Wednesday, February 23, 2011

Applied Materials Inc. (NASDAQ: AMAT): Q1 Earnings Preview

Applied Materials Inc. (NASDAQ: AMAT) is scheduled to release its first-quarter earnings after the closing bell on Thursday, February 24, 2011. Analysts, on average, expect the company to report earnings of 33 cents per share on revenue of $2.59 billion. In the year ago period, the company reported earnings of 13 cents per share on revenue of $1.85 billion.

Applied Materials, Inc. provides nanomanufacturing technology solutions for the semiconductor, flat panel display, solar, and related industries worldwide. It operates in four segments: Silicon, Applied Global Services, Display, and Energy and Environmental Solutions. 

In the preceding fiscal fourth-quarter, the Santa Clara, California-based company's net income was $468 million, or 35 cents per share, from $138 million, or 10 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 36 cents per share in the latest quarter. Revenue surged 89% to $2.89 billion from $1.53 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 31 cents per share on revenue of $2.59 billion. 

At its last earnings call in November, AMAT said that it  expects fiscal first quarter 2011 net sales to be down in the range of 8 percent to 15 percent quarter over quarter. The company expects non-GAAP EPS to be in the range of 30 cents to 34 cents, which excludes known charges related to completed acquisitions of approximately $0.01 per share. 

Total revenue for 2011 is expected to be similar to 2010 levels (+/- 10%), assuming flat wafer fab equipment purchases. Applied stated that the revenue outlook was based on expectations of continued strength at foundries, as well as a second half pickup in NAND capacity additions.

Applied’s sales are driven by the capital spending of chip makers. Demand for PCs, mobile phones, and new devices including the iPad boosted chips in 2010. Continued capital spending by Intel, Global Foundries and Micron is an encouraging sign for the U.S. economy and the U.S. semiconductor innovation.  Applied Materials is now tracking 17 new fabs and fab expansion projects that represent about 60 billion dollars of equipment spending over the next 8 to 12 quarters. 

Demand for PCs, mobile phones, and new devices including the iPad boosted chips in 2010.Tablets and smartphones bode well for Applied Materials’ semiconductor business, and is increasing demand for the company’s touch panel and OLED products. A global recovery after the sharp downturn last year also helped, as chip makers produced more chips to refill global inventories. Recently, the semiconductor Industry Association said that worldwide semiconductor sales for 2010 reached a record $298.3 billion, a year-on-year increase of 31.8 percent from the $226.3 billion recorded in 2009. December quarter's sales of $75.5 billion represent a 4.0 percent decline from the immediate prior quarter, and a 12.2 percent increase over the same period in 2009. 

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