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July 26 (Bloomberg) -- LSI Corp., a maker of chips used in computer-disk drives, rose the most in three years after it posted higher-than-expected growth from a new business and said demand for its main product will recover in the fourth quarter.

LSI jumped 16 percent to $7.04 at the New York close, its biggest one-day increase since March 2009.

The Milpitas, California-based company yesterday forecast third-quarter sales of $620 million to $660 million, compared with an average analyst estimate of $650 million, according to data compiled by Bloomberg.

“The outlook wasn’t all that bad, a little bit lower than consensus but better than some investor expectations,” said Ruben Roy, an analyst at Mizuho Securities USA Inc. “You’ve got the bad news out of the way.”

The company said revenue from its acquisition of SandForce, which makes controller chips for solid-state disk drives, rose 42 percent in the second quarter from the preceding three months and sales in the business including SandForce will more than triple this year.

LSI’s main business is controllers for traditional spinning magnetic-disk-based computer hard drives. The company’s stock had fallen after its largest customer, Seagate Technology Plc, said on July 6 that quarterly sales and profit margin would miss its previous forecast, citing reduced hard-drive shipments.

LSI Chief Executive Officer Abhi Talwalkar yesterday said he expects shipments of hard disks to fall in the third quarter as customers reduced unused stockpiles, before returning to normal seasonal levels in the fourth quarter.

The stock has gained 18 percent this year.

To contact the reporter on this story: Ian King in San Francisco at

To contact the editor responsible for this story: Tom Giles at

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