Applied Materials CFO George Davis Discusses Chip Industry Challenges

Strategic Insights -

Bloomberg TV's Matt Miller spoke with George Davis, CFO of Applied Materials, about the company's second-quarter earnings and the challenges facing the chip-making equipment industry. Applied Materials, the world's largest maker of chip-making equipment, posted slightly better-than-expected earnings, but warned of a potential 10% decline in sales in the third quarter due to a drop in demand for devices such as TVs, smartphones, and tablets.

However, Davis expressed confidence in the long-term demand for these products, citing strong growth in emerging markets and a desire for mobility and consumer electronics. He also downplayed concerns about the PC market, stating that the PC is not dead and will evolve to compete with tablets. Additionally, Davis discussed the company's currency-exchange strategy, stating that most of their products are sold in dollars, and they hedge their non-dollar exposures.

Key Takeaways:

  • Applied Materials, the world's largest maker of chip-making equipment, posted slightly better-than-expected earnings but warned of a potential 10% decline in sales in the third quarter.
  • The company cited a drop in demand for devices such as TVs, smartphones, and tablets as a headwind, but expressed confidence in the long-term demand for consumer electronics in emerging markets.
  • Davis downplayed concerns about the PC market, stating that the PC is not dead and will evolve to compete with tablets.
  • Applied Materials has a strategy to hedge its non-dollar exposures, which is not a significant factor for the company.
  • The company is expecting a record year for revenues and the strongest earnings per share in its history.
  • Tablets are up 200% and smartphones are up 70% year over year, indicating strong growth in mobility products.

Statistics:

  • Applied Materials' sales could decline 10% in the third quarter.
  • Tablets are up 200% year over year.
  • Smartphones are up 70% year over year.
  • The company is expecting a record year for revenues.
  • The company is expecting the strongest earnings per share in its history.
  • The PC market is down, but the company believes it will evolve to compete with tablets.

Sources:

  • Bloomberg LP, "Applied Materials CEO George Davis Talks Chips on Bloomberg TV", May 24, 2011.
  • Matt Miller, Bloomberg News, interview with George Davis, CFO, Applied Materials, May 24, 2011.