Customer’s about-face spells bad year for AMAT’s PV biz

April 7, 2009 – A mystery customer that made waves a year ago with a $1.9 billion order for Applied Materials SunFab thin-film tandem junction solar PV line has apparently changed its mind — and the company is drastically rewriting its near-term expectations for its solar business.

AMAT said in an SEC filing that the still-unidentified buyer is slashing the promised system’s production capacity, and the purchase price to just $250M. The company acknowledged that it has not recognized any orders in connection with the original deal, which had been said to support collective production of an estimated annual output ~1GW of solar PV modules.

That mystery customer may be China’s Best Solar, and this announcement likely is overdue, since “ambitious project financing plans had long since dwindled,” writes Deutsche Bank analyst Stephen O’Rourke, in a research note.

More importantly, the revision speaks to a significant rethinking of AMAT’s solar business outlook for at least the current year. “Early last fall Applied likely had expectations of potentially shipping 30 or more SunFab lines in 2009; we believe that expectations may now have declined to approximately 10,” thanks to the darker climate created by credit woes, he writes. Maybe half of those will turn into recognized revenue this year, but depressed demand alongside still-high solar PV costs “will push out segment profitability and dampen earnings expectations.”

O’Rourke is maintaining a “Hold” on his AMAT stock rating, citing “the ongoing cyclical SCE downturn, compounded by an FPD downturn and slowing growth in the solar PV industry, further exacerbated by global macroeconomic deterioration.”

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