NEW YORK – Applied Materials Inc. (AMAT) will slash about 11 percent of its work force in a move to combat a nearly two-year-old slump in microchip demand, the chip equipment giant said Monday -- stoking fears that the beleaguered sector may not rebound soon, and plunging Big Tech issues under a cloud Tuesday.
Shares of Applied Materials Inc. (AMAT) lost 64 cents to $15.81 on Tuesday and was among the most active stocks on the Nasdaq.
Santa Clara, California-based Applied Materials, the dominant player in the $28 billion semiconductor equipment industry, said it would cut about 1,750 positions from a staff of about 16,000 to address what has been the worst downturn on record for the industry.
The company said it will take an unspecified charge on earnings for the quarter ending Jan. 26.
The job cuts, which were expected by many industry analysts and come on top of about 3,700 job cuts announced since September 2001, are in response to an extended pull-back in spending on chip factory expansions and upgrades.
In a critical example of those cuts, Intel Corp., the world's largest chip maker, recently cut as much as half-a-billion dollars from its 2002 capital spending budget.
Other makers of chip equipment, which make the tools used to produce and test microchips, have already slashed payrolls. In October, Teradyne Inc. took a charge on earnings for a work force cut of about 500 people.
"Most of their component suppliers and peers have cut headcount, so quite frankly for them not to do it would be kind of surprising," said Timothy Summers, an analyst with investment bank Investec.
Applied Materials said about 800 jobs would be cut at its Silicon Valley headquarters, and another 200 jobs cut at its Austin, Texas, operation, where it does most of its equipment manufacturing.
The remainder of the jobs would be cut at other locations in the United States and worldwide, with employees notified by the end of the company's fiscal first quarter, the company said.
Applied Materials has operations around the world, with offices in places such as Japan, China, France and Germany.
By some estimates, chip makers overall will spend 25 percent less this year on capital equipment. For 2003, some analysts expect spending to be flat or grow only 5 percent.
Applied Materials will release its fiscal fourth-quarter earnings on November 13.
After the job cut announcement, U.S. bond rating agency Standard & Poors said Applied Materials' job cuts would have no effect on its debt rating or outlook.
The company, Standard & Poor's analyst Bruce Hyman wrote, had liquidity of more than $4.8 billion as of July 31, well in excess of its $587 million in debt.
Standard & Poor's has assigned Applied Materials an "A-minus" corporate credit rating, its fourth lowest investment grade out of 10, with a "stable" outlook.