Applied Materials Earnings Call Insights: EES OpEx Run Rate and Segment Guidance Analysis

Applied Materials (NASDAQ:AMAT) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

EES OpEx Run Rate

Terence Whalen – Citi: So the EES OpEx run rate is targeted to be about $25 million year-end. Any sense for where that was this quarter? Thank you.

Bob Halliday – SVP and CFO: Yeah. We exited the quarter as I mentioned at $30 million, and we might have been touch over that fall of the quarter, but we exited $31 million going down the rest of the year.

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Terence Whalen – Citi: Then, my follow-up question is on the gross margin side. You said that part of the positive variance in gross margin was due to fewer inventory reserves. Can you help us understand going forward whether you see that trend continuing or any insight on gross margin going forward would be helpful? Thank you.

Bob Halliday – SVP and CFO: Our gross margin is pretty good this quarter. The year-over-year comparison was aided by a couple of things. We had some inventory reserves last year, and then this year, we had a good drop, so we had incremental revenues which dropped to the gross margin line. If you look at our overall sales and expense and profitability guidance for next quarter, it implies reasonably positive gross margin opportunities next quarter also.

Segment Guidance Analysis

Edwin Mok – Needham & Company: So first just in terms of guidance, can you help us at least directionally how you think about the four segments that you guys have?

Bob Halliday – SVP and CFO: Sure, I’ll give it a shot, Edwin. Most are up a little bit. I think our sales will be up somewhat, and I think it’s pretty much across the board.

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Edwin Mok – Needham & Company: How about your bookings trend. This quarter, your bookings were quite a bit above your revenue, but next quarter, you’re just guiding for modest increase in revenue. Doesn’t it mean that there is some, call it, softness in booking or how do you kind of think about that and what are the moving parts between the foundry, logic et cetera?

Gary E. Dickerson – President: Edwin, as you know, we don’t give the bookings guidance. We continue with the overall CapEx guidance of flat to down 10% as Mike talked about earlier, we’re incrementally more optimistic. It’s part of what happens in CapEx, depends on just a few customers in foundry and memory, spending later in the year. So, overall – and the key message I think for us is around the transition in transistor technology as Mike talked about earlier, that’s the key battleground in mobility and that opportunity in the transistor inflection starting in 2014 also 3D memory. Those are extremely positive opportunities for us to grow overall share.