Applied Materials Report Sunny Q3 Earnings

Applied Materials Report Sunny Q3 Earnings

During yesterday’s earnings call Applied Materials CEO Mike Splinter and CFO George Davis discussed the company’s third quarter results. Overall the company exceeded its third quarter guidance driven by strong results in our semiconductor, display and crystalline silicon solar businesses.

A look at our Solar Business

Net sales for the Energy and Environmental Solutions (EES) segment was $387 million dollars, an increase of 133% and was the third highest booking quarter for EES despite the absence of any thin film orders. Our Baccini business was particularly robust, as net sales from that group were more than 75% above the previous high, achieved in Q4 ’08.

Applied had record profitability in crystalline silicon (c-Si) solar this quarter, led by the highest-ever sales in Baccini. Baccini is the platform of choice in China which is driving 60% of the world’s capacity additions this year. We’re pleased with our product roadmap -- which we see driving further increases in panel efficiency over the next couple of years. In our Precision Wafering Systems business, we set a new record for orders. We also recognized revenue on a single-junction SunFab line. Our thin film solar backlog ended the period at about $300 million dollars with two more factory sign-offs expected over the next two quarters.

As we detailed earlier this year on July 21, Applied Materials announced the restructuring of EES to focus on our industry-leading opportunities in c-Si solar and discontinue sales to new customers of our SunFab fully-integrated lines for manufacturing thin film solar panels and would offer individual tools for sale to thin film solar manufacturers.

While we expect EES net sales to be down 10 to 20% in the fourth quarter, it is possible there could be upside to this number if we achieve customer acceptance for a major SunFab factory in China during the quarter.

The Solar Industry

In the solar industry, worldwide panel installations are trending above 12 gigawatts for the year -- driven by pull-ins related to the feed-in-tariff in Germany. It’s likely that Germany’s growth will moderate in 2011, but we see panel demand increasing next year with strength in Europe, China, Japan and parts of the U.S. Fab utilization has improved throughout the crystalline silicon supply chain. Panel ASPs have remained stable, and leading panel makers reported sold-out conditions through the end of the year, with visibility into the first half of 2011.

We now believe net capacity additions will be in the range of 11 to 13 gigawatts for the year, with equipment spending likely to exceed 9 billion dollars. While early indications for 2011 are positive, we’ll keep a close eye on equipment demand as this year’s capacity is absorbed by the industry. Over time, we expect ratable reductions in panel prices to continue, resulting in a market that is less dependent on government support.


Safe Harbor Statement

This posting contains forward-looking statements, including those regarding Applied’s performance, opportunities, industry outlooks, and financial expectations. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to: the level of demand for Applied’s products, which is subject to many factors, including uncertain global economic and industry conditions, government renewable energy policies and incentives, and customers’ new technology and capacity requirements; Applied’s ability to (i) develop, deliver and support a broad range of products and expand its markets, (ii) align its cost structure with business conditions, (iii) plan and manage its resources and production capability, (iv) implement initiatives that enhance global operations and efficiencies, and (v) attract, motivate and retain key employees; and other risks described in Applied’s filings with the Securities and Exchange Commission. All forward-looking statements are based on management’s estimates, projections and assumptions as of August 18, 2010, and Applied undertakes no obligation to update any forward-looking statements.

 This presentation also includes financial measures not in accordance with U.S. GAAP, along with reconciliations of GAAP results to non-GAAP results.

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