November 30, 2012 – Applied Materials this week said it will combine its Display and Energy and Environmental Solutions (EES, essentially its solar tech) under one exec: Ali Salehpour, who was most recently a SVP at KLA-Tencor. This change also will usher out the current top execs in those business units, Mark Pinto (EVP/GM of EES) and Tom Edman (group VP/GM of AGS), who will both be leaving the company "after assisting in a smooth leadership transition."
"We are optimizing our worldwide organization to more effectively and efficiently address the dynamic markets in which we operate," stated Applied chairman/CEO Mike Splinter. "By bringing together these two business units, we believe we can better support our customers’ roadmaps and advance our technology for large-area applications."
Two weeks ago in AMAT’s fiscal 4Q12 conference call, Splinter acknowledged the "extremely weak market environment for display and solar" with very little investment activity happening. "Until we see clearer signs that solar equipment demand is recovering, we will take additional steps to reduce our cost structure and associated losses." (He also said business conditions should improve entering 2013 … but moments later in that same call CFO George Davis said AGS sales would be down -15% to -25% in fiscal 1Q13, and EES sales would be off by more than -30%.) Company president Gary Dickerson expanded later on in the call, referencing a reduction in operating expenses "significantly beyond our previously announced plans for this business" as well as a workforce restructuring (which was separately announced in October and interpreted by industry watchers as a de-emphasis of both EES/solar and display businesses). While stating confidence in solar as a long-term growth driver for AMAT, asserting it could gain $100M in revenues for each industrywide GW of newly added capacity, "as long as the current market conditions exist we will significantly scale back our investment in this business," Dickerson said.
Pinto has been with Applied since 2004, serving as CTO from then until 2010. He initiated the company’s efforts in solar and solid-state lighting, which led to the formation of the EES division; he also once led the company’s Displays business. Edman spent 10 years with Applied Films, serving as president and CEO from 1998 to 2006, when Applied Materials acquired it.
The departure of both execs, and combining the two profit-dragging divisions under one reporting structure, is just the start of "a more serious restructuring of the divisions [… and] evaluation of the market opportunities and the divisions’ cost," surmises Barclays analyst CJ Muse. He notes, though, that AMAT hasn’t formally changed its previous EES plan of ~$400M-$500M breakeven levels, and Muse sees no improved visibility here until the company’s March Analyst Day.