Applied expects to close the merger on November 10, 2011.  The world’s largest equipment maker for semiconductor manufacturing paid a 55% premium back when its own stock was closer to $15.00 versus about $12.35 today.  The company cannot be blamed for the market, but Applied Materials certainly did not heed the “sell in May and go away!” creed.  If it had, perhaps the deal could have been done for 10% or even 20% less depending upon whether or not Varian’s management would have been willing to sell at market-adjusted prices.

Applied has claimed that the acquisition will lift earnings per share within a year as well as adding in $60 million in annual savings after Applied integrates Varian’s ion implantation gear that is used in making chips or integrated circuits for consumer electronics.  Our latest figures show that this may be about 5% of the wafer fabrication equipment market of $35 billion.

This merger was Applied’s largest-ever acquisition and the goal was to gain market share for higher performance chips.  It can also be considered a buy that goes deeper into solar, as well as display and light-emitting diodes.

Varian’s key customers were previously reported as Intel Corporation (NASDAQ: INTC) and IBM (NYSE: IBM), as well as Micron Technology Inc. (NYSE: MU), and key players like GlobalFoundries, Hynix, and others.  Another merger is done, now comes the integration.

JON C. OGG

Axcelis, Inc. (NASDAQ: ACLS) is up on heavy volume  more than 19% premarket to $2.10.

Green Mountain Coffee Roasters (NASDAQ: GMCR) is up more than 18% premarket on moderate volume to $76.39, relative to a 52-week range of $21.83-$68.03.  The company issued 3Q earnings well above street expectations.

Varian Materials (NASDAQ: VSEA) is up 52% premarket to $61.55, relative to a 52-week range of $24.40-$50.40. Applied Materials (NASDAQ: AMAT) announced it would be buying the semiconductor company for $4.9 billion, or $63 per share. Shares of AMAT are also up nearly 4%.

AllianceBernstein Holding L.P. (NYSE: AB) Cut to Neutral and $26 target at BofA/ML.
Applied Materials, Inc. (NASDAQ: AMAT) Raised target to $15 at BofA/ML.
ARM Holdings plc (NASDAQ: ARMH) Reiterated Neutral on overvaluations at BNP Paribas.
AT&T Inc. (NYSE: T) Reiterated Buy at Argus.
EMBRAER (NYSE: ERJ) Raised to Conviction Buy List at Goldman Sachs.
Hasbro Inc. (NASDAQ: HAS) Started as Buy at Jefferies.
IAC/InterActiveCorp. (NASDAQ: IACI) Cut to Neutral at Goldman Sachs.
Intel Corporation (NASDAQ: INTC) Reiterated Outperform and $28 target but raised estimates at Credit Suisse; Reiterated Buy at Argus; Maintained Buy with $27 target at Gleacher & Co.; Maintained Buy at Gabelli & Co.
KLA-Tencor Corporation (NASDAQ: KLAC) Raised target to $48 at BofA/ML.
Mattel Inc. (NASDAQ: MAT) Started as Buy at Jefferies.
Merck & Co., Inc. (NYSE: MRK) Maintained Buy on weakness at Argus.
Novellus Systems, Inc. (NASDAQ: NVLS) Raised target to $38 at BofA/ML.
Potash Corp. of Saskatchewan (NYSE: POT) Reiterated Outperform but Raised target to $189 at Credit Suisse.
Safeway Inc. (NYSE: SWY) Cut to Sell at S&P Equity Research (late-Thursday call).
TD AMERITRADE Holding Corporation (NASDAQ: AMTD) Cut to Market Perform at BMO.
Varian Semiconductor Equipment Associates Inc. (NASDAQ: VSEA) Raised to Neutral with $45 target at BofA/ML.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Central European Distribution Corp. (NASDAQ: CEDC) Started as Buy at Citigroup.
ExxonMobil Corp. (NYSE: XOM) Cut to Sector Perform and $70 target at RBC (third cut in two days).
Gordmans Stores, Inc. (NASDAQ: GMAN) Started as Outperform at Baird; Started as Buy at Stifel Nicolaus; Started as Outperform at Wells Fargo.
Kulicke & Soffa Industries inc. (NASDAQ: KLIC) Cut to Underperform at Oppenheimer.
Research In Motion Limited (NASDAQ: RIMM) Cut target to $90 at TD.
Sanmina-SCI Corp. (NASDAQ: SANM) Reiterated Buy at Needham.
Skilled Healthcare Group, Inc. (NYSE: SKH) Cut to Hold at Jefferies.
Teradyne Inc. (NYSE: TER) Cut to Perform at Oppenheimer.
Varian Semiconductor Equipment Associates Inc. (NASDAQ: VSEA) Started as Overweight at JPMorgan.
Verigy, Ltd. (NASDAQ: VRGY) Cut to Underperform at Oppenheimer.

