Applied Materials Takes Big Writedowns, Beats Estimates

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Applied Materials Inc. (NASDAQ: AMAT) reported fourth fiscal quarter 2012 earnings after markets closed today. For the quarter, the semiconductor manufacturing equipment maker posted adjusted diluted earnings per share (EPS) of $0.06 and revenues of $1.65 billion. In the same period a year ago, the company reported EPS of $0.24 on revenues of $2.18 billion.Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.03 and $1.58 billion in revenues.

On a GAAP basis, the company posted a net EPS loss of $0.42 on a goodwill impairment charges and restructuring charges of $545 million, leading to an operating loss of $499 million.

The company’s CEO said:

We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter. Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share.

For the first quarter of Applied Materials’ 2013 fiscal year, the company expects net sales to be flat to down 15% sequentially, and adjusted EPS to range from breakeven to $0.06. The adjusted EPS estimate excludes about $0.05 related to completed acquisitions, but no other adjustments that may arise from now on.

The company’s acquisition of Varian contributed just one cent to the adjusted quarterly EPS and about $0.11 for the full year, not including acquisition-related charges. Applied added an unexpected $124 million to its restructuring and integration charges for the Varian acquisition.

The slow market for semiconductors means a slow market for the machines that make chips and wafers. Demand from solar panel makers gave Applied Materials a nice boost for a while, but the solar industry’s over-capacity problems have stifled further demand in the sector. Some $421 million of Applied’s goodwill writedown “reflects the deterioration in solar equipment market conditions, our customers’ financial condition, and reduced market valuations.” That about sums up the solar market.

The company’s shares are up about 0.3% in after-hours trading tonight, at $10.33 in a 52-week range of $9.97 to $13.94. The consensus target price for the shares was around $12.60 before today’s report.

Paul Ausick

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