(RTTNews) - Wednesday, Microchip manufacturer, LSI Corp. (LSI: News ) reported an increase in profit for the third quarter, on a tax benefit related to the settlement of a multi-year foreign tax audit. Both earnings and revenues came in ahead of Street estimates.

LSI's third quarter net income increased to $52.48 million or $0.08 per share, compared with $11.37 million or $0.02 per share in the year-ago period.

Non-GAAP net income for the quarter was $119 million or $0.18 per share, compared with $94 million or $0.14 per share in the year-ago period. Third quarter GAAP results included a $65 million tax benefit or $0.10 per share, primarily related to the settlement of a multi-year foreign tax audit.

On average, eleven analysts polled by Thomson Reuters expected the company to earn $0.04 per share for the quarter. Analysts' estimates typically exclude special items.

The Milpitas, CA based company that makes chips for networking and storage devices said revenues for the third quarter declined 11% to $578 million from $714 million reported in the third quarter of 2008. Twelve Wall Street analysts estimated revenues of $555.65 million for the quarter. Business segment-wise, Semiconductor revenues declined to $371.8 million from $500.4 million year-ago, while Storage systems revenues declined to $206.6 million from $213.9 million in the prior year period.

LSI's gross margin as a percentage of revenues declined to 39.0% from 41.6% in the prior year period.

Third quarter GAAP net income included a net charge of $66 million from special items, consisting primarily of $43 million of amortization of acquisition-related items, $15 million of stock-based compensation expense, $6.6 million in net restructuring and other items, and $1.7 million in write-down of investments.
Cost of revenues significantly declined to $315.06 million from $369.14 million in the year-ago quarter.

The total cost of research and development increased to $151.04 million from $169.55 million incurred in the prior year period. The company's total selling, general and administrative expenses declined to $82.17 million from $103.74 million year-ago.

"With the economy demonstrating signs that a modest recovery is underway, our third quarter revenues exceeded our guidance range, supported by healthy sequential growth across our businesses overall," said Abhi Talwalkar, LSI president and chief executive officer.

The company said that cash and cash equivalents at the end of the period were $705.38 million, compared with $784.91 million at the end of the end of the year-ago period.

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