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 Bank cutting loan officers and bankers at commercial banking offices around the country. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jul 11, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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