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  1. Technology
August 25, 1998


By CBR Staff Writer

Applied Materials Inc, the world’s biggest manufacturer of semiconductor fabrication equipment, has announced it will lay off 15% of its workforce, some 2,000 employees in a cost cutting exercise born of a continued decline in orders. Additionally, the company has announced a 10% cut in executive pay. The moves follow an extended slump within the semiconductor industry, which is proving to be the longest and most painful slump yet for this highly cyclical industry. Included in the cuts will be 750 positions at Applied’s Santa Clara facility in Silicon Valley, and 600 more will go at its facility in Austin, Texas. The subsequent costs of restructuring will result in a fourth quarter charge of an unspecified size, but Applied said it now expects to make a loss for the quarter as a result of these actions. Again, the company declined to say how large the expected loss would be. Prior to this news, the consensus of analysts estimates for the fourth quarter was a profit of $0.06 per share. Last quarter, Applied’s earnings fell by 74% to $0.13. Applied’s chief executive, James Morgan, blamed the problems on the convergence of three factors: the economic problems in Asia, industry over-capacity and the shift towards the sub $1,000 personal computer. Morgan has previously referred to this phenomenon as a triple witching hour. Shares of Applied Materials rose $0.75 to $31.44 on Tuesday but news of the restructuring was announced after the close of markets.

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