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Correction: Applied Materials is scaling back spending in its solar business operations beyond those previously planned.
The weak equipment order environment has lasted longer than management had expected and as a result the company said it would make further operational cuts to better match the business environment with operating expenses.
Management said in a conference call to discuss quarterly results that it was reducing the quarterly run rate or non-GAAP operating expense within its Energy and Environmental Solutions (EES) segment that includes its solar business operations to below US$30 million by the end of the second quarter of 2013, a further 20% reduction from first quarter levels.
Management did not say whether this would be the final round of restructuring, though it was made clear that the company would be prudent in its solar spending until there was a clear indications that market conditions were improving.
Further cuts could include axing product sectors such as its wire saw product range. Equipment assembly operations have already been closed down at its base in Switzerland and moved to China. The wafering sector has been particularily hit by massive overcapacity and has seen GT Advanced Technologies (GTAT) exit the ingot furnace segment of the wafering sector. GTAT was the leading industry supplier of furnaces.
However, in response to a financial analysts question on whether the latest cuts involved exiting some part of the solar equipment segment, Michael Splinter, Chairman and Chief Executive Officer of Applied Materials said, “We’re not announcing any changes in terms of the products that we have within the EES organization. We [have] certainly driven the cost down pretty dramatically, I think in Q4 2012 we were US$45 million, US$50 million as we said exiting Q4 2013 and the Solar business will be down to about US$20 million. So we’ve cut back in terms of the OpEx spending and that money is being reallocated into some great strategic opportunities we have to grow the company. But really no announcements at this time for any exits of major products within the Solar business.”
Applied Materials reported EES net sales were down 26% from the previous quarter to US$46 million. EES continued its loss making ways with a non-GAAP operating loss of US$44 million and a GAAP operating loss of US$54 million.
However, new orders for the FY first quarter 2013 were US$68 million, up 5% from the previous quarter. The majority of new orders were said to have come from its web coating equipment which is not related to the solar business. The company did not highlight any solar orders for the quarter, only noting in the conference call that solar equipment orders remain at depressed levels due to longer than expected period of overcapacity in the industry.
Applied Materials guided EES sales for the FY second quarter as being approximately flat and remaining at recent low levels.
According to information given to PV Tech, the European operations of the former HCT wire saw business are focused on R&D, while equipment assembly has been moved to China. Therefore operations on the R&D front continue to undertaken in Europe. Our initial report said that the HCT operations had been closed down entirely.