Recovery Is on the Horizon for Applied Materials

Applied Materials (AMAT), the world's largest maker of semiconductor fabrication gear, is expected to report improving performance for the company's first fiscal quarter of 2010 Wednesday, after the market's close. Analysts expect the company to report earning per share of 13 cents, according to Thomson Reuters, a turnaround from a loss of 10 cents per share of in the year ago quarter.During 2008 and 2009, many chip makers reduced their manufacturing capacity to adjust to diminished demand. "That capacity has to be replaced," said Mike Splinter, Applied's CEO, during a recent interview with Bloomberg TV.

"And it'll be replaced by leading edge technology... I think in the next six to nine months, we're going to start to see increased spending on new capacity," he said.

In December, Applied completed its acquisition of rival Semitool in an effort to take advantage of "emerging opportunities in the high-growth wafer packaging market," a segment that deals with assembling groups of computer chips together after they are manufactured and to pick up that company's semiconductor manufacturing technology.

Although sales of semiconductor equipment are at the heart of the company's revenue, the company has been actively adjusting to an ever-changing landscape, in which the number of its key customers has shrunk dramatically in recent years, going from 25 customers to between 5 and 10.

In particular, Applied has branched into the solar market, where Splinter says the company thinks "the opportunities over the next 20 years are really phenomenal" in both emerging markets as well as in developed economies.

In November, the company acquired the assets and intellectual property of Advent Solar Inc. for an undisclosed amount.

The company has also moved to reduce its operating costs, announcing in November that it would lay off between 1,300 to 1,500 workers by June 2011, a move that it expects will save the company $450 million annually once completed.

Several employees of the company were arrested in South Korea recently in connection with an criminal investigation into the alleged improper receipt and use of confidential information from Samsung, one of Applied Materials' biggest customers.

The company says it "believes that there are meritorious defenses to the charges," and is taking steps to resolve the matter.

Applied will report its first quarter 2010 earnings Wednesday at 4:30 p.m. ET.
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