AMAT Preview: Semi Slump Likely to Continue

Applied Materials (AMAT - commentary - Cramer's Take) will report numbers for its fourth quarter (ended Oct. 31) this evening after the close of regular market trading.

The Street expects the company to report earnings of 14 cents per share on revenue of $1.94 billion for the October quarter. For the next quarter (ending Jan. 31, 2009), the sell-siders expect earnings of 16 cents per share on revenue of $1.95 billion. For 2009 (ending October 2009), the consensus is calling for earnings of 82 cents per share on revenue of $8.35 billion.

Here are some questions to bear in mind when poring over the press release and listening to the earnings call:

• What does the company say about orders going forward? (I am expecting orders guidance to be very weak.)
• Have there been any workforce reductions? (I think that the company will announce its third workforce reduction this year as it struggles to maintain profitability.)
• How does demand look going forward? (I do not see any improvement in demand until the middle of next year at best.)
• How is the company's silicon business faring in this tough environment? (I am expecting the worst there.)
• How is the company's SunFab business doing? (Weak again.)

Most semiconductor equipment companies -- such as Lam Research (LRCX - commentary - Cramer's Take), KLA-Tencor (KLAC - commentary - Cramer's Take) -- have reported dismal earnings, with declining revenue and lowered guidance. Applied Materials should continue the trend. Although, the company is trading at eight-year lows, I just do not see anything worthwhile from an investment perspective to warrant a good guy shot at Applied Materials.

Good luck, whichever way you are positioned going into the company's call tonight, good guy or dark-sider.

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Know What You Own: Applied Materials, Lam Research and KLA-Tencor operate in the semiconductor equipment and materials industry, and some of the other stocks in its field include Advantest (ATE - commentary - Cramer's Take), Advanced Semiconductor Engineering (ASX - commentary - Cramer's Take) and Cree (CREE - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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At the time of publication, Somaney had no positions in the stocks mentioned, although positions may change at any time without notice.

Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas, and founder of GlobalTechStocks.com, a subscription site that focuses on technology and Indian stocks (including ADRs), providing information, news and chatter. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback; click here to send him an email.