Applied, the bellwether in the semiconductor equipment market, also plans to record a restructuring charge in the fourth fiscal quarter, ending October 28, for employee-related costs and consolidation of facilities.

The company said that it plans to cut about 700 positions in its Silicon Valley operations and approximately 500 positions in Austin, Tex. The remaining positions are expected to be eliminated at other locations worldwide by the end of its fourth fiscal quarter.

Since the beginning of the year, Applied has instituted a number of cost-savings programs in response to the slowing demand for chip equipment. This includes executive and employee salary reductions, mandatory shutdown days, a voluntary separation plan, restricted hiring, and a reduction in the temporary work force.

But like most chip-equipment vendors, Applied has been seriously impacted by the downturn. The company reported a 30% sequential drop in revenues to $1.33 billion in its fiscal third quarter, ended July 29, compared to $1.91 billion in the prior three-month period. Applied's net sales were 51% lower than $2.73 billion in the same quarter last year (see Aug. 14 story ).

"We implemented a series of aggressive cost-reduction programs in an effort to avoid reductions in our work force," said James C. Morgan, chairman and chief executive officer of Applied. "Unfortunately, the length and severity of the downturn and lack of near-term visibility have made it necessary for us to take additional action to align our operations with the current level of business," Morgan said.

"While this is a challenging time for Applied Materials and our customers, we firmly believe that the long-term outlook for the semiconductor industry remains strong," he said. "We are now working closely with our customers around the world on the leading-edge manufacturing technologies that will prepare them to make the critical transitions to the 300 mm, copper and nano-chip era," he added.