SAN FRANCISCO --
CEO Mike Splinter says the first half of 2005 was a mixed bag for the chip-equipment industry, but that the electronics industry is still outgrowing what remains a healthy global economy.
During the company's analyst meeting here Tuesday as part of Semicon West, the chip-equipment industry's largest trade show, Splinter wouldn't comment about Applied's current quarter, which ends this month, but he repeated his expectations for industrywide sales declines of 2% to 7% this year.
Instead, he highlighted the nontechnological advances that Applied Materials, the world's largest chip-equipment company, is making to improve efficiencies for it and its customers, such as a just-announced agreement with
commercial financing arm.
As part of the deal, GE will be the preferred source of financing for Applied's new and used tools and service contracts. Also, GE customers buying Applied's equipment will be encouraged to use Applied's support services.
"This is the kind of new thinking you should expect from us: business innovation and not just product innovation," says Splinter. The deal is expected to increase the amount of service contracts Applied Materials fulfills.
"The name of the game with customers is they have to produce products with technological advantages and the lowest costs," he says.
Splinter noted the company's business model, saying in the previous quarter, ended May 1, that Applied had net margins of 16%, operating margins of 22% and sales of $1.9 billion. He said on sales of $3 billion, Applied's net margin should rise to 23% and its operating margin should expand to 31%.
The themes were similar to a day earlier, when
, the world's seventh-largest equipment company, held its analyst and investor meeting.
Financial details were scarce, but Novellus Systems executives reiterated late Monday that they could outgrow their equipment company peers and achieve gross margins between 52% and 54%.
Executives touted their technology positioning and how much their products were helping their customers. This, executives said, would help Novellus expand market share for current products from between 20% to 25% to more than 40% during the coming five years.
Novellus reports financial results next Tuesday and no comments were made about the just-completed quarter. Analysts expect Novellus to earn 21 cents a share on sales of $329 million, on average, according to Thomson First Call.
During a midquarter update in May,
Novellus boosted its financial targets due to cost cuts and improved demand from Japan.
The net impact of both analyst meetings to the stocks was muted. Applied Materials shares dipped 0.5% to $17.11, while Novellus shares rose 0.5% to $26.89.
This could be a sign of things to come until investors get stronger evidence of a
pending acceleration in business, as opposed to announcements about financing linkages and multiyear growth targets.
After all, equipment companies have repeatedly shown an inability to forecast demand only a few months out. Why should investors be willing to bet on expected growth a few years out?