Chip Firm Applied Will Cut 2,000 Jobs

Applied Materials Inc., the largest manufacturer of chip-making equipment, said Tuesday that it will cut 2,000 jobs, or 15% of its work force, as it grapples with the Asia economic crisis and a shift to cheaper computers.

The announcement, which came two weeks after the company reported a 51% drop in quarterly profit, is the latest sign of a downturn in the semiconductor industry.

The company said it would begin notifying affected employees today. Most of the jobs will be eliminated at Applied’s headquarters in Santa Clara, Calif., where it will cut 750 workers, and in Austin, Texas, where it will cut 600. Applied will make the remaining cuts to its worldwide work force by the end of its fourth quarter ending Oct. 25.

Applied also plans to cut executive salaries by 10%. The company will take an unspecified charge for the firings, which will result in a fourth-quarter loss.

Applied’s shares gained 75 cents to close at $31.44 on Nasdaq. The stock has rebounded from a low of $25.50 in December, but it remains far below its 52-week high of $52.94. The company disclosed the job cuts after the close of regular U.S. trading.

The layoffs are Applied’s latest effort to deal with a slowdown in the chip equipment market, caused by weak computer sales and the economic crisis in Asia, where many chip makers are based. The company already has reduced temporary workers and shut its operations on certain days to try to slash costs.

“The industry’s in bad shape. We keep looking for the light at the end of the tunnel, but it’s still dark,” said Phil Schettewi, chief portfolio strategist for Loomis Sayles & Co. in Washington, which owns Applied Materials shares.

Applied and its rivals have been struggling since last year, when a financial crisis in Asia left many of its customers scrambling for loans they need to buy new equipment. Some of the biggest chip makers in the world are in Asia. South Korea alone is home to Samsung Electronics and Hyundai Electronics Industries, two of the biggest memory-chip makers.

“An unprecedented convergence of three factors--difficult economic conditions in Asia, industry overcapacity and the movement toward sub-$1,000 PCs--is continuing to cause customers to delay equipment deliveries and investments in capacity and strategic programs,” said James C. Morgan, Applied Materials’ chairman and chief executive.

The same factors Morgan cited have prompted other chip and computer companies, including Intel, Hewlett-Packard and National Semiconductor, to cut positions, reduce employee pay, temporarily shut offices and offer workers unpaid days off.

Applied Materials eliminated 1,500 jobs through voluntary separation and attrition in its fiscal third quarter, which ended in July.

Earlier this month, Applied said fiscal third-quarter profit fell 51% as sales tumbled amid Asia’s economic slump and lackluster demand worldwide for semiconductors.

Third-quarter profit before a charge fell to $70.6 million, or 19 cents a diluted share, from profit before a gain of $145.2 million, or 38 cents, a year ago. Sales for the quarter ended July 26 fell 16% to $884.5 million, from $1.06 billion.

New orders for equipment plummeted by half to $608 million, which was the steepest decline since 1986.

The company is expected to earn 3 cents a share in the fourth quarter. In the year-ago quarter, Applied had profit before a charge of $187.3 million, or 49 cents a share.