Faced with a weak global chip equipment market, Applied Materials, Inc. (AMAT), a semiconductor fabrication equipment maker, on Tuesday reported a lower profit for the second quarter. Net sales decreased 15%, as the company's Silicon segment reported a sales decline of 27%. New orders slipped 9% from the year-ago period.
The Santa Clara, California-based company said second quarter net income declined to $303 million or $0.22 per share from $411 million or $0.29 per share reported for the second quarter of 2007. However, net income in the latest period rose sequentially from $262 million or $0.19 per share, posted for the first quarter of fiscal 2008.
GAAP results include equity-based compensation expense, items associated with acquisitions, restructuring and asset impairments, as well as costs associated with ceasing development of beamline implant products.
On a non-GAAP basis, net income declined to $362 million or $0.26 per share from $509 million or $0.36 per share reported last year. On average, 22 analysts polled by First Call/Thomson Financial expected second quarter earnings of $0.22 per share.
KLA-Tencor Corp. (KLAC), one of the five largest semiconductor equipment companies in the world, last month reported that third quarter earnings fell from last year as revenue dropped amid what the company called a challenging industry-wide demand environment. The company said GAAP net income dropped to $111.0 million or $0.61 per share from $154.8 million or $0.76 per share for the year-ago quarter. Revenue fell 16% to $602.22 million from $716.21 million.
For Applied Materials, gross margin for the second quarter of 2008 rose to 45% from gross margin of 44.9% reported for the second quarter of 2007. In the first quarter of 2008, gross margin was 44.8%.
Net sales declined to $2.149 billion from $2.529 billion reported for the same period last year. The company reported net sales of $2.09 billion for the first quarter. While announcing the first quarter results in February, the world's biggest chipmaking equipment maker had forecast second quarter sales to be flat to up 5% sequentially. Analysts expected second quarter revenues of $2.13 billion.
Segment-wise, Silicon generated net sales of $1.268 billion, down from $1.738 billion in the previous year. For Applied Global Services, net sales increased to $599 million from $589 million. The Display segment reported net sales of $198 million, an increase from $160 million reported for the same segment in the previous year. Energy and Environmental Solutions generated net sales of $85 million, a decline from $43 million reported last year.
New orders dipped to $2.41 billion from $2.65 billion for the second quarter of the previous year. New orders for the first quarter were $2.50 billion.
Taiwan represented 22% of orders in the first quarter, while North America represented 12%, Korea 22%, Japan 13%, Southeast Asia and China 18%. Europe represented 13% of orders.
Backlog at the end of the first quarter totaled $4.59 billion, compared to $4.10 billion at the end of the previous quarter.
Operating expenses for the quarter declined to $529.08 million from $547.59 million, largely due to a decline in restructuring and asset impairments. Cost of products sold dropped to $1.183 billion from $1.392 billion.
Year-to-date, net income declined to $564.88 million or $0.41 per share from $814.92 million or $0.58 per share in the same period last year. Net sales for the first half decreased to $4.237 billion from $4.806 billion.
Cash and cash equivalents at the end of April 27, 2008 were $1.098 billion, while they were $1.202 billion as of October 28, 2007. Short-term investments for the same periods were $1.357 billion and $1.166 billion, respectively.
Commenting on the results, Mike Splinter, president and CEO of Applied Materials, said: "This quarter's performance demonstrates our focus on operational execution and prudent cost controls across all of our businesses. We are ramping our display and solar businesses while addressing the challenges of a weaker global chip equipment market."
An industry-wide glut has led to losses and drop in prices for memory chipmakers. As Applied Materials has been all along focusing on chip machinery, the slump in market meant decline in profit for the company. The company reported its fifth straight quarterly decline in profit on Tuesday.
Looking ahead, the company reportedly said in a conference call that orders would hit bottom next quarter. Orders are expected to decline 15%-25% for the third quarter. Third-quarter profit is estimated to be $0.10-$0.14 per share, while sales are estimated to drop 10%-18% from the previous period. For the third quarter, analysts expect earnings of $0.25 per share on revenues of $2.24 billion.
Due to the softening in the semiconductor-equipment markets, the company had announced a global cost reduction plan in January that included elimination of about 1000 positions.
Last month, Credit Suisse downgraded AMAT shares to "Neutral" from "Outperform" with a price target of $20.50. The analysts noted that the stock was trading purely on solar and that competition is rapidly consolidating around smaller panels.
Among others in the industry, semiconductor equipment maker Novellus Systems, Inc. (NVLS) said last month that first quarter profit plunged 71%, as net sales for the quarter declined over 20% from the year ago period. Net income declined 71.1% to $15.5 million or $0.15 per share from $53.8 million or $0.42 per share in the comparable quarter last year. Net sales fell 20.7% to $314.7 million from $397.0 million in the corresponding quarter a year ago.
Stock Movement
AMAT closed Tuesday's regular trade at $19.86, up $0.05 or 0.25%, on 36.38 million shares. The stock added $0.14 in the extended trade. For the past year, the company's shares have been trending in the range of $16.13-$23.00.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.