Applied Materials Backs 3Q Outlook, Cuts Chip Equipment View
July 12 2011 - 1:20PM
Dow Jones News
Applied Materials Inc.'s (AMAT) chief executive again lowered
projections on the amount chip manufacturers are expected to spend
on equipment this year but said his company is on track with its
guidance for the current quarter.
The comments from Applied Materials Chief Executive Mike
Splinter are the latest indications of cautiousness in the
semiconductor industry, which has seen weakness of late. Consumer
spending on PCs has remained soft, some large handset makers have
been struggling and macroeconomic worries have hurt demand.
Splinter, at the Semicon West Conference in San Francisco, said
the company--which makes tools used to produce semiconductors,
television screens and solar panels--still backs its third-quarter
guidance despite uncertainty about the short-term economic
outlook.
In May, Applied Materials projected cautious fiscal
third-quarter results and lowered 2011 expectations for spending on
equipment to make chips.
Tuesday, Splinter again lowered expectations for such spending,
this time to $30 billion to $33 billion, down from prior estimates
for $31 billion to $34 billion. He noted that spending for dynamic
random access memory, typically used in PCs, and by foundries,
which manufacture chips for other companies, has been soft in the
short term.
"But fundamental drivers remain strong," he said. "We continue
to believe major semi companies are going to continue aiming at the
goals of spending they set earlier in the year."
Applied Materials shares, down 10% in the year-to-date, recently
slid 3.1% to $12.57.
Monday, fellow semiconductor equipment maker Novellus Systems
Inc. (NVLS) also projected weak third-quarter results and warned
customers are feeling more cautious.
The comments from Applied Materials and Novellus, as well as a
dismal forecast late Monday from chip maker Microchip Technology
Inc. (MCHP), are raising investor concerns about the industry's
second half of 2011. Tuesday, shares of Philadelphia Semiconductor
Index fell 3.2% in recent trading.
Specifically, Novellus shares dropped 12% to $31.59, while
Microchip, which cited broad-based weakness in its businesses and
soft automotive demand for its guidance, fell 14% to $32.33.
Other companies exposed to auto also declined, including Texas
Instruments, down 3.6% to $31.28, and Analog Devices Inc. (ADI),
down 5.1% to $36.56. And several semiconductor equipment companies
also dropped, with KLA-Tencor Corp. (KLAC) down 6.7% to $9.97 and
Lam Research Corp. (LRCX) down 6.2% to $42.10.
A clearer outlook for the industry's second half should emerge
when larger companies--such as Intel Corp. (INTC), Texas
Instruments Inc. (TXN) and Qualcomm Inc. (QCOM)--post results in
the coming weeks.
Meanwhile, Splinter said Applied Materials has received approval
for its purchase of Varian Semiconductor Equipment Association Inc.
(VSEA) from half of the countries required, with approval still
needed from the U.S., China and Korea.
Applied Materials in April agreed to buy Varian for $4.9 billion
in cash, betting that the demand for popular gadgets such as
smartphones and energy-efficient technology will drive growth at a
combined company.
"As we've gotten together planning integration work with Varian,
we're even more impressed," Splinter said Tuesday. "We think it's
an even better deal than when we made it."
He said Applied Materials received a second request for
information from the U.S. Department of Justice, and he expects to
receive all approvals "sometime later in the year" to complete the
acquisition.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
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