Applied Materials Solar Strategy Paying Off (AMAT, CY, SPWR)

Applied Materials (NASDAQ: AMAT) saw a major run on Tuesday.  Despite a warning out of Intel the night before, the company is diversifying out of chip cap-ex and equipment dominance into a strategy of being a solar play.  This morning the semiconductor equipment maker disclosed in an SEC Filing a $1.9 Billion solar equipment sales agreement.  This is technically being listed as a total purchase price for the equipment and related services outside of post-warranty services that will be provided by Applied materials for approximately $1.9 Billion.

The sales agreements are with a private non-US corporation where it will supply equipment and installation and warranty services for several solar factories being constructed by the buyer. These factories will feature Applied SunFab equipment that will collectively produce an annual expected output of solar PV modules capable of generating electricity on a "gigawatt scale."

We have covered a $475 million acquisition made last year that was going to allow Applied Materials to get away from its chip cap-ex strategy into also being one of the solar leaders in a field that is booming.  On what was a negative day on Wall Street, shares closed up 7.6% to $20.32, and that is now toward the upper-end of the $16.13 to $23.00 trading range over the last 52-weeks.  Applied Materials’ market cap is $27.8 Billion and its fiscal October-2007 revenues were $9.734 Billion. 

If you have paid attention to Cypress Semiconductor (NYSE: CY) and its partial spin-off of SunPower (NASDAQ: SPWR) you will understand that it did show an incredible return for a while.  While Cypress has been cut in half over the last year, it did literally move almost 300% from bottom to top before giving back its gains.

Who knows, maybe we’ll get a spin-off of Applied SunFab down the road.

Jon C. Ogg
March 4, 2008