%25% of our total revenue,revenues, and our 10 largest customers accounted for approximately 61.9%63% of our revenue.revenues. We typically do not have contracts with our major customers that obligate them to purchase any minimum amount of products from us. Sales to these customers are made pursuant to purchase orders, which typically can be canceled or modified up to a specified point in time, which may be after we have incurred significant costs related to the sale. If any of our key customers reduced significantly or canceled its orders, our business and operating results could be adversely affected. Because many of our

semiconductor products are designed for specific customers and have long product design and development cycles, it would be difficult for us to replace revenues from key customers that reduce or cancel their existing orders for these products which may happen if they experience lower than anticipated demand or cancel a program.

In addition, if we fail to win new product designs from our major customers, our business and results of operations may be harmed. Further, if our major customers make significant changes in scheduled deliveries,deliveries; experience disruptions in their operations as a result of weather or natural disasters, or for any other reason,reason; decide to pursue the internal development of the products we sell to them,them; or are acquired, our business and results of operations may be adversely affected. Additionally, business combinations involving our customers or competitors of our customers could have a positive or negative impact on our business.

Recently,A significant portion of our revenues is derived from the sale of products for use in hard disk drives and dynamics in that industry as well as competing technologies could have an adverse impact on our revenues.

In 2013, we derived over 38% of our revenues from products for use in hard disk drives. The hard disk drive industry has been experiencingexperienced consolidation as Seagate has acquired Samsung’s storage operations and Western Digital is seeking to acquire Hitachi’s storage operations. Although this consolidation may open new opportunities for us, it may also increase our dependence on Seagate as a customer. In addition, it may resultover the last few years, resulting in fewer design opportunities and hard disk drive programs and a corresponding increase in the significance of winning or losing any one design or program. For example, following Seagate’s acquisition of Samsung’s storage operations, Seagate adopted Samsung’s 2.5 inch hard disk platform targeted at notebook computers, which does not use our SoCs, and reduced sales of its own notebook solution, which does incorporate our SoCs, adversely affecting our revenues. Additionally, we believe that end users may be purchasing tablet computers, which use flash memory rather than hard disk drives to store data, as the numbera substitute for purchasing a notebook computer containing a hard disk drive. We do not currently provide controllers for flash memory used in tablet computers and further increases in sales of potential customers decreases.tablet computers could adversely affect our revenues.

We operate in intensely competitive markets, and our failure to compete effectively would harm our results of operations.

We derive revenuerevenues from the sale of semiconductor products. The semiconductor industry is intensely competitive, and competition continues to increase as existing competitors enhance their product offerings and as new participants enter the market. Our competitors include large domestic and foreign companies that have substantially greater financial, technical and management resources than us. Several major diversified electronics companies offer products that compete with our products. Other competitors are specialized, rapidly growing companies that sell products into the same markets that we target. Some of our customers may alsoAdditionally, some companies that make products for which we could supply parts have semiconductor design and manufacturemanufacturing capabilities and may choose to develop products internally that compete with our products.rather than purchase them from us. We cannot provide any assurances that the price and performance of our products will be superior relative to the products of our competitors or will be sufficient to obtain business.

Some of our products are targeted at relatively new product categories. The market dynamics in these product categories may still be developing and could ultimately develop in ways that harm our business. For example, we sell flash controllers for solid state drives. This market is in the early stages of development and some of our potential customers may elect to design and manufacture their own flash controller products, which could have a negative impact on our revenues from these products. Additionally, the markets for these new product categories may develop more slowly than we anticipate or not at all, which could impact the timing and amount of our revenues.

In addition, our products often have a limited life before they are replaced by products utilizing newer technology. Because we do not have multi-generation contracts with most of our customers, we must win the business of our customers for each new generation of a product. If we are unable to do so, whether because we are unable to develop a next generation product rapidly enough, because our product is not priced competitively, or for any other reason, our results of operations could be adversely affected.

Increased competition may harm our revenues and margins. For example, competitors with greater financial resources may be able to offer lower prices than ours, or they may offer additional products, services or other

incentives that we may not be able to match. Competitors may be better able than us to respond quickly to new technologies and may undertake more extensive marketing campaigns than we do. They may also make strategic acquisitions or establish cooperative relationships among themselves or with third parties to increase their market share. In addition, competitors may sell commercial quantities of new products before we do, establishing a market position that we may not be able to overcome once we introduce similar products in commercial quantities. If we are unable to develop and market competitive products on a timely basis, we will likely fail to maintain or expand our market share and our revenues will likelymay decline.

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 sell a significant amount of our products pursuant to purchase orders that customers may cancel or defer on short notice without incurring a significant penalty. In addition, the period of time between order and product shipment can be very short. If customers reduce the rate at which they place new orders, whether because of changing market conditions for their products or other reasons, or if they cancel or defer previously placed orders, the impact on our revenuerevenues can occur quickly and could cause us to experience revenues that are lower than we may have indicated in any public forecast of our future revenue.revenues. For example, as economic conditions deteriorated in the fourth quarter of 2008, our sales declined below the expectations we had publicly announced earlier that quarter because our customers’ orders declined to a level below that which we had anticipated. Reductions in new order rates as well as cancellations or deferrals of existing orders could also cause us to hold excess inventory. Further, a significant portion of our costs are fixed and we may be unable to reduce those costs proportionately. Each of these events could adversely affect our results of operations.

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.

We depend on third-party foundries to manufacture integrated circuits for us and on outside suppliers to assemble and test our semiconductor products and to assemble our board-level products. As such, we face the following risks:

The ability of an independent foundry to provide us with integrated circuits is limited by its available capacity and existing obligations. We generally do not enter into contracts to reserve foundry capacity. Availability of foundry capacity has in the past been reduced from time to time due to strong demand and may not be available when needed at reasonable prices. We believe that semiconductor foundry capacity is currently constrained at some advanced technology nodes. If foundry capacity is limited, it is possible that one of our foundries may allocate capacity to the production of other companies’ products, including those of our competitors. This reallocation could impair our ability to obtain sufficient wafers. If we experience demand for our products that we are not able to meet, we would miss opportunities for additional revenuerevenues and could

experience a negative impact on our relationships with affected customers. We may also use a second foundry for a particular product when capacity at the main foundry is limited or unavailable, but the cost of integrated circuits at the second foundry may be higher, which would reduce our margins. In addition, as only a limited number of foundries provide manufacturing services using the advanced technologies that we require, we may be unable to provide leading edgesecure a second source or replacement foundry for some of our more advanced products. Because

We depend on our foundries to timely develop new, advanced manufacturing processes and face the risk of being unable to deliver products to our customers if these new processes are not timely developed or we do not have sufficient access to them. For example, we have design wins based on manufacturing processes that are currently under development. If these processes are not developed on schedule, we may lose revenue opportunities and damage our relationships with our customers. Further, because of the limited competition among large third-party foundries, it is possible that our foundry partners for products requiring these technologies will price their services at levels that have an adverse impact on our gross margins or make it unprofitable for us to offer these products. This limited competition among foundries may also make it more difficult for us to use a second foundry for a product when we believe that doing so would be advantageous.

