Applied Materials Feels Flat-Panel Slowdown

On the heels of a string of acquisitions, Applied said it had reorganized its internal financial reporting structure during the quarter, dividing the company into four main businesses: chipmaking equipment, semiconductor-factory services, flat-panel-display-making tools and "adjacent technologies" -- a category that includes Applied's nascent solar-cell business.

Applied spent $2.64 billion to repurchase 154 million shares of stock during the quarter, reducing outstanding shares by 10%. The company said it would not repurchase any shares during the current quarter, but will resume its stock repurchasing in Q2.

Orders in the fourth quarter were $2.69 billion, up 1% sequentially. Applied had projected that orders would be flat, plus or minus 2%, from the third quarter. DRAM and flash-memory orders accounted for 53% of the bookings in the quarter.

Executives said that ratio was not likely to change any time soon, given industry conditions. CEO Mike Splinter said the chip industry was experiencing separate trends, with the foundry and logic companies in a downturn and memory makers increasing investment in response to fast bit growth.

And while some analysts questioned the industry's increasing investments in flash-memory chip-manufacturing capacity, Splinter said he was not overly concerned about it. "The key here is do the [new flash] applications and do the bit growth continue?" he asked. "So far they have, and excess demand has been able to be absorbed by pricing declines."