Analyst Conference Summary

Applied Materials
AMAT

conference date: November 11, 2009 @ 1:30 PM Pacific Time
for quarter ending: October 25, 2009 (4th quarter fiscal 2009)


Forward-looking statements

Overview: Things are looking a lot better, but revenues have not yet risen to year-earlier levels.

Basic data (GAAP) :

Revenues were $1.53 billion, up 35% sequentially from $1.13 billion but down 25% from $2.04 billion in the year-earlier quarter.

Net income was $138 million, improved sequentially from negative $55 million, but down 40% from $231 million year-earlier.

EPS (earnings per share) were $0.10, improving sequentially from negative $0.04, but down 41% from $0.17 year-earlier.

Guidance:

Net sales are expected to grow over 30% in fiscal 2010. SSG growth estimated at 40%. Solar will grow slower, mayber 10%.

For fiscal Q1 2010, we will no longer correct non-GAAP numbers for stock-based compensation. SSG (silicon semiconductor group) revenue expected up over 20%. Services up modestly sequentially. Display down after strong Q4. EDS up 20%. Overall 10% to 25% increase in revenues. $0.10 to $0.14 GAAP EPS before restructing charges of $0.06 to $0.07 per share.

Conference Highlights:

The semiconductor equipment business had increased revenues and profitability, and demand improved for all segments. Solar business is doing well. Market share grew in the semiconductor segment, and expect to gain more share in 2010.

Customers are reporting higher factory utilization, including foundry customers. Memory price increases are driving a brighter outlook. Display end demand has been strong, so manufacturers are ordering new technology (gen 8.5); a 20% revenue rise is expected in 2010.

Solar improved both because end price declines stopped and financing availability improved. Customers want to improve automation and increase capacity. Seventh SunFab sign-off during quarter; this was the second tandem-junction sign-off. But thin-film market conditions are still challenging.

Non-GAAP numbers given as $177 million net income, $0.13 EPS.

New orders in the quarter were $1.47 billion. By geography orders were Southeast Asia and China 38%, Korea 20%, Taiwan 15%, North America 14%, Japan 8%, Europe 5%.

In fiscal 2010 Applied Materials plans to realign its sales force into business groups, consolidate the supply chain, and continue with cost reduction initiatives. More manufacturing will be moved to Asia to be closer to customers. The work force will be reduced by 1,300 to 1,500 people, or 10% to 12%, over the next year and a half. A restructuring charge of $100 million to $125 million will be mostly recognized in Q1 fiscal 2010. Savings from restructuring are estimated at $450 million.

By segment, revenue and orders were:

Silicon semiconductor group (SSG), $656 million in revenues with $629 million in new orders. Services group (AGS) had $390 million in revenue with $335 million in new orders. Display had $200 million in revenue, $151 million in new orders. Energy and Environmental Solutions (solar) had $280 million in revenues with $357 million in new orders. Orders overall were 37% higher sequentially.

Cost of goods sold was $968 million, leaving gross profit of $559 milion. Operating expenses were R&D $234.2 million, general and administrative $76 million, marketing and selling $79 million. There was a restructuring and asset impairment benefit of $4 million. Leaving income from operations at $173 million. Impairment of equity loss was $5 million. Interest net gain $6 million. Tax provision was $36 million.

Cash, equivalents and short term investments ended at $2.21 billion. Operating cash flow was $241 million. Inventories decreased $121 million to $1.6 billion. Long term investments were $1.05 billion. Long-term debt is $200 million.

$2.7 billion order backlog at the end of the quarter.

Fiscal Q1 2010 will see higher operating expenses due to restoration of base salaries and bonuses.

Q&A:

Linearity for fiscal 2010? It is hard to tell what will happen in the second half of the year. We are relatively certain of the strength of the first half of the year.

Operating margins in 2010? We see 2010 as a year of recovery. When things get back to normal we expect 20% to 25% margins overall.

Top ten customer activity in SSG? Most of them are active now to some degree, with the top 5 all very active. The issue in the future is when the memory guys get into capacity increases. Today it is all about technology transition, not capacity.

EPS for fiscal 2010? We think earning will be up in 2010, but we don't want to predict full 2010 EPS yet.

Energy and Environment profitability? There is a lot of question about the crystaline silicon market right now, so we are sticking with break even expectations for 2010 right now.

Advent Solar timeline? It will probably be 2011 before we see meaningful revenues from them because the technology needs to be further developed.

Germany solar subsidy risk? Thinks the risk is overblown. Believes Germany will be flat to up next year and other nations will contribute to growth.

Lead times? Lead times have increased, we are working with our suppliers to keep up. We are moving products to customers very quickly.

Use of generated cash? We believe share repurchase is the best way to return excess cash flow. We will resume when we are comfortable that the economy has stabilized and we have a few quarters of strong cash flow.

What would be the catalyst for solar growth? We are coming out with a number of new crystaline silicon products that should expand revenues. We are looking for an increase in wafering orders. If we see that grow, we will have a good year in crystaline silicon.

OpenIcon Analyst Conference Summaries Main Page

Applied Materials Investor Relations page

 

Search

More Analyst Conference Pages:

 
 ADBE
 AKAM
 ALTR
 AMAT
 AMD
 AMGN
 ANSV
 BIIB
 CELG
 CSCO
 DNA
 DNDN
 GILD
 GOOG
 HILL
 HPQ
 INTC
 HNSN
 MCHP
 MRVL
 MSFT
 MXIM
 NOVL
 NVDA
 ORCL
 ONXX
 RACK
 RHT
 TTMI
 XLNX
 YHOO

Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2009 William P. Meyers