Applied Materials: Surviving Hard Times

The world's largest chip equipment maker, Applied Materials Inc. (AMAT) announced its results for the quarter ended April 2009 on Tuesday (see conference call transcript). Sales dropped 53% y/y to $1.02 billion, its lowest levels since 2002, but were higher than the average Wall Street estimate of $905.3 million. Operating loss widen to $293 million from $196 million in the prior quarter. GAAP loss per share stood at $0.19 compared to an income of $0.22 in the year-ago quarter.

Results include pretax charges totaling $166 million, comprising of $77 million for equity investment impairments, $47 million for inventory write downs, $27 million for restructuring and asset impairment charges, and $15 million for bad debt provisions.

(Please note: Energy and Environmental Solutions (EES) revenue growth has been plotted on the secondary axis-RHS)

Source: Gridstone Research

New orders plunged 73% y/y and 28% q/q, dashing off hopes of any rebound in the next couple of quarters. Quarter ending backlog stood at $3.16 billion, down 31% y/y and 23% on a sequential basis.

Source: Gridstone Research

Energy and Environmental Solutions (EES) orders were down 45% y/y to $141 million. EES revenue is expected to decline in Q3 due to the reductions in the number of SunFab signoffs, and a continued slowing in crystalline silicon equipment spending.

Display orders dropped 97% y/y to $13 million. AMAT expects a flat growth in the global TV market for 2009, with display capital spending to be down by more than 50% for the year.

Silicon Systems Group (SSG) orders were down 76% y/y and up 5% q/q to $259 million. AMAT is seeing a slow uptick in the SSG end markets and expects orders to improve in Q3 sequentially.

(Please note: Energy and Environmental Solutions, and Display order growth has been plotted on the secondary axis-RHS)

Source: Gridstone Research

Guidance for Q3-FY09

Overall revenue is expected to be flat to down 15% q/q, with loss per share in the range of $0.06-0.14. SSG is expected to be flat to up 40%, while Services to be up by more than 5%. Display and EES revenue is expected to decline by approximately 50% and at least 30% respectively.

AMAT shares fell 2.5 % to $11.19 in after-hours trade on Tuesday from their close of $11.48 on NASDAQ.

Disclosures: No positions