Applied Materials Flags 2020 as Memory's 'Recovery Year' After Posting Weak 3Q -- Update
August 15 2019 - 9:12PM
Dow Jones News
By Maria Armental
Semiconductor-equipment supplier Applied Materials Inc. (AMAT)
says 2020 could be a recovery year for the memory sector, albeit
one that shaped like a "U" implying a long, slow rebound.
"We don't see any big hockey sticks," Chief Executive Gary
Dickerson said in a conference call with analysts, referring to a
sudden, sharp recovery. "It's going go be a long journey."
Chief Financial Officer Dan Durn reiterated that while he can't
yet call the bottom of the cycle, early signs of improvement are
visible as inventories fall and prices stabilize.
Asked why he didn't feel comfortable saying that the cycle has
hit a turning point, Mr. Durn cited the geopolitical environment,
saying: "I just think it's prudent...to set expectations in a
modest way."
Based on what the executives are observing, the recovery will be
led by NAND flash, the memory chips used in most mobile devices,
followed by DRAM, or dynamic random-access memory, which is used in
desktop computers and servers.
Along with the cyclical downturn, the sector has experienced a
shift brought about by artificial intelligence, big-data analytics
and the so-called Internet of Things, which connects everyday
objects such as household appliances and automobiles to the
internet.
"At a time when improvements in power, performance, area and
cost are paramount, classic Moore's law scaling is running out of
gas," Mr. Dickerson said, referring to what for decades was the
golden rule for the electronics industry.
He said Applied is rearranging and boosting its business around
what it calls the sector's new play book, one that urges new
architecture, materials and manufacturing techniques, among other
things.
Last month, Applied disclosed plans to buy Japanese
semiconductor-equipment supplier Kokusai Electric Corp. from
investment group KKR & Co. (KKR).
Applied has long focused on single-wafer processing, while
Kokusai is a leader in batch-processing technology and is
especially strong in the memory market.
Late on Thursday, Applied posted sharply lower profit and
revenue in the July quarter and forecast another difficult period
this quarter.
Profit for the quarter ended July 28 dropped 44% to $571
million, or 61 cents a share. On an adjusted basis, profit fell to
74 cents a share from $1.04 a share in the same quarter a year
earlier.
Net sales fell 14% to $3.56 billion.
The company had projected 67 cents to 75 cents a share in
adjusted profit and about $3.53 billion in revenue, while analysts
surveyed by FactSet forecast 70 cents a share and $3.53
billion.
Gross profit margin narrowed to 43.7% from 44.8%.
For the first nine months of the year, profit narrowed 12% while
net sales slid 16%.
This quarter, Applied Materials projects adjusted profit of 72
cents to 80 cents a share and about $3.69 billion in revenue,
compared with analysts' expectations for 76 cents a share in
adjusted profit and $3.66 billion in revenue.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
August 15, 2019 20:57 ET (00:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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