Eds Update

Central European Distribution Corp. (NASDAQ: CEDC) Started as Buy at Citigroup.
ExxonMobil Corp. (NYSE: XOM) Cut to Sector Perform and $70 target at RBC (third cut in two days).
Gordmans Stores, Inc. (NASDAQ: GMAN) Started as Outperform at Baird; Started as Buy at Stifel Nicolaus; Started as Outperform at Wells Fargo.
Kulicke & Soffa Industries inc. (NASDAQ: KLIC) Cut to Underperform at Oppenheimer.
Research In Motion Limited (NASDAQ: RIMM) Cut target to $90 at TD.
Sanmina-SCI Corp. (NASDAQ: SANM) Reiterated Buy at Needham.
Skilled Healthcare Group, Inc. (NYSE: SKH) Cut to Hold at Jefferies.
Teradyne Inc. (NYSE: TER) Cut to Perform at Oppenheimer.
Varian Semiconductor Equipment Associates Inc. (NASDAQ: VSEA) Started as Overweight at JPMorgan.
Verigy, Ltd. (NASDAQ: VRGY) Cut to Underperform at Oppenheimer.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Ariad pharmaceuticals (ARIA) Cut to Sell at Merriman Curhan Ford.
Bankrate (RATE) Cut to Hold at Jefferies.
Iron Mountain (IRM) Cut to Neutral at Baird.
Isilon Systems (ISLN) Raised to Buy at ThinkEquity; Raised to Buy at Needham.
Motorola (MOT) Raised to Outperform at Morgan Keegan.
OfficeMax (OMX) Raised to Buy at Citigroup.
Rio Tinto (RTP) Cut to Neutral at Credit Suisse.
Synaptics (SYNA) Cut to Hold at Jefferies.
Varian Semiconductor (VSEA) Raised to Buy at UBS.
Walt Disney (DIS) Cut to Underweight at JPMorgan.

Jon C. Ogg
July 31, 2009

The more important stock in the chip space today is Broadcom Corp.(NASDAQ: BRCM).  First Call has estimates at $0.27 EPS and $1.07billion in revenues.  Estimates for next quarter are $0.17 EPS and$953.14 million in revenues.  We would expect that Broadcom gets a bitmore conservative in its outlook and in the degree it willing to go outon a limb just like its peers have.  First Call has estimates nextquarter as $0.17 EPS and $953.14 million.  Analysts have already backedoff of forward numbers, so the bar is already set low here.  Shares are down 5.5% at $17.30 early in the afternoon, and the 52-weektrading range is $12.98 to $29.91.  A lot of how the reaction will beis likely to key off of how the company signals its own slow down aheadlike its peers are seeing.  Unless Marvell, Qualcomm, TexasInstruments, and other big players have all been sandbagging themselvesjust to avoid the appearance of opulence, then you know that cautionwill likely prevail.

Rambus Inc. (NASDAQ: RMBS) is going to be a very hard one to judge,because traders are going to have to listen to what the company saysabout its recent lawsuit loss and then try to plug in the negatives onhow it will affect earnings in the quarters ahead.  Top top it off,this active and volatile stock has a very limited analyst followingbehind it.  In fact, First Call has no big name firms in the stock.  Itis just a question of how wide losses will be.  This one got killedrecently, and at $9.06 its is in the lower reaches of its $4.95 to$26.41 over the last 52-week trading range.

Integrated Device Technology Inc. (NASDAQ: IDTI) has lost much of itsimportance or at least lost how it impacts the sector.  But it is alsoone of the under the radar players that is expected to remainprofitable.  The maker of mixed-signal semiconductor solutions for thecommunications, computing, and consumer industries is expected to postearnings of $0.14 EPS on $166.6 million in revenues.  For next quarterthe estimates are $0.09 EPS on $148.2 million in revenues.  With sharesdown 6% at $5.48 today, its 52-week trading range is $4.17 to $12.70.

KLA-Tencor Corporation (NASDAQ: KLAC) on the chip equipment and cap-exside of the chip business is almost impossible to get excited aboutwhen you have listened to what every company in the world has saidabout R&D and Cap-ex spending ahead.  First Call has estimates at-$0.01 EPS and $415.6 million in revenues.  And for next quarter,consensus is -$0.07 EPS and $347 million.  The estimates forFiscal-June-2009 are only $0.21 EPS and $1.64 billion in revenues.  Sothe only question is this… "Analysts gone so negative, so whathappens if they ac tually post a profit?"….  As $18.98 this is downabout 60% from last year’s high.

Maxim Integrated Products Inc. (NASDAQ: MXIM) has also been cut in justabout half from last year.  The maker of linear and mixed-signalintegrated circuits is expected to post $0.04 EPS on almost $410million in revenues.  Next quarter estimates are $0.06 EPS and $367.3million in revenues.  This one is deemed as an interchangeable stockwith Linear Tech (NASDAQ: LLTC) as far as traders are concerned.

Microchip Technology Inc. (MCHP) is an interesting one here in thespecialized semiconductor products for various embedded controlapplications.  First Call has estimates at $0.22 EPS on $188.88 millionin revenues.  For the next quarter, targets are $0.17 EPS and $174.5million in revenues.  What is interesting is that this one was raisedat Barclays to an Overweight just in the last day.  So any upside thatis less bad for the coming quarter might be greeted with cheer.  At$18.33, this is at the lower part of the $16.23 to $38.37 range of thelast 52-weeks.

PMC-Sierra Inc. (NASDAQ: PMCS) has also fallen from the importancescale over the years and is only a fraction of the value in the verylate-1990′s.  Estimates for the communications chip provider are $0.08EPS and $119.65 million in revenues.

Varian Semiconductor Equipment Associates Inc. (NASDAQ: VSEA) is beinghit rather hard today with an 11% drop to $18.98.  It too has been cutin more than half this last year.  It is in the semiconductorprocessing equipment used for fabricating integrated circuits.  FirstCall sees a loss at -$0.12 on $107.9 million for this last quarter.  Itis expected to be even lower for the quarter ahead with earnings (well,losses) at -$0.15 EPS on $90.9 million in revenues. 

Keep in mind that some of these estimates may have changed at the lastminute.  All EPS projections are on a non-GAAP basis.  We also did notinclude the "layoff expectations" from each company, but the sad partis that you have to know more layoffs in the sector are coming.  It hasalmost become cool for companies to cut workers, cap-ex, R&D, andcost structures.  Of course hard times call for hard measures, but youget the idea.

Today should mark the apex of chip earnings for this earnings season.

Jon C. Ogg
January 29, 2009

Jon C. Ogg
October 26, 2007