Applied Materials warned Monday of a first-quarter loss. One of the biggest charges cited was doubtful accounts, as customers failed to pay up.
The largest maker of chip production equipment said that it expects a net loss in the range of 9 cents to 11 cents per share for its first fiscal quarter, which ended January 25. It pointed to a restructuring charge of approximately $133 million (or 6 cents per share) associated with a cost reduction program announced on November 12, 2008, as the largest charge. At that time, Applied said it would cut 1,800 jobs, or about 12 percent of its work force.
Applied said this Monday about the steeper losses: "On November 12, 2008, the company provided a target of earnings per diluted share for the first fiscal quarter in the range of $0.00 to $0.04. This target did not include the above charges, which could not be estimated or were not known at that time."
The second-largest charge was $48 million (or 2 cents per share) for "doubtful accounts receivable related to certain customers' deteriorating financial condition," the company said in a statement. Additional inventory charges of $20 million (or 1 cent per share) were due to a decline in demand for semiconductor and display products.
Net sales for the first fiscal quarter are expected to be approximately $1.33 billion, down 35 percent from the fourth quarter of fiscal 2008, and at the low end of the previously provided target range of down 25 percent to 35 percent, Applied said. The company plans to announce and discuss its actual earnings on February 10.
Applied will continue to pursue cost reductions, including shutdowns. "The company intends to continue implementing cost reduction programs, including shutdowns and additional restructuring activities, as appropriate for the unprecedented business conditions."
In related news, global chip sales fell 22 percent in December amid a sharp drop in demand in almost all major chip categories, the Semiconductor Industry Association (SIA) said Monday.
Chip equipment maker Applied Materials is cutting 12 percent of its workforce after posting declining profit numbers and receiving quite the scare from Intel.
The company announced that 1,800 jobs will be cut from its ranks by this time next year, which could save it $400 million a year. Applied Materials makes the complicated and expensive equipment that Intel and AMD use to manufacture their processors, and if those companies see a downturn in their business, companies like Applied Materials are in for trouble.
With Intel reporting a huge decline in its expected revenue for the fourth quarter Wednesday afternoon, Applied Materials could be in for a rough 2009. Applied Materials CEO Mike Splinter noted in a press release accompanying the news that the company is working hard to build equipment for the solar industry, but there may be no safe harbor for a while.
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