North Coast Solar Stocks

November 11, 2009

Applied Materials sees turnaround but cuts jobs

Filed under: AMAT — Tags: , , , , , , — Jason @ 7:47 pm

Wed Nov 11, 2009 7:47pm EST

* Q4 10 cents/share vs 3 cents/share estimate

* Says to slash up to 1,500 jobs, cut costs in fiscal 2010

* Seeing early signs of turnaround in chip business

By Poornima Gupta

SAN FRANCISCO, Nov 11 (Reuters) – Applied Materials Inc (AMAT), the world’s largest producer of chip-making gear, said on Wednesday that its microchip business was starting to turn around and posted its first quarterly profit in a year, but it plans to cut as much as 12 percent of its workforce.

Stung by a severe decline in the sales of its core semiconductor manufacturing equipment, Applied Materials has moved aggressively into solar equipment to spur growth. But that market has also been pinched by the economic downturn.

Looking forward, the company expects net sales to increase 30 percent in fiscal 2010 and estimated earnings for the first quarter of between 4 cents and 8 cents per share, including restructuring charges. Analysts on average forecast a profit of 6 cents a share for the first quarter, according to Thomson Reuters I/B/E/S.

Applied Materials Chief Executive Mike Splinter also said the company saw improvement in the solar photovoltaic market during the fourth quarter, with module price decline slowing and financing opportunities gradually improving.

Germany remained a “bright spot” in the crystalline silicon rooftop solar market and China a growing area for such products, Splinter said.

But he added that near-term market conditions were challenging for the company’s thin-film photovoltaic customers.

“In calendar 2010, we expect worldwide solar PV installations to be up over 40 percent, with solar representing one of Applied’s key growth opportunities over the next several years,” Splinter said.

JOB, COST CUTS IN NEXT 18 MONTHS

The company plans to cut up to 1,500 jobs, or up to 12 percent of its global workforce, over 18 months to reduce costs.

Applied Materials said the cuts and other restructuring in fiscal 2010 are expected to achieve total annualized cost savings of about $450 million when completed.

Applied Materials shares rose nearly 2.5 percent to $13.58 in after hours trading immediately following the results, but later fell to $13.35. The shares had closed about 2 percent higher at $13.25 on the Nasdaq during the regular trading session.

The company said net income fell 40 percent in the fourth quarter to $137.9 million, or 10 cents a share, compared with a year-ago net profit of $231.1 million, or 17 cents a share. Revenue fell to $1.53 billion during the quarter from $2.04 billion a year ago.

Analysts on average forecast a profit of 3 cents a share and revenue of $1.32 billion, according to Thomson Reuters I/B/E/S.

In its semiconductor business, gross margins exceeded 50 percent in the quarter, the company said.

Applied Materials Chief Financial Officer George Davis said in an interview that the company saw a very strong uptick in its highest-margin businesses, namely its semiconductor capital equipment and display businesses, during the quarter.

Davis also said there were signs of improvement in the economy, with customers displaying more confidence in investing in their businesses.

Earlier this month, Applied Materials said it acquired privately-held Advent Solar — which has technology that streamlines the assembly of photovoltaic solar panels — in a deal it hopes will cut costs in its solar business.

Splinter said on the conference call following the results that he does not expect any “meaningful sales” from the acquisition until 2011.

“We need to finish up the development of the capability and then get it into the marketplace,” he added.

(Additional reporting by Laura Isensee in Los Angeles; editing by Andre Grenon)

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