By relying on outside suppliers to manufacture, assemble and test our products, we may have a reduced ability to control directly product delivery schedules and quality assurance. This lack of control may result in product shortages or quality assurance problems that could delay shipments of products or increase manufacturing, assembly, testing or other costs. In addition, if these outside suppliers are unable to obtain sufficient raw materials in a timely manner, we may experience product shortages or delays in product shipments, which could harm our customer relationships and results of operations.

If any of our manufacturing suppliers experiences capacity constraints, encounters financial difficulties, or experiences any other major disruption of its operations, we may need to qualify an alternate supplier, which may take an extended period of time and could result in delays in product shipments. Further, we may be unable to find an alternate supplier with the capacity or technical capability required to produce our products. These delays or our inability to find an alternate supplier could cause our customers to seek alternate semiconductor companies to provide them with products previously purchased from LSI, which could adversely impact our business.

As a result of all of these factors and risks, and although we carefully monitor and plan for capacity and other issues, we cannot provide any assurances that we can obtain sufficient quantities of products from our suppliers on a timely basis or at reasonable prices.

Failure to qualify our semiconductor products or our suppliers’ manufacturing lines with key customers could harm our business and results of operations.

Some customers will not purchase any products, other than limited numbers of evaluation units, until they qualify the products and/or the manufacturing line for the product. Weproducts. The qualification process can take significant time and resources and we may not always be able to satisfy the qualification requirements of these customers. Delays in qualification or failure to qualify our products may cause a customer to discontinue use of non-qualified products or forego future orders and result in a significant loss of revenue.

We are seeking to expand our business by selling to new types of customers and may be unsuccessful in doing so, which could have a negative impact on our results of operations.

While we have historically derived a significant portion of our revenues by selling to OEM customers, we have recently begun targeting end-user customers for some of our products. For example, while we sell our Nytro products through existing channels, we are seeking to establish sales relationships with some end-user customers, such as data center operators and cloud service providers. These customers may have different customer needs, such as shorter product and time to market cycles and different customer service requirements. If we fail to meet the requirements of these new customers, we may lose customers or fail to capture design wins for these products, which could have a negative impact on our 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.

Many of the industry segments in which we operate are characterized by rapid technological change, changes in customer requirements, frequent new product introductions and enhancements, short product cycles and evolving industry standards. We believe that our future success will depend, in part, on our ability to improve on existing technologies and to develop and implement new technologies.

For example, semiconductor products transition over time to increasingly smaller line width geometries. This requires us to adapt our products and manufacturing processes to these new technologies, which requires expertise in new procedures. Our failure to successfully transition to smaller geometry process technologies could impair our competitive position.

Our success will also depend on our ability to adopt and implement emerging industry standards in a timely manner and to adapt products and processes to technological changes based on these standards. For example, the SAS standard used to connect computers and servers to storage devices has advanced over the years to support faster speeds. As a result, our products in this area have a limited life span before they are superseded by products supporting faster speeds, which we must develop and market in a timely fashion. If we fail to develop new and enhanced products and technologies, if we focus on technologies that do not become widely adopted, or if new technologies that we do not support and that compete with technologies we do support become widely accepted, demand for our current and planned products may be reduced. For example, if tablet computing, which involves the use of flash memory rather than hard disks to store data, becomes significantly more popular, it could have a negative impact on demand for hard drives.

In addition, the evolution of standards for integrated circuits may be affected by factors beyond our control. For example, we design some products to conform to current specific industry standards. Our customers may not adopt or continue to follow the standards that we have chosen, which would make our products less desirable to customers, and could negatively affect our sales. Also, competing standards may emerge that are preferred by our customers, which could reduce our sales and require us to make significant expenditures to develop new products. To the extent that we are not able to adapt effectively and expeditiously to new standards, our business may be harmed.

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

Our products may contain undetected defects, errors or failures, which may not become apparent until the products are deployed in commercial applications and other equipment. Consequently, customers may discover errors after the products have been deployed. The occurrence of any defects, errors or failures could result in:

Any of these occurrences could also result in the loss of or delay in market acceptance of products and loss of sales, which could negatively affect our business and results of operations. As our products become even more complex in the future, this risk may intensify over time and may result in increased expenses.

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

We have defined benefit pension plans under which we are obligated to make future payments to participants. These plans are primarily for theMost benefit of former Agere employees. Benefit accruals under the Agere plans were frozen in 2009. At December 31, 2011,2013, our projected benefit obligations under our pension plans exceeded the value of the assets of those plans by approximately $595.8

$335.1 million. U.S. law provides that we must make contributions to the pension plans in 20122014 of at least $94.4$75.9 million. We expect to be required to make additional contributions to the plans in future years. We may also choose to make additional, voluntary contributions to the plans. Depending on our cash position at the time, contributions to our pension plans could impact our operating flexibility.flexibility and our financial position.

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.

As is typical in the semiconductor industry, we are frequently involved in disputes regarding patent and other intellectual property rights. We have in the past received, and we may in the future receive, communications from third parties asserting that our products, processes or technologies infringe on the patent or other intellectual property rights of third parties, and we may also receive claims of potential infringement if we attempt to license intellectual property to others. Intellectual property litigation, regardless of the outcome, may be costly and time consuming, and may divert the attention of management and key personnel from other business issues. ClaimsIn response to claims of intellectual property infringement, also might require uswe may seek to enter into costly royalty or license agreements.agreements or be required to make material changes in production processes or our products. We may not be able to obtain royalty or license agreements on acceptable terms.terms or be able to make acceptable changes to our processes or products. Further, our products or our customers’ products may be restricted from being sold in the United States or another jurisdiction. For example, as described in Note 16 to our financial statements in Item 8, Rambus has sued us and is seeking an exclusionary order that if granted would preclude us and our customers from selling certain products in the United States. If any of our products or intellectual property infringes on valid rights held by others, our results of operations or financial position may suffer and we may have to make material changes in production processes or products.be adversely affected.

If we are unable to protect or assert our intellectual property rights, our business and results of operations may be harmed.

Our future success will depend, in part, upon our ability to protect and assert our intellectual property rights. We rely primarily on patent and other intellectual property laws, as well as nondisclosure agreements and other

methods, to protect our proprietary technologies and processes. It is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose proprietary technologies and processes, despite our efforts to protect them.

While we hold a significant number of patents, we can give you no assurance that any additional patents will be issued. Even if new patents are issued, the claims allowed may not be sufficiently broad to protect our technology. In addition, any of our existing patents, and any future patents issued to us, may be challenged, invalidated or circumvented, or changes in law may result in us having less protection than we may have experienced historically. As such, any rights granted under these patents may not provide us with meaningful protection. We may not have foreign patents or pending applications corresponding to our U.S. patents and applications. Even if foreign patents are granted, effective enforcement in foreign countries may not be available.

If our patents do not adequately protect our technology, competitors may be able to offer products similar to our products more easily. Our competitors may also be able to develop similar technology independently or design around our patents. Some or all of our patents have in the past been licensed and likely will in the future be licensed to certain of our competitors through cross-license agreements.

IncreasesVolatility 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.results of operations.

