UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended October 2, 2011July 1, 2012

OR

For the transition period from                        to                

Commission File Number: 1-10317

LSI CORPORATION

(Exact name of registrant as specified in its charter)

1621 Barber Lane

Milpitas, California 95035

(Address of principal executive offices)

(Zip code)

(408) 433-8000

(Registrant’s telephone number, including area code)

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. Yesþ 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). Yesþ No¨

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 Exchange Act). Yes¨ Noþ

As of November 4, 2011,August 1, 2012, there were 563,488,950557,562,166 shares of the registrant’s Common Stock, $.01 par value, outstanding.

LSI CORPORATION

FORM 10-Q

For the Quarter Ended October 2, 2011July 1, 2012

INDEX

FORWARD-LOOKING STATEMENTS

This Form 10-Q 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 II, “Item 1A. Item 1A-”Risk Factors” a number of factors that could cause our actual results to differ materially from our projections or estimates. 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.

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

LSI CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE INCOME

(In thousands)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

LSI CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

LSI CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

For financial reporting purposes, LSI Corporation (“LSI” or the “Company”) reports on a 13- or 14-week quarter with the year ending December 31. The thirdsecond quarter of 20112012 and 20102011 consisted of 13 weeks each and ended on October 2,July 1, 2012 and July 3, 2011, and on October 3, 2010, respectively. The first nine months of 2011 and 2010 consisted of approximately 39 weeks each. The results of operations for the three and nine monthsquarter ended October 2, 2011July 1, 2012 are not necessarily indicative of the results to be expected for the full year.

On January 3, 2012, the Company completed the acquisition of SandForce, Inc. (“SandForce”) for total consideration of approximately $346.4 million, net of cash acquired. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The acquisition was accounted for under the purchase method of accounting. Accordingly, the results of operations of SandForce and the estimated fair value of assets acquired and liabilities assumed were included in the Company’s condensed consolidated financial statements from January 3, 2012.

On May 6, 2011, the Company completed the sale of substantially all of its external storage systems business to NetApp, Inc. (“NetApp”). The results of the external storage systems business are presented as discontinued operations in the Company’s condensed consolidated statements of operations and, as such, have been excluded from all line items other than “income“Income from discontinued operations” for all periods presented. Since the first quarter of 2011, the Company operates in one reportable segment. Before it was sold, the external storage systems business was part of the Storage Systems segment. The results of the redundant array of independent disks (“RAID”) adapter business, which were formerly included in the Storage Systems segment, are now included in the Company’s remaining reportable segment.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, comprehensive income and cash flows for the interim periods presented. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.2011.

Recent Accounting Pronouncements

Pronouncements not yet effective:adopted:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued additional guidance on fair value measurements and related disclosures. The new guidance clarifies the application of existing guidance on fair value measurement for non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. ThisThe Company adopted this guidance is effective on a prospective basis for interim and annual periods beginning after December 15, 2011.in the first quarter of 2012. The adoption of this guidance isdid not expected to have any impact on the Company’s results of operations or financial position.

In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This guidance is effective on a retrospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance is not expected to have any impact on the Company’s results of operations or financial position.

In September 2011, the FASB amended the goodwill impairment guidance to provide an option for entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. After assessing the totality of events and circumstances, if an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performance of the two-step impairment test is no longer required. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The adoption of this guidance is not expected to have any impact on the Company’s results of operations or financial position.

Pronouncements adopted during the nine months ended October 2, 2011:

In October 2009, the FASB amended revenue recognition guidance on multiple-deliverable arrangements to address how to separate deliverables and how to measure and allocate arrangement consideration. The new guidance requires the use of management’s best estimate of selling price for the deliverables in an arrangement when a vendor does not have specific objective evidence of selling price or third party evidence of selling price. In addition, excluding specific software revenue guidance, the residual method of allocating arrangement consideration is no longer permitted, and an entity is required to allocate arrangement consideration using the relative selling price method. This guidance also expands the disclosure requirements to include both quantitative and qualitative information. The Company adopted this guidance in the first quarter of 2011. The adoption did not impact the Company’s results of operations or financial position.

