Analyst: Applied faces layoffs, product cuts
Mark LaPedus
(08/10/2009 1:31 AM EDT)
URL: eetimes.com
SAN JOSE, Calif. -- Despite a rebound in business, Applied Materials Inc. is set for more layoffs and cost-cutting moves, according to an analyst.
The world's largest fab tool supplier--which is set to report its results this week--could see more cuts within its product lines, especially process control. Amid a horrible downturn, Applied recently backed away from another fab tool market, this time, the wafer track sector. It has exited the e-beam, ion implanter and other markets as well.
''We see potential for restructuring announcement, which we think involves headcount reductions as well as additional cost cutting efforts. Emphasis (is) on service and solar and a more focused effort in process control business,'' said C.J. Muse, an analyst with Barclays Capital, in a new report.
Even Applied's solar business is under pressure. Applied has made a big push in solar in recent times, but the overall solar industry is facing its first downturn.
''Our checks suggest management may be considering additional cost cuts, with everything potentially on the table including a particular focus on service and solar,'' Muse said. ''Considering the focus of the cuts would likely be across the entire company including solar, we do think this does beg question of the outlook for, in particular, Applied's solar business where we continue to have concerns regarding Applied's thin film technology.''
Applied's solar turnkey technology, SunFab, is ramping up in mass production at five or so companies after early glithes. Applied's traditional fab tool business remains under pressure as well.
''Our checks also suggest Applied is freezing R&D spend on process control and prioritizing its business based on profitability and likely reducing its product lines in the following areas -- review SEM, CD-SEM, U-Vision, mask inspection,'' he said.
''We believe that the service business could be broken up into a 'spares and specials' unit (likely to enjoy good margin, better than corporate average levels) and the customer service engineers that used to belong to AGS will probably enter the product business units,'' he added.
Still, Applied is seeing an upturn in business. ''For the July quarter, we expect Applied to report revenues of $950 million (minus 7 percent Q/Q), inline with consensus of $955 million and at the mid-point of management guidence of flat to minus 15 percent Q/Q,'' he said. ''This, in turn, drives our EPS loss estimate of (minus) $0.05, slightly above consensus of (minus)$0.08.''
There is good--and bad--news. ''The key positive feature is silicon, where we model revenues growing from $260 milliion in April to $425 million in July. Strength here, as widely known, is driven primarily by foundry spending,'' he said. ''Aided by (about) $80-100 million in crystalline silicon tool based revenues and (about) $100 million in thin film Sunfab revenues from Malibu (40MW, $90-to-$135 million), we expect Applied to report (million) $180 million in EES revenues in the July quarter. We look for very weak FPD revenues (expected) and improvement to AGS revenues due to higher utilization levels.''
What's next? ''Looking to the October quarter, we expect revenues of $1.19 billion, exceeding consensus of $1.06 billion, led again by strength in Silicon (TSMC, Renesas, UMC, Samsung), and a pickup in EES revenues fueled in large part by push out of Xin Ao revenues (originally expected in July quarter) into the October quarter, likely Masdar revenues (70MW or $150 million for the line in Germany) and likely bonus payments for better than expected performance for at least two more systems,'' he said. Assuming incremental cost down efforts, we now model EPS of breakeven verses a consensus loss of (minus) $0.08.''
Hit hard by the downturn, Applied said sales were $1.02 billion for the second fiscal quarter, and the GAAP net loss was $255 million, or minus $0.19 per share. In November, Applied said it reduced its global work force by 12 percent after its GAAP net income for the fiscal fourth quarter fell by more than 45 percent year-to-year. |
