LSI sells external storage business to NetApp for $480m

US electronics firm LSI has agreed to sell its external storage business to NetApp for $480m (£280m) in cash, as the company looks to re-focus its efforts on the semiconductor market.

NetApp will purchase the entire LSI external storage systems business, including the Engenio product range, under the terms of the agreement.

The business generated revenues of $705m (£438m) in 2010, and most of LSI's storage-based employees are expected to join NetApp, the firms said in a joint statement.

Meanwhile, LSI will retain its adapter business, which develops the Megaraid and 3ware storage controllers and software for direct-attached storage environments.

LSI expects to reduce operating expenses by up to $40m per quarter after the sale, and anticipates strong revenue growth in its semiconductor business.

"We're excited by the opportunities we have been pursuing in our semiconductor business and are well positioned at the forefront of a strong pipeline of design win ramps that we expect to drive top line growth," said Abhi Talwalkar, LSI president and chief executive.

"Going forward as a pure-play storage and networking semiconductor company, we believe we can accelerate the achievement of our current business model, establish a richer business model target, and deliver greater long-term shareholder value."

The semiconductor market rebounded last year after hitting rock bottom in 2009. Market research firm iSuppli noted that sales peaked at £194bn at the end of last year on the back of strong DRAM and NAND Flash memory sales.

Global sales of storage software, meanwhile, increased to £7.7bn last year after five consecutive quarters of growth, IDC noted.