By Silicon Valley / San Jose Business Journal

Applied Materials Inc. said Wednesday it will cut up to 500 jobs as it shifts from selling its SunFab thin-film solar panel manufacturing equipment and concentrates on other energy businesses.

The Santa Clara company (NASDAQ:AMAT) said its energy and environmental solutions unit will now focus on selling equipment used to make crystalline silicon solar panels and LED lighting.

The move comes after Applied wrote down $83 million in thin film solar panel manufacturing equipment in the spring as sales plummeted.

CEO Mike Splinter blamed a number of factors for the lack of success in the thin film business that Applied thought several years ago would be quite promising.

"The thin film market has been negatively impacted by several factors, including delays in utility-scale solar adoption, solar panel manufacturers' challenges in obtaining affordable capital, changes and uncertainty in government renewable energy policies, and competitive pressure from crystalline silicon technologies," Splinter said.

The company also plans to divest its low-emissivity architectural glass coating products, which is more efficient because it reflects more energy than other glasses. Instead it will continue development of emerging technologies such as "smart" electrochromic glass that can be darkened or lightened electronically.

Applied said the reorganization will cut its annual operating expenses by at least $100 million a year and make the energy unit profitable in fiscal year 2011.

It will discontinue sales to new customers of its SunFab lines for manufacturing thin film solar panels. It will continue, however, to offer to sell individual tools to thin film solar manufacturers, including chemical vapor deposition and physical vapor deposition equipment.

It also said it will continue research and development efforts to improve thin film panel technology and will support existing SunFab customers.

Applied's solar R&D center in Xi'an, China, will now concentrate on advancing other solar power technologies, including crystalline silicon solar.

The energy unit will be led by Executive Vice President Mark Pinto.

The cost of the restructuring is expected to be in the range of between $375 million and $425 million, or 18 cents to 21 cents per share, which will be reported in the third quarter of fiscal 2010.

As part of the total pre-tax cost, Applied estimated it will record inventory charges of up to $240 million; equipment and intangible assets impairment charges of up to $95 million; employee severance of up to $50 million; and other obligations of up to $40 million.

This action is expected to impact between 400 to 500 positions globally, with a number of affected employees offered the opportunity to transfer to other groups or functions within the company.

As a result of the restructuring, Applied said it is cutting its outlook for the quarter to between 10 cents and 14 cents a share in adjusted earnings for the third quarter. It previously projected adjusted earnings of between 22 cents and 26 cents a share.

Copyright 2010 American City Business Journals

Copyright 2010