In October 2009, the FASB issued guidance to clarify that tangible products containing software components and non-software components that function together to deliver a product’s essential functionality will be considered non-software deliverables and will be scoped out of the software revenue recognition guidance. The Company adopted this guidance in the first quarter of 2011. The adoption did not impact the Company’s results of operations or financial position.

In December 2010, the FASB issued guidance to clarify that, when presenting comparative financial statements for business combinations that occurred during the current year, a public entity should disclose revenue and earnings of the combined entity as though the business combinations had occurred as of the beginning of the comparable prior annual reporting period. The update also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The Company adopted this guidance in the first quarter of 2011.2012. The adoption did not impact the Company’s results of operations or financial position.

Note 2 — Stock-Based Compensation

Stock-Based Compensation Expense

The following table summarizes stock-basedIn May 2012, the Company’s 2003 Equity Incentive Plan was amended to increase the number of shares available for new awards to a total of 25 million, of which 15 million shares were available for restricted stock and/or restricted stock units (“RSUs”). In addition, the period during which incentive stock options can be granted was extended to February 9, 2022, and the maximum number of shares that may be issued upon exercise of incentive stock options was set at 25 million.

Stock-based compensation expense included in continuing operations, net of estimated forfeitures, related to the Company’s stock options, Employee Stock Purchase Plan (“ESPP”) and restricted stock unit awards:awards by expense category was as follows:

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce. Stock-based compensation expense for the six months ended July 1, 2012 included $4.5 million of expense related to the accelerated vesting of stock options and RSUs for certain SandForce employees in January 2012. Stock-based compensation expense for the three and six months ended July 1, 2012 also includes $3.3 million and $5.7 million, respectively, related to stock options and RSUs assumed.

The Company has issued RSUs that will not vest unless specified performance criteria are met. In the first quarter of 2012, the compensation committee of the board of directors authorized additional vesting of performance-based RSUs where the Company’s performance had been adversely affected as a result of the flooding that occurred in Thailand in the fourth quarter of 2011 and as a result, vesting levels would have been lower. The Company recognized $1.6 million and $6.0 million of stock-based compensation expense related to the additional vesting for the three and six months ended July 1, 2012, respectively. No executive officers were included in the group of employees that received additional vesting. Executive officers hold RSUs, the vesting of which depends on the Company’s performance compared to specified peer companies over a three-year period. Based on the Company’s latest available financial performance, the Company recognized $1.6 million and $4.0 million of stock-based compensation expense related to the executive officer performance grants for the three and six months ended July 1, 2012, respectively. There was no stock-based compensation expense related to the executive officer performance grants for the three or six months ended July 3, 2011.

Stock Options:Options

The fair value of each option grant is estimated as of the date of grant using a reduced-form calibrated binomial lattice model (“lattice model”). The following table summarizes the weighted-average assumptions that the Company applied in the lattice model:

The following table summarizes changes in stock options outstanding:

As of July 1, 2012, the total unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, was $46.8 million and is expected to be recognized over the next 2.3 years on a weighted-average basis.

Restricted Stock Units

The cost of service-based and performance-based RSUs is determined using the fair value of the Company’s common stock on the date of grant. For performance-based RSU expense, the Company also considers the probability that those RSUs will vest.

Service-based:

The vesting of service-based RSUs requires that the employees remain employed by the Company for a specified period of time.

ForThe following table summarizes changes in service-based RSUs outstanding:

As of July 1, 2012, the total unrecognized compensation expense related to service-based RSUs, net of estimated forfeitures, was $98.7 million and will be recognized over the next 2.9 years on a weighted-average basis.

Performance-based:

The vesting of performance-based RSUs is contingent upon the Company meeting specified performance criteria and requires that the employees remain employed by the Company for a specified period of time.

The following table summarizes changes in performance-based RSUs outstanding:

As of July 1, 2012, the total unrecognized compensation expense related to performance-based RSUs, net of estimated forfeitures, was $30.0 million and, if the performance conditions are fully met, will be recognized over the next 3 years.

A total of 9,117,372 shares of common stock were reserved for future issuance upon exercise of options outstanding and RSUs assumed in the SandForce acquisition. Those options exercisable as of October 2, 2011,and RSUs are included in the weighted-average remaining contractual term was 3.47preceding tables. The options vest over four years and 2.51 years, respectively, and the aggregate intrinsic value was $30.3 million and $13.5 million, respectively.have ten year terms. The RSUs vest over one to four years.

