this explains the ah selloff. Splinter is far too optimistic </sarcasm>
One On One With Michael Splinter, CEO of Applied Materials.
Tuesday, May 16, 2006
SUSIE GHARIB: Applied Materials posted strong quarterly earnings late today and a burst of new orders. The world`s largest chip equipment maker earned $0.26 a share in its fiscal second quarter, $0.03 better than estimates. Revenues jumped 21 percent to $2.2 billion, also better than expected. Joining us now to talk about the outlook, Michael Splinter, Applied Materials` CEO. Mr. Splinter, welcome back to NIGHTLY BUSINESS REPORT.
MIKE SPLINTER, PRESIDENT & CEO, APPLIED MATERIALS: Well, thank you.
GHARIB: Well, you said today on the conference call that the industry is healthy and growing. We know the semiconductor industry is cyclical. What`s working in your favor?
SPLINTER: Well, consumer electronics is working in our favor. You look at Data Quest numbers for electronics industry, it`s a 1.3 trillion industry. It`s going to grow 7 percent this year; that`s huge. And that`s filtering down to the semiconductor and the semiconductor equipment industry and creating strong growth.
GHARIB: You`re not finding that with high gasoline prices and high interest rates that consumers are becoming less enthusiastic about buying consumer electronics?
SPLINTER: Actually, no. This is a worldwide market so even in emerging markets where people are coming into the consumer class, they`re buying products like cell phones. They`re buying products like PDAs and computers and overall I think it`s strong and as long as the world GDP stays strong, electronics market is going to stay strong.
GHARIB: Now, Applied Materials reported for this second quarter that orders were up 22 percent. What`s your outlook for the second half of the year? SPLINTER: Well, we said for Q3 that our orders would be up between five to 10 percent and our revenue would be up between 5 to 10 percent. But fundamentally, our core business is growing. It`s gaining share and it`s building a foundation for future growth in the years to come.
GHARIB: Well, now we saw that your stock in after hours trading slipped a bit, about 3 percent. Investors seem to be concerned about an order slow down. Five percent to 10 percent might sound good but not as good as what you just came off of. What are your thoughts on that?
SPLINTER: Well, we think that the market is strong. We think that we`re well positioned in the market and because of our excellent financial performance, we`re able to add new businesses. This quarter we announced an acquisition and a new JV (ph) that in new product areas for us that are going to add revenue and profitability in upcoming years.
GHARIB: So what are you hearing from your customers, whether they`re foundries or other customers?
SPLINTER: Well, our memory customers have been strong and they`ve been strong for the last 18 months. We see that continuing. The foundry factories are full. They`ve made rather conservative investments during this period of time. So we think that they have to come back here in the second half of the year to make increasing investments in capacity. And we`re looking forward to that as we`re strongly positioned there.
GHARIB: Mr. Splinter, I see that you have $6 billion of cash at Applied Materials. What are you going to do with that money? Any plans for a major acquisition or maybe a dividend?
SPLINTER: Well, we implemented a dividend last year and increased our dividend last quarter to $0.05. This -- re also doing major stock buybacks. We announced today that we`d buy back between $400 and $600 million of stock. We did a couple of acquisitions this quarter plus the JV. So we`re quite active right now and trying to utilize that cash for shareholder benefit.
GHARIB: OK, thank you very much Mr. Splinter. We`ve been speaking with Michael Splinter, CEO of Applied Materials. |
