Nov. 11 (Bloomberg) -- Applied Materials Inc., the largest maker of chip-production machinery, may be preparing to cut more jobs, a sign the company doesn’t expect the market to bounce back to pre-recession levels.

Analysts at Pacific Crest Securities, RBC Capital and Auriga USA LLC are predicting job cuts of as much as 15 percent when Applied releases fourth-quarter earnings today. That would amount to more than 1,500 jobs. The company is reducing its costs to adjust to a smaller industry, said Daniel Berenbaum, an Auriga analyst in New York.

“I expect them to try to size the company for the level of business going forward,” said Berenbaum, who recommends selling the stock. “The problem for Applied and the problem for semi equipment in general is that it’s highly unlikely that we’re going back to 2007 capital spending levels.”

Semiconductor companies will spend about $15 billion on manufacturing machinery this year, half the amount in 2008 and a fraction of 2007’s $43 billion tally, according to trade group Semiconductor Equipment and Materials International. While orders have begun to pick up again, some chip companies have gone bankrupt and others are shifting away from doing their own manufacturing. That means they don’t need Applied’s gear.

“For a few years at least, you have to think about this being a smaller market,” said Weston Twigg, a Pacific Crest analyst in Portland, Oregon. He has a “sector perform” rating on Applied’s stock. “2007 was a huge year. I don’t think we ever get back to those numbers.”

Analysts’ Estimates

David Miller, an Applied spokesman, declined to comment. The company has about 12,600 employees.

Applied will report a profit of 3 cents a share and sales of $1.32 billion for the three months ended in October, according to a Bloomberg survey of analysts’ estimates. In August, the Santa Clara, California-based company predicted profit of as much as 4 cents a share and a sales gain of at least 10 percent. That would equate to revenue of about $1.25 billion.

Applied rose 24 cents, or 1.9 percent, to $13.24 at 11:50 a.m. New York time in Nasdaq Stock Market trading. The shares had climbed 28 percent this year before today.

Memory-chip makers, led by Samsung Electronics Co., fueled the industry’s last boom, which peaked two years ago. The companies spent $29 billion on capital spending in 2007, according to Berenbaum. The increase in production led to a glut of the chips, which store memory in computers and portable devices, such as Apple Inc.’s iPhone.

Bankruptcy Cases

The resulting collapse in prices wiped out industry profits and sent at least two chipmakers, Qimonda AG and Spansion Inc., into bankruptcy. Those two companies alone had spent $2.3 billion on plants and equipment in 2007.

To realign supply with demand, the industry shut down older plants and curbed expansion plans. Samsung, the world’s second- largest chipmaker after Intel Corp., will spend $5 billion on new plants and equipment next year, down from the $8.15 billion in 2007, Berenbaum estimates.

Under Chief Executive Officer Mike Splinter, Applied has sought to decrease its reliance on the chip-equipment business. It’s adapted some of its semiconductor and flat-panel display machinery for use in the production of solar panels.

Applied cut about 1,000 jobs, or 7 percent of its workforce, in 2008.

The new cuts will help free up money to continue improving the solar products if it wants to compete, Twigg said.

“The solar segment hasn’t taken off in the way they expected it to, so they have to be very fiscally conservative to stay in that market,” he said.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

Last Updated: November 11, 2009 11:51 EST