The priceprices of some commodities used in the production of semiconductors hasour products have been increasing. Increasesvolatile. Sudden increases in the costs of the materials used in the production of semiconductorsour products or lack of availability of these materials may increase our costs or reduce the amount of product we are able to sell, negatively impacting our gross margins.margins and revenues. For example, we use gold in the production of semiconductors and the market price of gold increasedhas fluctuated significantly during 2011, adversely affectingover the last few years, impacting our gross margins. Additionally, at any point in time we may hold a large inventory of flash memory, which is incorporated into our Nytro products. If the price of flash memory changes significantly over a short period of time, we may not be able to make corresponding changes in the prices of our products incorporating flash memory, and our gross margins may be adversely affected. 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.

We are exposed to legal, business, political and economic risks associated with our international operations.

We derive, and we expect to continue to derive, a substantial portion of our revenuerevenues from sales of products shipped to locations outside of the United States. These products are typically incorporated into our customers’ products, which we believe are ultimately sold to end-users around the world. In addition, we perform a significant amount of our development work outside the United States and most of our products are manufactured outside of the United States. We are subject to a number of risks that could adversely affect our business and results of operations as a result of our operations outside of the United States, our customers’ and suppliers’ operations outside of the United States and end-demand outside of the United States, including:

Any of these factors, most of which are outside of our control, could have a negative impact on our business. For example, new import/export laws may increase the restrictions on the flow of technology across country boundaries, making it more difficult and/or costly to develop products as we may not be able to easily develop products in close proximity to our customers or using an optimal labor pool.

We use indirect channels of product distribution over which we have limited control.

We sell some of our products through distributors and resellers. A deterioration in our relationships with our resellers or distributors, or a decline in their business, could harm our sales. In addition, we are seeking to increase our business through indirect channels of distribution. We may not successfully maintain or expand these indirect channels of distribution, and our failure to do so could result in the loss of sales opportunities. Furthermore, our reliance on indirect channels of distribution may reduce visibility with respect to future business opportunities, thereby making it more difficult to forecast orders.

We have engaged, and may in the future engage, in acquisitions and strategic alliances, which may disrupt our business or may not be successful and could harm our business and operating results.

We expect to continue tohave made acquisitions of other companies, assets and technologies, and may explore strategic acquisitions that build upon or expand our library of intellectual property, human capital and engineering talent, and that could increase our ability to address the needs of our customers. For example, we recently acquired SandForce, a provider of flash storage processors for enterprise and client flash solutions and SSDs. Acquisitions of high-technology companies have inherent risks. No assurance can be given that our previous acquisitions or future acquisitions will be successful and will not harm our business or operating results. Forresults, and any future acquisitions which we

complete could be viewed negatively by our customers or potential customers, the markets or our stockholders. In addition, if we fail to successfully integrate any acquired companies, products or technologies or to identify and address liabilities associated with an acquired business or assets, our business, revenues and operating results could be adversely affected. We may not successfully evaluate the financial impact of an acquisition transaction, or the time and resources required to integrate a business, product or engineering team. If, for example, if we are unable to retain SandForcekey personnel or are unsuccessful in growing the SandForcean acquired business, we willmay not achieve the expected benefits of the acquisition and our financial results may be negatively impacted. In addition, we may make investments in companies, products and technologies through strategic alliances and otherwise. If these investments are not successful, our results of operations may suffer.

The semiconductor industry is highly cyclical, which may cause our operating results to fluctuate.

We operate in the highly cyclical semiconductor industry. This industry is characterized by wide fluctuations in product supply and demand. In the past, the semiconductor industry has experienced significant downturns, often in connection with, or in anticipation of, excess manufacturing capacity worldwide, maturing product cycles and declines in general economic conditions. Even if demand for our products remains constant, a lower level of available foundry capacity could increase our costs, which would likely have an adverse impact on our results of operations.

Our failure to attract, retain and motivate key employees could harm our business.

In some of our fields of operation, there are only a limited number of people in the job market who possess the requisite skills. In the past, we have experienced difficulty in identifying and hiring sufficient numbers of qualified engineers in parts of our business, as well as in retaining engineers and other qualified employees. The loss of the services of any key personnel or our inability to hire new personnel with the requisite skills could restrict our ability to develop new products or enhance existing products in a timely manner, to sell products to our customers or to manage our business effectively. In recent years, we have discontinued our efforts in some product areas and sought to streamline our operations, which has resulted in employee layoffs. These measures, or others that we may take in the future, may negatively impact our ability to recruit and retain qualified personnel.

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.

Our operations and those of our suppliers are subject to natural disasters and other events outside of our control that may disrupt our business and harm our operating results. During 2011, Thailand experienced flooding as a result of significant rains. A suppliernumber of companies in Thailand has performed assembly and test functions for our products and that supplier’s facility was affected by flooding. Other technology companies also havethe hard disk drive industry had facilities in Thailand that were affected by flooding. Thethe flooding, reduced our ability to supply products for hard disks and resultedresulting in reduced demand for these products as some customer facilities and facilitiesability of other suppliersthat industry to produce disk drives, which affected our revenues. Some of our customers were affected.in the HDD industry continue to manufacture their products in Thailand. We also have substantial operations in parts of California that have experienced major earthquakes and in parts of Asia that have experienced typhoons, earthquakes and various health issues. Taiwan, a location where many of our suppliers and customers manufacture their products, experienced a series of earthquakes in 2012. A widespread outbreak of an illness such as H1N1 flu, avian flu, or bird flu, or severe acute respiratory syndrome, or SARS, could harm our operations and those of our suppliers as well as decrease demand from customers.

If our operations or those of our suppliers are curtailed because of natural disasters or health issues, our business may be disrupted and we may need to seek alternate sources of supply for manufacturing or other services. Alternate sources may not be available, may be more expensive or may result in delays in shipments to customers, which would affect our results of operations. Some of the technologies we use are sole sourced due to the complex nature of the technology, so a disruption at one of these suppliers could result in our inability to produce certain products. In addition, a curtailment of design operations could result in delays in the development of new products. If our customers’ or suppliers’ and manufacturers’ businesses are affected by natural disasters, health issues or other events outside of our control, our business and results of operations may be harmed.

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.

In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. Companies in the technology industry are particularly vulnerable to this kind of litigation due to the high volatility of their stock prices. For example, following the announcement of our pending acquisition by Avago our stock price increased. In connection with the merger, we and our officers and directors are the subject of a number of lawsuits that may divert the attention and resources of our management and result in substantial costs. Our stock has also experienced substantial price volatility in the past. This may be a result of quarterly variations in our results of operations, the published expectations of security analysts and announcements by us and our competitors as well as general economic conditions and our stock price may continue to experience substantial volatility. Accordingly, we may in the future be the target of securities litigation. Any securities litigation could result in substantial costs and could divert the attention and resources of our management.

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 business is subject to or may be impacted by various environmental protection and social responsibility legal and customer requirements. For example, we are subject to the European Union Directive 2011/65/EU on the Restriction of the use of certain Hazardous Substances in Electrical & Electronic Equipment (RoHS)(RoHS Directive Recast) and the European Union Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Regulation (EC) No 1907/2006 in the European Union. Such regulations could require us to redesign our products in order to comply with their requirements and require the development and/or maintenance of compliance administration systems. Redesigned products could be more costly to manufacture or require more costly or less efficient raw materials. If we cannot develop compliant products on a timely basis or properly administer our compliance programs, our revenues could decline due to lower sales. In addition, under certain environmental laws, we could be held responsible, without regard to fault, for costs relating to any contamination at our current or past facilities and at third-party waste-disposal sites. We could also be held liable for consequences arising out of human exposure to such substances or other environmental damage.

