By Gabriel Madway

SAN FRANCISCO, Oct 28 (Reuters) - LSI Corp reported better-than-expected results on good demand across all its businesses and set a forecast for the current quarter above Wall Street's estimates, sending its shares up 7 percent on Wednesday.
The results from LSI, whose chips are used in hard drives and other networking hardware, are the latest positive sign from the semiconductor industry as demand for technology products begins to recover.
About 80 percent of LSI's sales are tied to business spending, where the company is seeing signs of improvement.
Analysts are expecting businesses to begin upgrading aging technology hardware starting next year, boosting sales of IT equipment.
Chief Executive Abhi Talwalkar said IT demand is stronger, and the company's end markets are stabilizing.
"We know that storage-related products and storage systems will be at the top of the list relative to IT spending (next year)," he told Reuters in an interview.
LSI forecast earnings excluding items for the current quarter of 7 to 13 cents a share on revenue of $605 million to $645 million.
Wall Street was expecting earnings of 6 cents a share on revenue of $587.5 million.
Kaufman Bros analyst Suji De Silva said LSI sells into a market "that tends to have a good buying pattern in the second half of the year."
Hard drive makers such as Seagate Technology have posted better-than-expected results this earnings season, as the PC market begins to recover from lows seen earlier in the year.
Seagate, together with International Business Machines , accounted for about one-third of LSI's sales last fiscal year.
LSI merged with Agere Systems in a $4 billion deal in 2007 and the company has since moved to cut costs and divest consumer-focused businesses, such as cellphone chips and video chips.
LSI reported net income of $52.5 million, or 8 cents a share, in the third quarter ended Oct. 4, up from $11.4 million, or 2 cents a share, in the year-ago period.
Excluding items, LSI earned 18 cents a share, ahead of the average analyst estimate of 4 cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell 19 percent to $578.4 million, above the Wall Street target of $555.7 million.
Shares of Milpitas, California-based LSI rose 7 percent to $5.34 after closing at $4.99 on the New York Stock Exchange.

(Reporting by Gabriel Madway; Editing by Gary Hill and Matthew Lewis)

((gabriel.madway@thomsonreuters.com; +1 415 677 2536; Messaging: gabriel.madway.thomsonreuters.com@reuters.net)) Keywords: LSI/ (See http://blogs.reuters.com/mediafile/ for Media and Technology -- Reuters' media and technology blog.)

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