Q1 2011 forecast for semiconductor equipment

NEW TRIPOLI, USA: Applied Materials Fourth Quarter Results Exceed Expectations according to their press release.

“Applied ended a very strong year by delivering results that exceeded our expectations in the fourth quarter,” said CEO Mike Splinter. “We are seeing strong momentum in our business as we enter 2011, fueled by accelerated innovation and market share gains.” Looking ahead, Applied expects first quarter revenue to be down in the range of 8 percent to 15 percent quarter over quarter.

That seems like a self-contradictory (oxymoron) statement to me - strong momentum as we enter 2011 but revenues down next quarter over quarter.

Looking at their PR a little closer:

Silicon Systems Group (SSG) orders were $1.67 billion in the fourth quarter, up 9 percent from the third quarter led by higher demand for inspection equipment. Net sales increased to $1.48 billion, up 2 percent led by record net sales of chemical mechanical polishing (CMP) systems.

Operating income rose to $564 million or 38 percent of net sales. New order composition was: foundry 47 percent, logic and other 24 percent, DRAM 20 percent, and flash 9 percent.

For the year, SSG orders more than tripled to $5.76 billion, net sales more than doubled to $5.30 billion, and operating income rose to $1.89 billion or 36 percent of net sales.

So, net sales for the year more than doubled but grew only 2 precent Q-to-Q in the latest quarter!!! BIG DIFFERENCE. That means to me that all the growth we saw in their equipment business, and based on other companies' reports is pretty much OVER.

Don't pay attention to the 9 percent increase in orders, as pushouts will nullify this growth.

What does that mean? We told you back in August to expect this (read your e-mails!). Companies only stick their necks out 1 quarter in forward announcements in releases and earning calls. That means, according to AMAT and others, that CY Q4 2010 will be down as much as 15 percent from Q3. But what about 2011??

A chart of our proprietary leading indicators, which successfully predicted Q3 and Q4, are shown below. The blank space will show what will be happening in Q1 2011. No one else has this information but us.Source: The Information Network, USA.