Recently there has been increased focus on environmental protection and social responsibility initiatives. We may choosebe required or be requiredchoose to implement various standards or processes due to the adoption of rules or regulations that result from these initiatives, such as with respect tothe recently adopted United States rules on the disclosure of the use of conflict minerals, which are certain minerals that originate in the Democratic Republic of the Congo or adjoining countries.“conflict minerals.” Our customers may also require us to implement environmental or social responsibility procedures or standards before they will continue to do business with us or order new products from us. Our adoption of these procedures or standards could be costly, and our failure to adopt these standards or procedures could result in the loss of business, or fines or other costs.

We rely on our information technology systems to run our business and any failure of these systems or any malicious intrusion into those systems could result in harm to our business, results of operations and financial condition.

Critical aspects of our business such as our order management processes, financial and reporting infrastructure, and engineering systems and software are dependent on our information technology systems. We also rely on our technology infrastructure to store, process and transmit proprietary information and sensitive or confidential data, including our and our customers’ intellectual property and trade secrets. Any problems that arise with our information technology systems could impair our ability to process customer orders, ship products, provide services and support to our customers, fulfill contractual obligations, file reports with the Securities and Exchange Commission in a timely manner, and otherwise run our business. Our technology infrastructure or capabilities may be impacted by earthquakes, flooding or other natural disasters, or by other events outside of our control, such as power or Internet outages. Moreover, while our information systems are tested to ensure controls to prevent unauthorized access are in place and working, our information systems have been, and will likely continue to be, subject to attempts by others to gain unauthorized access to our systems, computer viruses

or other malicious code, cyber-attacks, or other computer related breaches. While, to date, we have not experienced a material breach of our infrastructure, a material breach of our information systems could result in a disruption to our operations, our inability to run our business, or the misappropriation of our or our customers’ proprietary information. Security breaches of customer or personal data could harm our reputation and lead to significant costs which may not be covered by insurance. We have implemented security procedures such as virus protection software and emergency recovery processes; however, the measures we have implemented may not be sufficient to address all breaches. Implementing additional security measures may be costly or may be disruptive to our business during implementation.

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.

Our board has the authority to issue preferred stock and to determine its rights, preferences, privileges and restrictions, including voting rights, without any further vote or action by our stockholders. If we issue any of these shares of preferred stock in the future, the rights of holders of our common stock may be negatively affected. Although we have no current plans to issue shares of preferred stock, if we were to issue preferred stock, a change of control of our company could be delayed, deferred or prevented.

Furthermore, Section 203 of

the Delaware General Corporation Law restricts certain business combinations with any “interested stockholder” as defined by that statute. These provisions are designed to encourage potential acquirers to negotiate with our board of directors and give our board an opportunity to consider various alternatives to increase stockholder value. These provisions are also intended to discourage certain tactics that may be used in proxy contests. However, the potential issuance of preferred stock or the restrictions in Section 203 of the Delaware General Corporation Law could discourage potential acquisition proposals and could delay or prevent a change in control, which may adversely affect the market price of our stock.

These provisions may also have the effect of preventing changes in our management or board of directors.

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.

In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. Companies in the technology industry are particularly vulnerable to this kind of litigation due to the high volatility of their stock prices. Our stock has experienced substantial price volatility in the past. This may be a result of quarterly variations in our results of operations, the published expectations of security analysts and announcements by us and our competitors as well as general economic conditions and our stock price may continue to experience substantial volatility. Accordingly, we may in the future be the target of securities litigation. Any securities litigation could result in substantial costs and could divert the attention and resources of our management.

Not applicable.

We leaseown an office complex in San Jose, California comprising approximately 240,000 square feet of space in two buildings in Milpitas, Californiathat we use for our corporate headquarters, administration and engineering offices. We also own aan approximately 600,000 square foot office complex in Allentown, Pennsylvania that we use for administration and engineering offices. We have leased out approximately 81,50052,318 square feet of space in that facility to tenants.

We also own approximately 150,000 square feet of sales and engineering office space in Fort Collins, Colorado and approximately 180,000 square feet of sales and engineering office space in Colorado Springs, Colorado.

We own or lease additional space in the United States and in various other countries, and use that space for sales, marketing, engineering, general corporate and test purposes.

We believe that our existing facilities and equipment are well maintained, in good operating condition, suitable for our operations and are adequate to meet our current requirements.

This information is included in Note 1615 (“Commitments, Contingencies and Legal Matters — Legal Matters”) to our financial statements in Item 8 of Part II and is incorporated herein by reference.

Not applicable.

Executive Officers of LSI

Set forth below is information about our executive officers as of the date of filing of this Form 10-K.

Mr. Talwalkar has been our President and Chief Executive Officer and a member of our Board of Directors since May 2005. Prior to joining LSI, Mr. Talwalkar was employed by Intel Corporation, a microprocessor manufacturer, from 1993 until 2005. At Intel, he held a number of management positions, including senior positions from 1995 to 2005. Mr. Talwalkar has served as a member of the board of directors of LAM Research Corporation since February 2011.

Mr. Huff has been our Chief Technology Officer since July 2012. From May 2011 through July 2012, he served as our Senior Vice President of Corporate Strategy. Prior to joining LSI, Mr. Huff was Vice President and Chief Technology Officer of Hewlett Packard’s Industry Standard Server business from 2007 to 2011. Prior to that, he served as Research and Development Director for the HP Superdome product family from 2003 to 2007.

Mr. Look has been Executive Vice President, Chief Financial Officer and Chief Administrative Officer of LSI since January 2009. From November 2000 through January 2009, he served as our Executive Vice President and Chief Financial Officer. Between March 1997 and November 2000, he was our Vice President, Corporate Development and Strategic Planning. Prior to joining LSI, he was manager of business development in Hewlett-Packard’s corporate development department. During a 21-year career at Hewlett-Packard, Mr. Look held a variety of management positions in finance and research and development.

Ms. Rankin has been our Executive Vice President, General Counsel and Secretary since April 2007. Ms. Rankin joined LSI in 2007, following our acquisition of Agere Systems, a semiconductor company. At Agere, she had been Executive Vice President, General Counsel and Secretary since 2000. Ms. Rankin has served as a member of the board of directors of InterDigital, Inc. since June 2010.

Mr. Richardson has been Executive Vice President and Chief Operating Officer of LSI since April 2011. He was previously the leader of our Semiconductor Solutions Group from January 2009 to April 2011. From April 2007 through January 2009, he led our Network and Storage Products Group, which included our Networking, Custom and Storage Interfaces semiconductor businesses. From September 2005 through April 2007, he was the leader of our Custom Solutions Group, and from June 2005 through September 2005, he led our Corporate Strategy function. From 1992 through June 2005, he held a variety of management positions at Intel, including senior positions from 1999 to 2005. Mr. Richardson has served as a member of the board of directors of Volterra Semiconductor Corporation sincefrom April 2011.2011 through October 2013.

