Investopedia: Good Luck Figuring Out Applied Materials' Course

It's common knowledge that the semiconductor industry is cyclical and that any company selling equipment for this industry is going to have its ups and downs. Even so, it almost feels like investors considering Applied Materials (Nasdaq: AMAT) would be better served with a Ouija board or tarot deck. Nobody questions that AMAT is a key player in the equipment used to make chips, solar panels, flat panel displays and so on, but it seems no two analysts or investors can agree on where we are in this cycle and how low the next bottom will be. 


A Solid Fiscal Second Quarter
What is certain is that Applied Materials had a solid second quarter. Revenue rose almost 7% on a sequential basis and surpassed the high end of its analyst range. Growth was led by the services and solar businesses, while the core semiconductor business was down about 3% from the prior quarter. Orders were also solid - climbing 7% - with growth everywhere but the solar business and the core chip equipment business matching that overall growth rate.

Going with straight-up GAAP reported results, AMAT saw gross margin improve more than a full point from last year, but come off about 70 basis points sequentially. Operating income was stronger on a year-over-year basis (up 75%), and up strongly on a sequential basis. To the extent that looking at cash flow can help resolve some of the non-cash items that complicate earnings reports, AMAT reported that year-to-date operating cash flow was up almost 26% from the year-ago period. (For more, see Strategies For Quarterly Earnings Season.)


Continue reading at the link below:
http://stocks.investopedia.com/stock-analysis/2011/Good-Luck-Figuring-Out-Applied-Materials-Course-AMAT-TSM-AUO-INTC-TXN-AEIS-CYMI0527.aspx