Applied Materials: Plans for Layoffs, Cautious Outlook on Solar

By Ucilia Wang

Applied Materials (AMAT) plans to cut about 10-12 percent of its workforce and expects it solar business to break even at least in the coming year.

The factory equipment maker, which reported its fourth fiscal quarter earnings Wednesday, remains cautious about the pace of the economic recovery and its customers' willingness to place more orders.

"I would say we haven't recovered yet. We still have a fragile global economy," said Mike Splinter, CEO of Applied, during a conference call. "We have a customer base that has consolidated substantially."

Santa Clara, Calif.-based Applied is the world's largest semiconductor equipment company, and it branched into solar in recent years. The company sells tools for making crystalline silicon wafers and cells, as well amorphous silicon panels.

The company already instituted a series of cost-cutting measures earlier this year, including layoffs and factory shutdowns.

Splinter said Applied would have to do more to curb costs and boost sales. The company plans to cut 1,300 to 1,500 positions worldwide in the next 18 months and streamline its supply chain. Overall, these steps should lead to $450 million in savings, the company said.

Many of Applied's customers have suffered setbacks in the past year as supply greatly exceeded demand. At least one of its solar customers cut its order dramatically, from $1.9 billion to $250 million.

Manufacturers have reported anywhere from 30 percent to 50 percent drop in solar panel pricing over the past year. Crystalline silicon equipment dominates the market today, and pricing of its key material, silicon, has crashed.

Splinter said the solar market has improved. The price drop has slowed in recent months as demand, particularly in Germany, picked up. But he also mentioned briefly that the pricing decline in the crystalline silicon equipment market has slowed demand for the competing thin film technologies.

Outlook for 2010 remains murky, said Splinter when financial analysts asked him why he isn't projecting a better sales outlook for the company's solar business.

"What we are concerned right now is how fast the [silicon] wafering expansion is going to occur," Splinter said. "If wafering orders start to come in, then we know the cell orders aren't far behind."

To boost its offering in the crystalline silicon segment, Applied recently bought Advent Solar. Advent Solar was developing ways to make solar cells more efficient at converting sunlight into electricity. It also had technology that it said would completely automate the process of assembling cells into panels.

Applied doesn't expect to offer Advent's technology to its customers soon, however. The company needs to complete the technology development work before marketing it, and that's likely to take place in 2011, Splinter said.

Applied posted a net income of $138 million, or 10 cents per share, on a revenue of $1.53 billion for the fiscal fourth quarter.

For fiscal 2009, the company reported a net loss of $305 million, or 23 cents per share, on a revenue of $5.01 billion. For fiscal 2008, the company posted a net income of $960.7 million, or 70 cents per share, on a revenue of $8.1 billion.

Comments

[William M. ...:]

Solar tax credit raised to 30% this year, prices tumble but so do sales. Oil going from $40 to $80. And still Solar struggles. And with notebooks and laptop unit sales booming so too are intel chips sales, yet AMT has done nothing but hang around $12-14 for a decade. Just more sad employment news....another 10% of a companies work-force layoff announcement.

Nov 19 01:38 PM

[Windsun33:]

More good news about the so-called "green jobs"...

Nov 19 03:17 PM

[Moon Kil Woong:]

AMAT's news is not inspiring for semis. BAC's downgrade of the semi industry is prescient and correct. Cap-Ex spending buy businesses is not resurgent (how can it be with continued layoffs) and aside from netbooks growing by leaps and bounds the computer market is not as lusterous as one might imagine after hearing Intel's pep rally.

Congrats to an insigtful analyst for once. Although he may be playing the end of the holiday season ramp that winds up by the beginning of November, I think he is on to something.

As for the broader market, William is right, sectoral fundamentals mean little in this bubble rally. All that really matters is if the government and Fed keep pouring hundreds of billions in the market and devaluing the dollar. Nothing can countermand such strong bubble mechanics save inflation (signalling the fact it all must end soon) and/or a refusal by anyone to buy dollars or US Treasuries.

Nov 20 12:27 AM