Applied Materials, Inc. (Nasdaq:AMAT) today announced plans to restructure its Energy and Environmental Solutions (EES) segment.
The company will discontinue sales of its integrated SunFab manufacturing line for amorphous silicon (a-Si) thin film solar. The company said it will focus instead on crystalline silicon (c-Si) solar and advanced energy technologies including light emitting diodes (LED).
Applied said it will continue to offer individual thin-film
manufacturing tools, including chemical vapor deposition (CVD) and
physical vapor deposition (PVD) equipment. However, R&D efforts to
improve thin film panel efficiency and high-productivity deposition will
continue.
The company said it will support existing SunFab
customers with services, upgrades and capacity increases through its
Applied Global Services segment.
The company also plans to divest its low-emissivity architectural glass
coating products, while continuing development activities in emerging
technologies such as “smart” electrochromic glass.
Upon completion of the restructuring plan, annual operating expenses are expected to decrease by at least $100 million on an annualized basis. The restructuring plan is intended to make EES a profitable segment in fiscal year 2011.
The cost of implementing the EES restructuring plan is expected to be in the range of approximately $375 million to $425 million, or $0.18 to $0.21 per share, which will be reported as cost of products sold and restructuring and asset impairments in the company’s consolidated statements of operations for 3Q10.
As part of the total pre-tax cost, Applied anticipates that it will record: (i) inventory charges of up to $240 million; (ii) equipment and intangible assets impairment charges of up to $95 million; (iii) employee severance of up to $50 million; and (iv) other obligations of up to $40 million. This action is expected to impact between 400 to 500 positions globally. A number of affected employees may transfer to other groups or functions within the company.
Applied revised its 3Q10 business outlook. In May, the company announced its target for non-GAAP EPS for 3Q10 of between $0.22 and $0.26 per share, which did not include any potential restructuring charges. The revised target is for non-GAAP earnings of $0.10 to $0.14 per share, which the company said would have been at the high end of the previous target after taking into account the approximately $0.14 per share impact of the inventory charges and other obligations related to today’s actions.
Chairman and CEO Mike Splinter said 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. He addresses the restructuring on the Applied Materials Blog.
Loading...