Applied Q4 sales dip, revenue expected to be lower for Q1

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 11/15/2007

Santa Clara, Calif.-based semiconductor manufacturing equipment leader Applied Materials Inc. reported Wednesday afternoon record net sales for its 2007 fiscal year ended October 28 of $9.73 billion, 6 percent above $9.17 billion for fiscal 2006, while fiscal Q4 net sales fell 6 percent to $2.37 billion, from $2.52 billion in fiscal Q4, and were down 7.4 percent sequentially from $2.56 billion in fiscal Q3.

Net income for the year was $1.71 billion, or $1.20 per diluted share, up from $1.52 billion, or 97 cents per diluted share, for fiscal 2006, while Q4 net income was $422 million, or 30 cents per share, compared to net income of $449 million, or 30 cents per share, for fiscal Q4 2006, and down from $474 million, or 34 cents per share, for fiscal Q3.

New orders in fiscal 2007 totaled $9.68 billion, a 2 percent decrease from $9.89 billion for fiscal 2006, while Q4 new orders were $2.21 billion, down 18 percent from $2.69 billion for fiscal Q4 2006, and 3 percent lower than $2.28 billion in fiscal Q3. Regional distribution of new orders for Q4 was: Taiwan 27 percent, Japan 18 percent, Southeast Asia and China 18 percent, Korea 14 percent, North America 13 percent, and Europe 10 percent. Backlog at the end of Q4 was $3.65 billion, up from $3.43 billion at the end of Q3.

Q4 gross margin was 45.5 percent, down from 47.1 percent for fiscal Q4 2006, and down from 47.5 percent in fiscal Q3.

Applied president and CEO Mike Splinter said in a statement, “This was one of the strongest years in the history of Applied Materials as we delivered record net sales and increased profitability. During 2007, we enhanced our position in flash memory, entered the thin film solar business with strong demand for the SunFab line, and drove our operating performance to increase earnings per share. These achievements strengthen our foundation for the future.”

“We met our financial targets for the fourth quarter in a softening semiconductor and a challenging display environment. We invested in new opportunities, including the HCT acquisition for precision solar wafering and the launch of our PVD product for flat panel display arrays,” Splinter added.

Looking ahead to fiscal Q1 2008, Applied said it expects new orders to be 5 to 15 percent lower than fiscal Q4, with revenue down 13 to 18 percent from fiscal Q4, and earnings per share of 16 to 20 cents.

In other Applied news, Heibei, China-based XinAo Group said it would enter the solar energy market by establishing what it aims to be China’s leading photovoltaic (PV) module production line and will install one of Applied's SunFab Thin Film production lines with PV technology using 5.7m2 glass substrates. With an optional tandem junction upgrade, the line will be capable of producing modules to generate more than 50MW of electricity, as the first phase of a planned 500MW capacity plant in China, the companies said.

Also, DRAM giant Elpida Memory Inc. signed a five-year contract to utilize Applied’s advanced service capabilities to reduce cost-of-ownership and improve operational efficiency at Elpida’s semiconductor fab as part of a collaborative asset management program that includes GE Capital Leasing Corp., a subsidiary of General Electric Co., and Applied’s expertise to increase customer fab asset utilization.

Applied said its certified customer engineers will work at Elpida’s fabs using the latest diagnostic and monitoring techniques to provide preventive and corrective maintenance.