Mr. Srivastava has served as Senior Vice President, Corporate Marketing and Human Resources of LSI since May 2011. From July 2009 through May 2011, he was our Senior Vice President, Human Resources. Prior to joining LSI, Mr. Srivastava was employed by Advanced Micro Devices, a semiconductor design company,

most recently as Vice President, Sales and Marketing and Managing Director, Middle East, Africa and Pakistan from 2006 to 2008. From 2005 to 2006, Mr. Srivastava was Vice President, Sales and Marketing and Chief of Staff to the Chief Sales and Marketing Officer at AMD. Prior to that, he served as AMD’s Vice President, Compensation and Benefits. Prior to AMD, Mr. Srivastava held various roles in management consulting and at technology startups.

Officers are not elected for a fixed term of office but serve at the pleasure of the Board of Directors. There are no family relationships among the executive officers and directors of LSI.

PART II

Our common stock tradeshas traded on the Global Select tier of The NASDAQ Stock Market under the stock symbol “LSI” since December 19, 2012. Prior to that time, it traded on the New York Stock Exchange under the symbol “LSI.” In June 2011, our Chief Executive Officer submitted to the Exchange an annual certification stating that he was not aware of any violations of the Exchange’s corporate governance listing standards.

Exchange. The table below shows the high and low sales prices for our common stock for each quarter during our last two full fiscal years, as reported in the consolidated transaction reporting system.

We did not payOur board of directors declared quarterly cash dividends onof $0.03 per share payable to holders of our common stock in 2011 or 2010.each of the last two quarters of fiscal year 2013. As a result, cash dividends of $16.5 million were paid in the three months ended December 31, 2013 and a total of $32.8 million were paid in the fiscal year ended December 31, 2013.

As required by the merger agreement relating to our proposed acquisition by Avago, we have discontinued paying a quarterly dividend.

At February 22, 2012,19, 2014, there were 306,824272,217 holders of record of our common stock. We have a greater number of beneficial owners of our stock who own their shares through brokerage firms and other nominees.

Issuer Purchases of Equity Securities

The following table contains information about our repurchases of our common stock during the quarter ended December 31, 2011.

On March 9, 2011, our Board of Directors authorized the repurchase of up to $750.0 million of our common stock. The repurchases reported in the table above were made pursuant to this authorization.

PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return on our common stock to that of the S&P 500 Index and the S&P 500 Semiconductors Index. The graph assumes that a $100 investment was made in our common stock and each of the indices at December 31, 2006,2008, and that dividends, if any, were reinvested in all cases. The stock price performance shown on the graph is not necessarily indicative of future price performance.

PART II

Five-Year Consolidated Summary

On April 2, 2007,January 3, 2012, we acquired Agere Systemscompleted the acquisition of SandForce, Inc. through the merger, or SandForce, for total consideration of Agere and a subsidiaryapproximately $346.4 million, net of ours.cash acquired. The merger was accounted for as a purchase. Accordingly, the results of operations of AgereSandForce and the estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements from April 2, 2007.January 3, 2012.

The 2012 benefit from income taxes includes a $42.4 million tax benefit due to the partial release of the valuation allowance resulting from the net deferred tax liabilities arising from the SandForce acquisition. The 2009 benefit from income taxes includes an $81.0 million tax benefit resulting from settlements of tax audits in foreign jurisdictions.

On May 6, 2011, we completed the sale of our external storage systems business to NetApp, Inc., or NetApp, for $480.0 million in cash. We have reflectedreported the external storage systems business as discontinued operations in our 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.operations.

Item 7.

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-K, including Part 1, “Item 1: Business”Item 1- “Business”; Part I, “Item 1A: RiskItem 1A- “Risk Factors”; Part II, “Item 6: SelectedItem 6- “Selected Financial Data”; and Part II, “Item 8: FinancialItem 8- “Financial Statements and Supplementary Data.”

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.property to other entities.

On December 15, 2013, we entered into a definitive agreement with Avago Technologies Limited, or Avago, and certain of its subsidiaries under which Avago will acquire LSI for $11.15 per share in an all-cash transaction valued at approximately $6.6 billion. The merger is expected to close in the first half of 2014, subject to regulatory approvals in various jurisdictions and satisfaction of customary closing conditions, as well as the approval of our stockholders.

Sixteen purported class action complaints have been filed by alleged stockholders of LSI against us, our individual directors, and, in fifteen of the cases, against Avago. These actions generally allege that the members of our board of directors breached their fiduciary duties in connection with the merger because the merger was not in the best interest of the company, the merger consideration is unfair, and certain other terms of the merger agreement are unfair. Among other remedies, the lawsuits seek to enjoin the merger, or in the event that an injunction is not entered and the merger closes, to rescind the merger or obtain unspecified money damages, costs and attorneys’ fees. We and our board of directors believe these claims are entirely without merit, and intend to vigorously defend these actions.

Our products are sold primarily to original equipment manufacturer, or OEM, companies, in the server,results of operations for 2013, 2012 and 2011 were as follows:

On January 3, 2012, we acquired SandForce, Inc., a provider of flash storage processors for enterprise and networking industries. We also sell our products through a networkclient flash solutions and solid state drives, for total consideration of resellers and distributors.approximately $346.4 million, net of cash acquired.

On May 6, 2011, we completed the sale ofsold our external storage systems business to NetApp, Inc., or NetApp, for $480.0 million in cash. That business sold external storage systems, primarily to original equipment manufacturers, or OEMs, who resold these products to end customers under their own brand name. We have reflectedreported the external storage systemsresults of that business as discontinued operations in our consolidated statements of operations and, as such, the resultsoperations. Our net income in 2011 included a gain from that sale of that business have been excluded from all line items other than “income from discontinued operations” for all periods presented. We believe that, as a result of this sale, we are seeing increasing interest in our products from other external storage systems OEMs who previously were reluctant to buy our products because they viewed us as a competitor.$260.1 million or $0.43 per diluted share.

We derive the majority of our revenuerevenues from sales of products for the hard disk and solid state drive, server and networking equipment end markets.markets, and our revenues depend on market demand for these types of products. We believe that these markets offer us attractive opportunities because of the growing demand to create, store, manage and move digital content.content efficiently. Our products are sold primarily to OEMs in the storage, server and networking industries. We believe that this growth is occurring asalso sell some of our products through a resultnetwork of a number of trends, including:resellers and distributors. The

Ourour revenues depend on market demand for these types of products and our ability to compete in highly competitive markets.successfully. We face competition not only from makers of products similar to ours, but also from competing technologies. For example, we see the development

Our board of solid state drives based on flash memory rather than the spinning platters used in hard disk drives as a long-term potential competitor to certain types of hard disk drives, and we are focusing development efforts in that area.

In 2011, we reported net income of $331.5 million, or $0.55 per diluted share, compared to net income of $40.0 million, or $0.06 per diluted share, in 2010. Net income for 2011 included a $260.1 million gain on the sale of our external storage systems business.

On March 9, 2011, our Board of Directorsdirectors authorized a stock repurchase program of up to $750.0$500.0 million of our common stock. Through December 31, 2011,on August 1, 2012. During 2013, we had repurchased 72.422.8 million shares for $498.8$163.5 million under this program. As of December 31, 2013, $315.1 million remained available for stock repurchases. During 2013, we declared and paid cash dividends of $0.06 per common share, or $32.8 million in total, on our outstanding common stock. In connection with the merger agreement entered into with Avago, we have discontinued share repurchases and our quarterly dividend.

