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Corvex Moves out of Position in Applied Materials

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Corvex exits stake in Applied Materials

Corvex Management sold its stake in Applied Materials (AMAT). The position accounted for 0.54% of the fund’s total portfolio in the third quarter.

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Overview of Applied Materials

Applied Materials (AMAT) provides manufacturing equipment, services, and software to the global semiconductor, flat panel display, solar photovoltaic, or PV, and related industries. It operates in the following four segments:

  1. Silicon Systems
  2. Global Services
  3. Display
  4. Energy and Environmental Solutions

Worldwide demand for semiconductors drives Applied Materials’ business.

Applied Materials–Tokyo Electron deal

In September 2013, Applied Materials (AMAT) agreed to form a strategic combination with Tokyo Electron, a global supplier of semiconductor and flat panel display production equipment. The combination will form a new company, Eteris.

Shareholders of both companies have approved the transaction. A Korea Times report notes that the deal has conditional approval from The Korea Fair Trade Commission. Samsung Electronics and SK hynix have raised competition concerns over the deal.

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Semiconductor manufacturing market leader

In a January business overview of Applied Materials, Market Realist cited a Gartner report that called AMAT the world’s largest maker of semiconductor equipment in terms of revenues. It’s followed by ASML Holding (ASML), Lam Research (LRCX), and Tokyo Electron.

Applied Materials and Tokyo Electron reported fiscal 2013 revenues of $5.46 billion and $3.06 billion, respectively. In 2013, Applied Materials and Tokyo Electron commanded a market share of 16.2% and 9.1%, respectively.

1Q15 results

In the first quarter of 2015, AMAT’s net sales were up 4% sequentially and 8% year-over-year to $2.4 billion. This was driven by growth in its Global Services and Display segments.

Orders were sequentially up 1% and down 1% year-over-year to $2.3 billion. Non-GAAP (generally accepted accounting principles) adjusted EPS (earnings per share) grew 17% year-over-year but remained sequentially flat at $0.27.

Disappointing 2Q15 earnings forecast

In 2Q15, net sales are expected to increase 0% to 2% sequentially. Analysts expect non-GAAP adjusted diluted EPS to be between $0.26 and $0.30. This excludes $0.03 per share charges related to completed acquisitions.

AMAT accounts for 0.78% of the iShares U.S. Technology ETF (IYW). It also has a 0.70% exposure to the Sector SPDR Trust SBI Interest (XLK).

The next part of this series will review Corvex’s exit from EMC.

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