AMAT

Applied Materials, Inc. (AMAT)

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Applied Materials, Inc. (AMAT)

F2Q 2013 Earnings Conference Call

May 16, 2013 4:30 PM ET

Executives

Michael Sullivan – VP, Investor Relations

Michael R. Splinter – Chairman and Chief Executive Officer

Gary E. Dickerson – President

Bob Halliday – Senior Vice President and Chief Financial Officer

Analysts

Terence Whalen – Citigroup Global Markets Inc.

Edwin Mok – Needham & Co. LLC

Tim M. Arcuri – Cowen & Co. LLC

Thomas Yeh – Bank of America Merrill Lynch

Jim Covello – Goldman Sachs & Co.

Mahesh Sanganeria – RBC Capital Markets LLC

Stephen Chin – UBS Securities LLC

Satya Kumar – Credit Suisse Securities (USA) LLC

Vishal Shah – Deutsche Bank Securities

Jagadish Iyer – Piper Jaffray, Inc.

Mehdi Hosseini – Susquehanna International Group, LLP

Patrick J. Ho – Stifel, Nicolaus & Co., Inc.

Ben Pang – B. Riley & Company

Presentation

Operator

Good afternoon and welcome to the Applied Materials’ Earnings Conference Call. During the presentation, all participants will be in listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today, May 16, 2013.

I would now like to turn the conference over to Michael Sullivan, Vice President of Investor Relations. Please go ahead, sir.

Michael Sullivan

Thank you, Kia, and good afternoon. Joining us on the call today are Mike Splinter, our Chairman and CEO; Gary Dickerson, our Company’s President; and Bob Halliday, our Chief Financial Officer.

Today we’ll discuss the results for our second quarter ended April 28. Let me remind you that today’s call contains forward-looking statements including the Company’s current view of its markets, industry trends, opportunities, growth strategies, share position, technology, cost structure, profitability and Q3 business outlook. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied and they should be interpreted in that line. Information concerning the risk factors is contained in our Company’s SEC filings including our most recent Form 10-Q.

Today’s call also includes non-GAAP adjusted financial measures. Reconciliations to GAAP measures are contained in today’s earnings press release and in our quarterly financial highlights presentation, both of which are available on Investor page of our website at appliedmaterials.com.

Before we begin, I’d like to remind you that Applied will hold our 2013 Analyst Day in Santa Clara on Monday July 8, just prior to SEMICON West. Many of you have already signed up to join us and we look forward to seeing you there. If you like additional information about the events, please contact me using the number in today’s earnings press release.

And now, I’d like to turn the call over to Mike Splinter.

Michael R. Splinter

Thanks, Mike, and good afternoon to everyone on the call today. In our second fiscal quarter, Applied Materials delivered earnings that exceeded the high-end of our outlook. We fulfilled request for accelerated delivery of orders from a number of our semiconductor and display customers, while carefully managing our spending.

At this point in the year 2013 is shaking up largely as we have expected. Demand for semiconductor equipment is healthy, utilization at our customers’ factories is steadily increasing, and investment in display is strengthening. Across the company, we are building momentum for profitable growth. Over the past two quarters, we have implemented measures to reduce our overhead costs and have redeployed spending to product development and our customer facing technical teams. These changes are enabling us to strengthen customer collaborations and increased our product development philosophy.

We are focusing our R&D investments on key programs that support our strategic priority to increase our share in wafer fab equipment, while making targeted investments in display and other opportunities that expand our total available market. We see further opportunities to reduce our operating expenses and organizational complexity to improve operating margins at current revenue levels and provide significant earnings leverage as volumes increase.

I will discuss these opportunities later in the call. Major industry trends are expanding our served available market in place to our strengths in Precision Materials Engineering. We expect to grow our share of wafer fab equipment this year while winning key development tool at record positions that provide a foundation for additional share gains in 2014 and beyond. We are also building momentum in display. Customers are adding capacity and we are seeing stronger order growth. We are significantly increasing our share of the display PVD market, complementing our strong position in CVD.

In semiconductor, the mobility trend remains the biggest factor influencing industry growth. The global appetite for always on, always connected mobile devices continues to strengthen. And now the value of silicon being consumed by smartphones and tablets has surpassed that being used by PCs. Around 200 million smartphones and 35 million tablets shipped in the first calendar quarter of 2013. That’s in line with expected annual growth rate of 35% for phones and 55% for tablets.

Demand for the advanced application of baseband processors used in smartphones and tablets is fueling investment by foundries as they add capacity at 28 nanometers, begin 20 nanometer pilot production and accelerate the development of 3D transistors.

Transistor performance is the key battleground for our foundry customers. In his latest earnings call, Morris Chang described how TSMC has differentiated offering in high-K metal gate delivers better performance for their customers’ products. Applied’s clear leadership in the transistor module enables us to help our customers solve their high value device performance challenges and we are earning share gains at the leading foundries.

Read the rest of this transcript for free on seekingalpha.com