We ended 20112013 with cash and cash equivalents, together with short-term investments, of $935.5$809.8 million, an improvement from $676.7compared to $676.0 million at the end of 2010, primarily attributable to cash we received from the sale of our external storage systems business.2012.

In 2011, Thailand experienced significant flooding, which adversely affected the operations of various technology companies, particularly those involved in the hard disk drive industry. We have a supplier in Thailand that performs assembly and test functions forearly 2012, our semiconductor products and that supplier’s facility was affected by flooding. As a result of the flooding, our ability to supply system-on-a-chip and pre-amplifier products to hard disk drive customers, as well as the operations of some hard disk drive customers and their other suppliers, were constrained in the fourth quarter of 2011. We currently believe that we can meet anticipated demand for our products. However, the hard disk drive industry may take several quarters to fully recover from the impact of the flooding.

On January 3, 2012, we completed the acquisition of SandForce, Inc., or SandForce, for total consideration of approximately $346.1 million, net of cash acquired. SandForce is a provider of flash storage processors for enterprise and client flash solutions and solid state drives. This acquisition is expected to enhance LSI’s position in storage technology solutions.

The price of some commodities used in the production of semiconductors increased in 2011, adversely affecting our gross margins. For example, we use gold in the production of semiconductors and the market price of gold increased significantly during 2011. 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 may also have an adverse impact on our gross margins.

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

RESULTS OF OPERATIONS

Revenues

Revenues increased by $174.3 million, or 9.3%,The decrease in 2011revenues in 2013 as compared to 2010. 2012 reflected lower unit sales of semiconductors used in hard disk drives and our older networking products in 2013. Revenues in 2012 reflected temporarily higher unit sales of semiconductors used in hard disk drives as a result of the recovery from the Thailand flooding. These decreases were partially offset by increased unit sales from the ramping of flash memory-based storage products and a $19.7 million increase in intellectual property licensing revenues in 2013.

The increase in revenues in 2012 as compared to 2011 was primarily attributable to increaseddriven by higher unit sales of semiconductors used in storage product applications and the ramping of new products to existing customers and highercustomers. Sales of semiconductors used in hard disk drives benefited in 2012 as a result of the recovery from the Thailand flooding. The increase also reflects $159.7 million of revenues from flash storage processors as a result of the licensingacquisition of our intellectual property.SandForce. These increases were offset in part by a decrease in unit sales of semiconductors used inlegacy networking product applications.products.

Revenues increased by $293.3 million,Significant Customers:

The following table provides information about sales to Seagate Technology, which was our only customer that accounted for 10% or 18.6%, in 2010 as compared to 2009. The increase was primarily attributable to an increase in unit sales of semiconductors used in networking and storage product applications. To a lesser extent, the increase in revenues also reflected higher revenues from the licensingmore of our intellectual property.revenues in each of 2013, 2012 and 2011:

Revenues by GeographyGeography:

The following table summarizes our revenues by geography based on the ordering location of ourthe 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.

RevenuesThe decrease in revenues in North America increased by $89.0 million, or 20.6%, in 20112013 as compared to 2010. The increase was2012 primarily attributable to increasedresulted from lower unit sales of semiconductors used in storage product applications, and higherproducts in 2013. The decrease was partially offset by an increase in intellectual property licensing revenues from the licensing of our intellectual property. Revenuesin 2013. The decrease in revenues in Asia increased by $100.4 million, or 8.2%, in 20112013 as compared to 2010. The increase2012 was primarily attributable to increasedlower unit sales of semiconductors used in hard disk drives in 2013 as compared to 2012, when sales of those products temporarily benefited from the recovery from the flooding in Thailand. The increase in revenues in Europe and the Middle East in 2013 as compared to 2012 was primarily due to an increase in networking product sales as a result of the ramping of new networking products with existing customers.

The increases in revenues in both Asia and North America in 2012 as compared to 2011 were primarily attributable to higher unit sales of semiconductors used in storage product applications partiallyand the ramping of new products to existing customers. Sales of semiconductors used in hard disk drives benefited in 2012 as a result of the recovery from the flooding in Thailand. 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 in part by a decrease in unit sales of semiconductors usedlegacy networking products. The decrease in networking product applications. Revenuesrevenues in Europe and the Middle East decreased by $15.1 million, or 7.0%, in 20112012 as compared to 2010. The decrease2011 was primarily attributable to decreaseda decrease in unit sales of semiconductors used in storage product applications.

Revenues in North America increased by $125.6 million, or 41.1%, in 2010 as compared to 2009. The increase was primarily attributable to increased unit sales of semiconductors used in storage product applications and higher revenues from the licensing of our intellectual property. Revenues in Asia increased by $97.3 million, or 8.6%, in 2010 as compared to 2009. The increase in Asia was primarily attributable to increased unit sales of semiconductors used in storage andlegacy networking product applications. Revenues in Europe and the Middle East increased by $70.4 million, or 48.6%, in 2010 as compared to 2009. The increase was primarily attributable to increased unit sales of semiconductors used in storage and networking product applications.products.

Significant Customers:

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

Revenues by Product GroupsGroups:

The following table presents our revenues by product groups:

RevenuesThe decrease in revenues from storage products increased by $185.0 million, or 14.2%, in 20112013 as compared to 2010, and by $168.9 million, or 14.9%, in 2010 as compared to 2009. The increases in both periods were primarily2012 was attributable to increasedlower unit demand forsales of semiconductors used in hard disk drives server RAID adapters and storage area network applications.

Revenues from networking products decreased by $19.6 million, or 4.1%, in 20112013 as compared to 2010.2012, when sales of those products

temporarily benefited from the recovery from the flooding in Thailand. The decrease was partially offset by increased unit sales from the ramping of flash memory-based storage products in 2013. The increase in revenues from storage products in 2012 as compared to 2011 was primarily dueattributable to a decrease inhigher unit sales of semiconductors used in networking product applications. Revenueshard disk drives, as a result of the recovery from the Thailand flooding, and an increase in sales of new products to existing customers. The increase was also the result of higher unit sales of flash storage processors due to the acquisition of SandForce.

The decrease in revenues from networking products increased by $88.5 million, or 23.0%, in 20102013 as compared to 2009. The increase2012 was primarily attributable to an increase inthe result of lower unit sales of semiconductors used in our older networking product applications.products, offset in part by increased sales from the ramping of new products with existing customers. The decrease in revenues from networking products in 2012 as compared to 2011 was primarily the result of lower unit sales of semiconductors used in older networking products.

Other revenues consist primarily of fees from the licensing of our intellectual property. The increase of $8.9 million, or 9.4%, in 2011other revenues in 2013 as compared to 2010 and the increase of $35.9 million, or 61.5%, in 2010 as compared to 2009 were2012 primarily due to increased licensing activity andresulted from higher intellectual property rights settlements.licensing revenues in 2013.

Gross Profit Margin

Gross profit as a percentageVarious factors affect and may continue to affect our product gross margin. These factors include, but are not limited to, changes in our production mix and volume of revenues remained flatproduct sales, the timing of production ramps and the margin structures of new products, the positions of our products in 2011 as compared to 2010. Decreased amortizationtheir life cycles, the effects of intangible assets benefited our gross margin in 2011, which was offset by higher costscompetition, the price of commodities used in our products, a one-time inventory chargeprovisions for excess and obsolete inventories, changes in the costs charged by foundry, assembly and test subcontractors, and amortization of $7.5 million as a result of the flooding in Thailand, an unfavorable shift in product mix, and the absence of a gross margin benefit recognized in 2010 upon termination of a contract associated with our former Mobility Products Group.acquired intangible assets.

