Analysis and Discussion with Bill Ong of American Technology Research on Applied Materials and their posting of their Q4 results. Bill Ong just upgraded them to a BUY.
About Bill Ong
Bill joined American Technology Research in April 2003 to cover the Semiconductor Capital Equipment sector. Bill has nearly 20 years of experience ranging from both the semiconductor industry and on Wall Street covering technology stocks as an equity analyst. Bill spent seven years on both the buy-side, at Elijah Asset Management covering technology stocks, and on the sell side, at B of A Securities covering semiconductor capital equipment stocks. Prior to working on Wall Street, Bill spent 12 years in industry at Intel and Applied Materials. Bill worked in various roles including engineering, management, finance and investor relations.
Bill was graduated from Columbia University with a B.S. degree in Applied Physics and later earned his MBA in finance at Santa Clara University.
Q4:
Fourth quarter net sales were $2.04 billion, down from $2.37 billion for the fourth quarter of fiscal 2007, and up from $1.85 billion for the third quarter of fiscal 2008. Gross margin was 39.1 percent, down from 45.5 percent for the fourth quarter of fiscal 2007, and down from 40.2 percent for the third quarter of fiscal 2008. GAAP net income was $231 million, or $0.17 per diluted share, down from net income of $422 million, or $0.30 per diluted share, for the fourth quarter of fiscal 2007, and up from $165 million, or $0.12 per diluted share, for the third quarter of fiscal 2008.
New orders of $2.21 billion for the fourth quarter of fiscal 2008 were comparable to the fourth quarter of fiscal 2007, and increased from $2.03 billion for the third quarter of fiscal 2008. Regional distribution of new orders for the fourth quarter of fiscal 2008 was: Taiwan 26 percent, North America 22 percent, Southeast Asia and China 22 percent, Europe 11 percent, Korea 10 percent, and Japan 9 percent. Backlog at the end of the fourth quarter of fiscal 2008 was $4.85 billion, up from $4.74 billion at the end of the third quarter of fiscal 2008 and up from $3.65 billion at the end of fiscal 2007.
Fiscal 2008 net sales were $8.13 billion, down from $9.73 billion for fiscal 2007. Gross margin for fiscal 2008 was 42.4 percent, down from 46.1 percent for fiscal 2007. GAAP net income for fiscal 2008 was $961 million, or $0.70 per diluted share, down from net income of $1.71 billion, or $1.20 per diluted share, for fiscal 2007. New orders of $9.16 billion for fiscal 2008 decreased from $9.68 billion for fiscal 2007.
“Fiscal 2008 was a pivotal year for Applied as we made significant progress in advancing our Silicon and Display businesses and expanding in the solar market. Our fourth quarter results demonstrate effective performance in a very challenging environment,” said Mike Splinter, president and CEO. “We passed a major milestone as the first SunFabTM Thin Film Solar Line began volume production demonstrating Applied’s commitment to deliver exciting new technology to the solar industry.
“As Applied moves into fiscal 2009, we will implement further cost-reduction actions due to declining market conditions, and we will invest in strategic priorities,” concluded Splinter.
Applied will implement a restructuring program beginning in the first quarter of fiscal 2009, designed to streamline the organization and reduce operating costs. When completed the program is expected to drive annualized cost savings of approximately $400 million. As part of this program, the company plans to reduce its global workforce by approximately 12% or 1,800 positions by the end of fiscal 2009 through a combination of attrition, voluntary separation and other workforce reduction programs consistent with local legal requirements and in consultation with employee representatives, where applicable.
Non-GAAP net income for fiscal 2008 was $1.20 billion, or $0.87 per diluted share, compared to non-GAAP net income of $1.90 billion, or $1.33 per diluted share, for fiscal 2007. Non-GAAP net income for the fourth quarter of fiscal 2008 was $264 million, or $0.20 per diluted share, compared to non-GAAP net income of $472 million, or $0.34 per diluted share, for the fourth quarter of fiscal 2007, and $228 million or $0.17 per diluted share for the third quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.