Employee Stock Purchase Plan:Plan

Compensation expense for the Company’s ESPP is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Under the ESPP, rights to purchase shares are granted during the second and fourth quarters of each year. A total ofThe Company issued 2.8 million and 2.9 million shares and 3.3 million shares were issued under the ESPP during the three months ended July 1, 2012 and July 3, 2011, and July 4, 2010, respectively. No shares related to the ESPP were issued during the three months ended October 2, 2011 or October 3, 2010. The following table summarizes the weighted-average assumptions that went intothe Company applied in the calculation of the fair value for the May 20112012 and May 20102011 grants:

Restricted Stock Awards:

The cost of service-based and performance-based restricted stock unit awards is determined using the fair value of the Company’s common stock on the date of grant. For performance-based restricted stock unit awards, the Company also considers the probability that those restricted stock units will vest.

Service-based:

The vesting requirements for service-based restricted stock units are determined at the time of grant and require that the employee remain employed by the Company for a specified period of time. As of October 2, 2011, the total unrecognized compensation expense related to these restricted stock units, net of estimated forfeitures, was $55.7 million and is expected to be recognized over the next 3.1 years on a weighted-average basis. The fair value of the shares that were issued upon the vesting of service-based restricted stock units during the three and nine months ended October 2, 2011 was $1.0 million and $12.0 million, respectively.

The following table summarizes changes in service-based restricted stock units outstanding:

Performance-based:

The vesting of performance-based restricted stock units is contingent upon the Company meeting specified performance criteria and requires that the employee remain employed by the Company for a specified period of time. As of October 2, 2011, the total unrecognized compensation expense related to performance-based restricted stock units was $15.9 million and, if the contingencies are fully met, is expected to be recognized over the next 3 years.

The following table summarizes changes in performance-based restricted stock units outstanding:

Note 3 — Common Stock Repurchases

On March 9, 2011, the Company’s Boardboard of Directorsdirectors authorized a stock repurchase program of up to $750.0 million of itsthe Company’s common stock. The repurchasesAs of July 1, 2012, $75.0 million remained available under this program are funded from the proceeds of the sale of the external storage systems business, available cash and short-term investments. Under this program, thestock repurchase program. The Company repurchased 11.217.9 million shares for $75.0$138.0 million during the three months ended October 2, 2011July 1, 2012 and 67.522.5 million shares for $471.8$176.2 million during the ninesix months ended October 2,July 1, 2012. The Company repurchased 41.6 million shares for $300.0 million during the three months ended July 3, 2011 and 56.3 million shares for $396.8 million during the six months ended July 3, 2011. The repurchasedRepurchased shares wereare retired immediately after the repurchases wereare completed. Retirement of the repurchased shares is recorded as a reduction of common stock and additional paid-in capital. AsOn August 1, 2012, the Company’s board of October 2, 2011, $278.2directors authorized the repurchase of up to an additional $500.0 million remained available under this stock repurchase program.of the Company’s common stock.

Note 4 — Restructuring Asset Impairment Charges and Other Items

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

In connection with the sale of the external storage systems business and other exit-related activities, the Company initiated certain restructuring actions. The results of those actions are included in discontinued operations and are summarized below:

The following table summarizes the significant activity within, and components of, the Company’s restructuring obligations from continuing operations and discontinued operations:obligations:

Note 5 — Business Combination

Acquisition of SandForce

On January 3, 2012, the Company completed the acquisition of SandForce. SandForce was a provider of flash storage processors for enterprise and client flash solutions and solid state drives. The Company acquired SandForce to enhance its position in storage technology solutions.

Total consideration consisted of the following (in thousands):

In connection with the SandForce acquisition, the Company assumed stock options and RSUs originally granted by SandForce and converted them into LSI stock options and RSUs. The portion of the fair value of partially vested equity awards associated with prior service of SandForce employees represents a component of the total consideration for the SandForce acquisition, as presented above. Stock options assumed were valued using a binomial lattice model calibrated to the exercise behavior of LSI’s employees. RSUs were valued based on LSI’s stock price as of the acquisition date.