Gross profit margin as a percentage of revenues increased by 1.9% in 2013 as compared to 47.1% in 2010 from 40.2% in 2009.2012. The increase was primarily dueattributable to continued improvement in operational efficiencies. The increase was offset in part by decreased revenues with a favorable shift in product mixsimilar level of fixed costs.

Gross profit margin as a resultpercentage of revenues increased by 2.1% in 2012 as compared to 2011. The increase was primarily attributable to increased revenues from our higher margin intellectual property licensing,products and higher revenues enabling better absorption of fixed costs. The increases were offset in part by a decrease in intangible asset amortization and more favorable unit costs driven by higher volumes. The increase was also attributable to a benefit recognized upon termination of a contract associated with our former Mobility Products Group and the absence of a charge incurred in 2009 related to0.6% adverse effect on gross profit margin resulting from fair valuing inventories acquired as part of the 3ware RAID storage adapter business acquisition.from SandForce.

Research and Development

R&D expenses consistexpense consists primarily of employee salaries, contractor expenses and materials used in product development, costs related to third-party design tools and materials used in the design of custom silicon and standard products, as well as depreciation of capital equipment and facilities-related expenditures. In addition to the significant resources required to support hardware technology transitions, we devote significantto hardware development, we also devote resources to developing and enhancingthe development of software features and functionality to remain competitive.for our products.

The increase in R&D expense increased by $13.0 million, or 2.3%, in 20112013 as compared to 2010. The increase2012 was primarily attributable to higher compensation-related expenses and facility costs as a result ofresulting from headcount additions and increased material costs for R&D projects,to support product development efforts, offset in part by lower costs for shared development engineering projects due to higher contributionsfunding from customerscustomers.

The increase in R&D expense in 2012 as compared to 2011 was primarily attributable to higher compensation-related expense resulting from headcount additions associated with existing R&D projects. As a percentthe acquisition of revenues, R&DSandForce and headcount additions to support our ongoing product development efforts, higher performance-based compensation expense declined from 30.1% in 2010 to 28.2% in 2011 as a result of higher revenues in 2011 as comparedimproved financial performance and increased spending to 2010.

R&D expense increased by $54.3 million, or 10.7%, in 2010 as compared to 2009. The increase was primarily due to the restoration in 2010 of certain employee compensation-related expenses that we reduced in

2009. The increase was also attributable to increased compensation-related expenses and facility costs as a result of headcount additions in China and India in 2010 and higher headcount from the acquisition of the 3ware RAID storage adapter business in April 2009. As a percent of revenues, R&D expense declined from 32.3% in 2009 to 30.1% in 2010 as a result of higher revenues in 2010 as compared to 2009.support new design wins.

Selling, General and Administrative

SG&A expense increased by $16.3 million, or 5.8%,consists primarily of compensation related expenditures for sales, marketing and administrative employees, costs related to third party services, depreciation and facilities-related expenditures.

The decrease in 2011SG&A expense in 2013 as compared to 2010. The increase2012 was primarily dueattributable to increases in litigation costs and higher sales and marketing expenses, including higherlower compensation-related expenses as a result of headcount additions, to support increased revenues and design activity. These increases were partially offset by lower stock-based compensation and decreases in general and administrative expenses as a result of our continuing focus on control of expenses. As a percent of revenues,

The increase in SG&A expense declined from 14.9% in 2010 to 14.5% in 2011 as a result of higher revenues in 20112012 as compared to 2010.

SG&A expense increased by $22.2 million, or 8.6%, in 2010 as compared to 2009. The increase2011 was primarily dueattributable to the restoration in 2010 of compensation-related expenses that were reduced in 2009, an increase in sales commissions and other sales-related expenditures as a result of increased design wins and revenues in 2010, and higher compensation-related expendituresexpense resulting from headcount additions associated with the acquisition of the 3ware RAID storage adapter business in April 2009. The increase was offset in part by reductions in spendingSandForce and headcount additions to support revenue growth, along with higher performance-based compensation expense as a result of maintaining tighter expense controls. As a percent of revenues, SG&A expense declined from 16.3% in 2009 to 14.9% in 2010 as a result of higher revenues in 2010 as compared to 2009.improved financial performance.

Restructuring of Operations and Other Items, net

Restructuring:

In 2011, 20102013, 2012 and 2009,2011, we initiated restructuring plans designed to focus our business on targeted end markets and to improve operational efficiency and financial results. These plans primarily involved the termination of employees and consolidation of facilities. The restructuring charges recorded in conjunction with these plans primarily represented severance and costs related to the continuation of certain employee benefits, exit costs for facility consolidations and closures, contract termination costs, research and development program cancellations, and asset impairment charges.

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

(c)	Includes a $4.5 million intellectual property write-off due to a customer program cancellation.

Interest Expense, Other Items:

We recorded net charges of $29.4 million and $26.1 million for other items during 2013 and 2012, respectively, primarily for litigation settlements and acquisition-related costs. We recorded a net charge of $7.2 million for other items during 2011, primarily for transition service agreement costs associated with the sale of the external storage systems business, offset by a reversal of a sales and use tax related liability.

Interest Income and Other, net

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

Interest expense decreased by $5.6 millionThe decrease in 2011interest income in 2013 as compared to 20102012 primarily resulted from lower returns on investments in 2013 as compared to 2012. The decrease in interest income in 2012 as compared to 2011 primarily resulted from 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 than in 2011.

Other income, net, in 2013 primarily included $6.1 million of insurance proceeds we received for covered losses related to the 2011 Thailand flooding. We do not expect any further insurance recoveries related to the Thailand flooding. Other income, net in 2012 primarily included $10.8 million of insurance proceeds we received for covered losses from the 2011 Thailand flooding, $6.4 million of income for services provided under the transition service agreements associated with the sale of the external storage systems business, a $5.8 million gain as a result of the repayment ofre-measuring our 4% Convertible Subordinated Notespre-acquisition equity interest in May 2010. Interest expense decreased by $16.3 million in 2010 as comparedSandForce to 2009 asestimated fair value, and a result of the redemption of our 6.5% Convertible Subordinated Notes in June 2009 and the repayment of our 4% Convertible Subordinated Notes in May 2010.

Interest income decreased by $2.6 million in 2011 as compared to 2010 primarily as a resultgain on sale of lower interest rates in 2011 compared to 2010. Interest income decreased by $6.9 million in 2010 as compared to 2009 primarily as a result of lower cash balances and lower interest rates during 2010 compared to 2009.

non-marketable securities. Other income, net in 2011 primarily included $13.6 million of income for services provided under the transition service agreements entered into in connectionassociated with the sale of the external storage systems business.

