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Applied to Cut 1,750 Jobs

The chip-equipment maker cites the continuing downturn in the semiconductor industry.

November 05, 2002|Alex Pham | Times Staff Writer

Chip-equipment maker Applied Materials Inc. on Monday announced that it will eliminate 1,750 jobs, or 11% of its work force, to cope with a slump in the market for computers and other high-tech devices.

Santa Clara, Calif.-based Applied, the world's largest manufacturer of machines used to make semiconductors, said the job cuts will include 800 workers from its Silicon Valley operations and 200 from its Austin, Texas, facility. It also will take an unspecified charge in its first quarter ending Jan. 26 to account for the layoffs. It currently has 16,000 employees.

"In the past, when they've hit hard times, they've lowered salaries 5% to 15%," said Alex Mou, senior analyst with San Francisco research firm Hotovec, Pomeranz & Co. "The layoff sends the signal that a quick rebound is not in sight. We expect the sector to continue to have a challenging time in 2003."

Many chip companies that are customers of Applied, including chip giant Intel Corp., have forecast anemic sales growth for the remainder of the year and modest growth in 2003, based on weak consumer and business spending.

Consequently, chip makers have cut back spending. Intel, for instance, reduced capital expenditures from $7.3 billion in 2001 to an estimated $4.7 billion this year.

Even if the semiconductor market picks up in 2003, analysts say Applied and other equipment makers will be slow to recover. The reason: Chip companies overbuilt their production capacity in 1999 and 2000, and it will take some time for chip demand to catch up, Mou said.

Shares rose 73 cents to $16.45 on Nasdaq, then fell to $16 in after-hours trading after the announcement.

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