Applied Materials to Cut Up to 9% of Staff Amid Slump

Applied Materials to Cut Up to 1,300 Jobs, or 9 Percent of Staff
The staff reduction, which will result in pretax costs of $180 million to $230 million, will come through a voluntary retirement program and other actions, Applied Materials Inc. said in a statement today. Photographer: David Paul Morris/Bloomberg

Applied Materials Inc., the largest producer of chipmaking equipment, plans to eliminate as much as 9 percent of its workforce as lackluster personal-computer demand leads customers to slow orders for manufacturing tools.

The company will cut 900 to 1,300 jobs, resulting in pretax costs of $180 million to $230 million, through a voluntary retirement program and other actions. The restructuring will save $140 million to $190 million a year, Applied Materials said in a statement yesterday.

Investors and analysts track Applied Materials’ earnings as a gauge of optimism about future growth in the electronics industry. The PC market may grow by less than 1 percent this year, its worst showing in more than a decade, according to market researcher IDC. That means Applied Materials’ customers, such as Intel Corp., face slowing orders for components, reducing their appetite for spending to increase output.

Applied Materials shares dropped less than 1 percent to $11.10 at the close in New York. The stock has gained 3.6 percent this year.

In August, the Santa Clara, California-based company gave a forecast for fiscal fourth-quarter sales that was less than analysts had estimated. At the time, Chief Executive Officer Mike Splinter said orders for chip gear would pick up in the last three months of the year.

Sales Prediction

Analysts now predict sales in the period that ends later this month will fall 27 percent to $1.58 billion, the average estimate compiled by Bloomberg.

Applied Materials in July reduced its projection for industrywide factory-equipment sales for this year to $30 billion to $33 billion, compared with an earlier prediction of $32 billion to $35 billion.

Semiconductor-equipment orders are seen as a harbinger of demand for the broader electronics industry because chipmakers such as Intel and Samsung Electronics Co. vary spending on new equipment and plants based on their projections for demand as much as two years in advance. Last month, Intel slashed its own third-quarter sales forecast, citing reduced orders from PC makers.

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