  LSI +61 303 is one of the few X-ray binaries with Be star companion from
which both radio and high-energy gamma-ray emission have been observed. We
present XMM-Newton and INTEGRAL observations which reveal variability of the
X-ray spectral index of the system. The X-ray spectrum is hard (photon index ~
1.5) during the orbital phases of both high and low X-ray flux. However, the
spectrum softens at the moment of transition from high to low X-ray state. The
spectrum of the system in the hard X-ray band does not reveal the presence of a
cut-off (or, at least a spectral break) at 10-60 keV energies, expected if the
compact object is an accreting neutron star. The observed spectrum and spectral
variability can be explained if the compact object in the system is a rotation
powered pulsar.