Prior to the acquisition, the Company held an equity interest in SandForce. The Company determined the fair value by applying the per share value of the contractual cash consideration to the SandForce shares held by the Company immediately prior to the acquisition. The fair value of the Company’s pre-acquisition investment in SandForce represents a component of total consideration, as presented above. As a result of re-measuring the pre-acquisition equity interest in SandForce to fair value, the Company recognized a gain of $5.8 million, which was included in interest income and other, net, for the six month period ended July 1, 2012.

The allocation of the purchase price to SandForce’s tangible and identified intangible assets acquired and liabilities assumed was based on their estimated fair values.

The purchase price has been allocated as follows (in thousands):

The goodwill is primarily attributable to the assembled workforce of SandForce and synergies and economies of scale expected from combining the operations of LSI and SandForce. The goodwill recognized is not deductible for tax purposes.

Identified intangible assets were comprised of the following:

The allocation of the purchase price to identified intangible assets acquired was based on the Company’s best estimate of the fair value of such assets. Fair value for acquired identified intangible assets is determined based on inputs that are unobservable and significant to the overall fair value measurement. As such, acquired intangible assets are classified as Level 3 assets.

The fair value of each of the acquired identified intangible assets was determined using a discounted cash flow methodology. The cash flows for each category of identified intangible assets represent the estimated incremental effect on the Company’s cash flows directly attributable to that intangible asset over its estimated remaining life. Estimated cash flows represent expected incremental revenues, net of returns on contributory assets and after considering estimated incremental operating costs and income taxes. Discount rates ranging from 12.9% to 17.9% were used based on the cost of capital, adjusted to reflect the specific risk associated with each of the cash flows.

Current technology represents the fair value of SandForce products that had reached technological feasibility and were a part of its product offering. Customer relationships represent the fair values of the underlying relationships with SandForce’s customers.

In-process research and development (“IPR&D”) represents the fair value of incomplete research and development projects that had not reached technological feasibility as of the date of the acquisition. At the time of acquisition, SandForce had IPR&D related to its next generation flash storage processor (the “Griffin project”). At July 1, 2012, expected costs to complete the Griffin project are approximately $24 million through its anticipated completion date in 2013. Total revenues for the Griffin project are expected to extend through 2018. The acquisition date fair value of the Griffin project will be either amortized or impaired depending on whether the project is completed or abandoned.

From January 3, 2012 through July 1, 2012, the Company recognized approximately $77.0 million of revenues related to the SandForce business. In addition, during the six months ended July 1, 2012, the Company recognized $8.4 million of acquisition-related costs included in restructuring of operations and other items, net, related to SandForce. It is impracticable to determine the effect on net income resulting from the SandForce acquisition for the six months ended July 1, 2012, as the Company immediately integrated SandForce into its ongoing operations. As such, the impact of SandForce is not separable from the Company’s consolidated results of operations.

Historical pro forma results giving effect to the acquisition have not been presented because such effect is not material to the prior period financial results.

Note 6 — Benefit Obligations

In 2007, the Company acquired Agere Systems Inc. (“Agere”). The Company has pension plans covering substantially all former Agere Systems Inc. (“Agere”) U.S. employees, excluding management employees hired after June 30, 2003. Retirement benefits are offeredprovided under defined benefit pension plans, which include a management plan and a represented plan. The payments under the management plan are based on an adjusted career-average-pay formula or a cash-balance program. The cash-balance program provides for annual company contributions based on a participant’s age and compensation and interest on existing balances. It covers employees of certain companies acquired by Agere since 1996 and management employees hired after January 1, 1999 and before July 1, 2003. The payments under the represented plan are based on a dollar-per-month formula. Since February 2009, there have been no active participants under the represented plan. The Company also has a non-qualified supplemental pension plan in the U.S. that principally provides benefits based on compensation in excess of amounts that can be considered under a tax qualified plan. The Company also provides post-retirement life insurance coverage under a group life insurance plan for former Agere employees excluding participants in the cash-balance program and management employees hired after June 30, 2003. The Company also has pension plans covering certain international employees.

Effective April 6, 2009, the Company froze the U.S. management defined benefit pension plan. Participants in the adjusted career-average-pay program will not earn any future service accruals after that date. Participants in the cash-balance program will not earn any future service accruals, but will continue to earn 4% interest per year on their cash-balance accounts.

The following table summarizes the components of the net periodic benefit cost/(credit):cost or credit: