Applied Materials Drops after Revised Forecast
Shares of Applied Materials Inc. (AMAT: Charts, News) closed down -0.30 or -2.7 percent on Tuesday to $10. 71 per share after the company announced it had cut its annual target estimates due to an unexpected drop in orders in its biggest market at the end of the company's current quarter.
The company said it now expects its net sales for its fiscal year ending October 28th, 2012 to be below the previous forecast of $9.1 to $9.5 billion and non-GAAP earnings per share to be below its previous estimate of $0.85 to $0.95 per share. Applied is expecting the slowdown in demand could impact earnings per share by $0.15 to $0.20 on a yearly non-GAAP basis and will release its revised target ranges during an earnings call on August 15th. Daily Chart
Santa Clara, California based Applied Materials is a global leader in providing equipment, software and services for the production of semiconductors, solar photovoltaic cells and flat panel displays. The company's nanomanufacturing technology is used worldwide for the production of semiconductors for electronic products, coatings for photovoltaic cells and flat panel displays for televisions and computers. Applied was hit hardest at its Silicon Systems Group division, which is the company's largest source of revenue. The division is responsible for more than half of the company's revenue and has been the largest equipment supplier to the semiconductor manufacturing industry since the early 1990s. The extraordinary cutback in orders was due in part to weaker PC sales and took the company by surprise. Applied's CFO George Davis, at the SEMICON West trade show in San Francisco on Tuesday stated that, "Even though we anticipated there would be some seasonal pullback, we really didn't expect anything on the order of magnitude, I would say clearly the macro environment has been far more difficult this year, so the seasonality relative to last year is stronger." Davis also said that the company had experienced a $500 million order pullback since early June by foundry customers that manufacture chips for other companies. The company assured investors on May 17th that contract manufacturers were rushing to add capacity after underestimating the demand for high tech semiconductors used in smartphones. Applied CEO Mike Splinter told analysts during a conference call that, "Demand on 28-nanometers is very high and there's still constrained supply," he continued, "We think 28-nanometer's going to be strong through the year. It's going to be strong into 2013. Assuming that our customers can find a place to put equipment, they will continue to add equipment as quickly as they can." Twenty-eight nanometer chips are the latest in chip technology and have transistors which measure 28 nanometers or billionths of a meter in size. The 28 nm chips are a key component for smartphones and tablets and a slowdown in demand for these chips could signal a downturn in global technology spending. Other semiconductor stocks were also down on Tuesday, with Advanced Micro Devices dropping by 11% to $4.99 per share and Intel, losing -2.3% to $25.56 per share. Other News About AMAT Applied Materials Launches UVision 5 Wafer Inspection System
Applied introduces new inspection system to monitor defects in sub-20 nm logic devices. Customer Jitters Hit Applied Materials
WSJ article about the turndown in orders. Other Stocks in the News Amazon working on smartphone with Asia firms
Amazon working on releasing its own smartphone by late this year or early next year. BofA cutting commercial banking jobs: sources
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Published on Jul 11, 2012
By Jay Hawk