AMAT (just to balance the news articles): Applied Materials Expected to Lay Off Staff
Friday October 18, 6:13 pm ET
By Daniel Sorid
NEW YORK (Reuters) - Applied Materials Inc., the world's largest maker of semiconductor equipment, has been cutting jobs and is gearing up for a larger round of layoffs to combat a relentless industry slump, analysts said on Friday.
"I can tell you they've been laying people off with two months (notice)," said Banc of America Securities chip equipment analyst Mark FitzGerald, citing company sources. "We're hearing that they're putting together a list of employees at this point for a sort of full-blown layoff."
Another analyst who follows the sector said sources at Applied Materials (NasdaqNM:AMAT - News) told him the company was gearing up to lay off between 1,500 and 3,000 people, or as much as around 20 percent of its staff. During its last conference call with analysts in August, the company said it had about 16,000 employees.
Since September last year, Applied Materials has announced 3,700 job cuts, but more are expected.
"They trimmed the fat last year, if you will," the analyst, who requested anonymity, said. "They picked the low hanging fruit. Now we're hearing it's moving up the ranks a bit."
Applied Materials, which declined to comment, is the dominant player in the $28 billion semiconductor equipment industry. Chip equipment makers provides the tools that produce, test and package microchips.
The industry has faced a brutal slump, as chip makers shutter factories and pare back plans for upgrades or expansion.
Top chip maker Intel Corp. (NasdaqNM:INTC - News) is cutting as much as $500 million from its annual capital spending plans for this year, and its rival Advanced Micro Devices Inc. (NYSE:AMD - News) is cutting its capital spending forecast by $100 million.
Applied Materials sales are expected to drop to around $5.1 billion in the fiscal year ending this month, according to Multex, from around $9.5 billion reported two years ago.
A jump in industry orders, especially for next-generation technology, in the first half of this year raised hopes for a recovery in the industry, but the rise was only temporary.
Many chip equipment companies had pegged their hopes on a recovery in the second half of the year, but those predictions were off. Industry watchers expect orders to drop between 15 percent and 20 percent in the fourth quarter.
Brett Hodess, Merrill Lynch's chip equipment analyst, said Applied Materials has been making selective layoffs to combat the tough market.
"We've heard from a number of sources that they're contemplating a large cost reduction, including a large layoff, but we have not been able to confirm that with management," Hodess said.
Earlier this week, Teradyne Inc. (NYSE:TER - News), which makes chip testing equipment, disclosed it had cut 500 jobs and would make more cuts if market conditions deteriorate.
Applied Materials has been no exception to the trend of cutting costs. The company has sought to save money by revamping its manufacturing process and trying to get better prices from its suppliers, said Lehman Bros. chip equipment analyst Ed White.
The company is set to report earnings for the fourth quarter of its fiscal year on Nov. 13.
"I wouldn't be surprised for Applied Materials, when they report in three weeks, to announce a fairly dramatic headcount reduction," said Tim Summers, semiconductor equipment analyst at investment bank Investec.