Provision for/(Benefit from) Income Taxes

During 2013, we recorded an income tax provision of $13.1 million, which represents an effective tax rate of approximately 9.5% on our income before income taxes of $137.8 million. This rate differs from the U.S. statutory rate primarily because we have a full valuation allowance recorded against the U.S. deferred tax assets and lower tax rates in foreign jurisdictions. The income tax provision in 2013 also included a reversal of $23.3 million of liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $13.5 million and interest and penalties of $9.8 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

In December 2013, we entered into an Advance Pricing Agreement, or APA, with the Internal Revenue Service, or IRS, in connection with the valuation of intellectual property in conjunction with a cost sharing arrangement. This APA has resulted in an intercompany recognition of prepaid U.S. income in the current year. We have utilized our available net operating losses to offset this income. The use of net operating losses has resulted in a reduction of deferred tax assets and a corresponding reduction in the valuation allowance of $252.4 million and had no impact on the effective tax rate.

Management continues to monitor the realizability of our deferred tax assets. Historically, we have sustained losses from our U.S. operations and, as a result, have maintained a full valuation allowance against U.S. net deferred tax assets. We do not believe there is sufficient positive evidence to reach a conclusion that it is

more likely than not that we will generate sufficient future taxable income in the U.S. to realize the benefits of our deferred tax assets. Depending on future results and projected trends, it is reasonably possible that we may determine in the foreseeable future that it is more likely than not that a significant portion of our U.S. deferred tax assets will be realized, resulting in a release of a significant portion of the valuation allowance.

The American Taxpayers Relief Act of 2012 was signed into law on January 2, 2013. The act retroactively extended research credits for a two year period from January 1, 2012 through December 31, 2013. The provisions of the act did not have a material impact on our effective tax rate.

On September 13, 2013, the IRS and Treasury Department released final regulations related to the timing of deductibility of expenditures related to tangible property. These regulations apply to tax years beginning on or after January 1, 2014. We are currently assessing the impact of these regulations and do not expect that the application of these rules will have a material impact on our results of operations.

During 2012, we recorded an income tax benefit of $21.0 million, which represents an effective tax rate of approximately (12.0)% on our income before income taxes of $175.3 million. This rate differs from the U.S. statutory rate primarily due to the benefit realized from deferred tax assets not previously recognized in the U.S. and lower tax rates in foreign jurisdictions. The income tax benefit in 2012 included a tax benefit of approximately $42.4 million due to the partial release of the valuation allowance resulting from the net deferred tax liabilities recorded as part of the SandForce purchase price allocation. The income tax benefit in 2012 also included a reversal of $18.9 million of liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $9.4 million and interest and penalties of $9.5 million, as a result of the expiration of statutes of limitations in multiple jurisdictions.

During 2011, we recorded an income tax provision of $3.8 million, which represents an effective tax rate of approximately 4% on theour income before income taxes of $93.8 million. This rate differs from the U.S. statutory rate primarily due to the benefit realized from deferred tax assets not previously recognized in the U.S. and lower tax rates in foreign jurisdictions, which is partially offset by certain foreign earnings taxed in the U.S.jurisdictions. In addition, the income in discontinued operations resultsresulted in an intraperiod allocation of tax benefit of $11.7 million relatingrelated to a current-year loss in the domestic continuing operations.operations for the year ended December 31, 2011. The income tax provision in 2011 included $24.2 million of additional accrual for uncertain tax positions, offset by a reversal of $18.1 million inof liabilities for uncertain tax positions, which included interest and penalties as a result of the expiration of statutes of limitations in multiple jurisdictions.

During 2010, we recorded an income tax provision of $3.2 million, which represents an effective tax rate of approximately 9% on the income before income taxes of $37.6 million. This rate differs from the U.S. statutory rate primarily due to lower tax rates in foreign jurisdictions offset by certain foreign earnings taxed in the U.S. and an increase in valuation allowance against the U.S. deferred tax assets. The income tax provision in 2010 included $14.1 million of additional accrual for uncertain tax positions, offset by a reversal of $31.8 million in liabilities for uncertain tax positions, which included interest and penalties as a result of the expiration of statutes of limitations in multiple jurisdictions.

During 2009, we recorded an income tax benefit of $109.3 million, which represents an effective tax rate of approximately 64% on the loss before income taxes of $169.6 million. This rate differs from the U.S. statutory

rate primarily due to certain foreign earnings taxed in the U.S. and an increase in valuation allowance against the U.S. deferred tax assets. In addition, the income tax benefit in 2009 was primarily a result of a net reversal of $111.7 million in liabilities for uncertain tax positions, which included previously unrecognized tax benefits of $88.3 million and interest and penalties of $23.4 million, as a result of a settlement of a multi-year audit in a foreign jurisdiction, the expiration of various statutes of limitations and re-measurements of uncertain tax positions taken in prior periods based on new information. Lastly, the income in discontinued operations and other comprehensive income enable the realization of a tax benefit of $27.6 million relating to the 2009 loss in the domestic continuing operations.

With the exception of certain foreign jurisdictions, we believe it is not more likely than not that the future benefit of deferred tax assets will be realized.

Discontinued Operations

Discontinued operations consists of the results of the external storage systems business that we sold in 2011. Following is selected financial information included in income from discontinued operations:

DuringThere was no income or loss from discontinued operations for the years ended December 31, 2013 or 2012.

During the year ended December 31, 2011, and 2010, we recorded write-downsrecognized $40.9 million of $23.0 million and $44.1 million, respectively, of assets relatingrestructuring expense related to the external storage systems business. The 2011 write-downs primarily consisted of $10.5 million of identifiedbusiness as we terminated employees, closed several office locations, terminated contracts, discontinued various development projects and wrote off intangible assets including $9.0 millionand software due to the cancellation of current technology, $0.7 million of customer base and $0.8 million of in-process research and development. The 2011 write-downs also included $7.8 million of capitalized software and $3.7million of inventories and fixed assets. The 2010 write-downs primarily consisted of $25.4 million of capitalized software and $17.1 million of identified intangible assets, including $16.8 million of current technology and $0.3 million of trade names.development programs. Further, we released $21.0 million of deferred tax liabilities related to tax deductible goodwill in connection with the sale of the external storage systems business in 2011, which is included in the $9.0 million benefit from income taxes of $9.0 million.taxes.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Cash, cash equivalents, and short-term investments and cash generated from our operations are our primary source of liquidity. Short-term investments consist primarily of U.S. government and agency securities. 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 increased to $935.5$809.8 million as of December 31, 20112013 from $676.7$676.0 million as of December 31, 2010.2012. The increase was mainly due to proceeds from the sale of our external storage systems business and cash inflows generated from operating activities, offset in part by cash outflows for financinginvesting and other investingfinancing activities, as described below. On January 3, 2012, we used $319.2 million of cash in connection with the acquisition of SandForce.

Working Capital

Working capital increased by $182.6$115.7 million to $961.8$825.6 million as of December 31, 20112013 from $779.2$709.9 million as of December 31, 2010.2012. The increase was primarily attributable to the following:

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

Working capital increaseddecreased by $48.1$251.9 million to $779.2$709.9 million as of December 31, 20102012 from $731.1$961.8 million as of December 31, 2009.2011. The increasedecrease was primarily attributable to the following:

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

Operating Activities

During the year ended December 31, 2013, we generated $337.8 million of assetscash from held for sale to held and used because the held for sale criteria were no longer met at December 31, 2010, as well as decreases in deferred tax assets and other receivables; and