Applied Materials posts loss, orders down

Feb. 12, 2003 – Santa Clara, CA – Applied Materials Inc. reported a quarterly net loss on Tuesday exacerbated by microchip makers’ diminished plans to build and upgrade chip factories and a charge related to layoffs.

The company posted a profit of $6.2 million excluding the charge, but forecast earnings for its current quarter at the lower end of Wall St. expectations.

Blaming a marketplace jittery over a possible war with Iraq and hesitant to spend on new chip-building equipment when sales of electronics are weak, the company said revenue would rise slightly in the second quarter, reported Reuters. It also said orders would rise but declined to say by how much.

“There’s a lot of identified business, but you just can’t predict when a customer will sign a purchase order,” CEO James Morgan said.

During a call with analysts and investors, company executives also refused to rule out further cost cutting, including job cuts, if business conditions fail to improve.

Applied Materials stock fell about 3% in after-hours trading to $11.56, from a 4:00 p.m. (EST) close of $11.94 on NASDAQ.

Some chipmakers that Applied Materials supplies have been facing problems raising enough capital to begin ambitious projects to build new factories or install next-generation tools, the company said. “You could boil that down to Moore’s Law hitting a financial wall,” said Byron Walker, the chip equipment analyst for UBS Warburg.

Applied Materials said orders in 1Q fell 35% from 4Q02 to $1.02 billion, a decline the company warned about at the end of January. Orders can be a good indication of what revenue will be several months ahead.

Before a $99 million charge for job cuts the company discussed in November, Applied Materials reported a 1Q profit of $6.2 million, which equated to break-even on a per share basis. Including charge, it reported a loss of $65.7 million, or $0.04/share, in the quarter, which ended Jan. 26.

Analysts were expecting Applied Materials to report results in the range of break-even to $0.03/share, with an average estimate of $0.02/share, according to Multex. Revenue was expected to be in the range of $1.1 to $1.2 billion, with an average estimate of $1.15 billion.

Revenue rose to $1.05 billion from $1 billion a year ago, but fell from $1.45 billion in 4Q.

The 35% drop in 1Q orders comes as the largest chipmakers, like Intel Corp., cut capital spending budgets from the ambitious levels of years past. “There’s only a handful of companies ordering,” said Mark FitzGerald, the semiconductor equipment analyst for Banc of America Securities. “It’s just catch as catch can.”

For 2Q, Applied Materials said it expects earnings of $0.01 or $0.02/share.

Morgan said the company does not expect a near-term rise in semiconductor capital spending, and said the company would continue to cut costs “as necessary.” Part of those cost cuts will take the form of a temporary shut-down in the company’s operations. Applied Materials said it would shut down for two weeks in its current quarter.


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