LSI (LSI) shares are lower today after Merrill Lynch analyst Mark Heller cut his rating on the stock to Neutral from Buy. In making the call, Heller pointed to last night’s earnings news from Seagate (STX), which accounts for 20% of LSI’s revenue. He notes that Seagate’s sales were light, while inventory jumped 30%. (For the reasons why, see the post on my interview with Seagate CEO Bill Watkins.)

Heller also contends that LSI is likely to lose some market share at Seagate to Marvell (MRVL) in enterprise controllers, a factor that “will be a drag on revenues for the next several quarters.”

Heller says he now sees “limited upside to the stock.”

LSI today is down 37 cents, or 6.9%, at $5.