The real surprise was that the fall guy appeared to be Tom St. Dennis, once the rising star at Applied and possible heir apparent to Mike Splinter, the company's chairman and CEO.

St. Dennis was in charge of Applied's entire fab equipment efforts, but the long-time executive resigned from the company as part of a management shakeup. In recent times, it became painfully obvious that change was in the wind. Applied was not only suffering from the current and major downturn, but the company has experienced a string of product failures in the fab tool arena.

Some wonder if Applied has taken its eye off the ball in the fab tool arena, as the company has expanded its efforts in solar. Others believe there has been a significant ''brain drain'' at Applied, as many executives and technologists have left the company in recent times.

Are the glory days over for Applied? Not by a long shot. In any case, Applied saw a shakeup last week, and going forward, it could face more layoffs. As reported, Applied Friday (Sept. 18) announced significant leadership changes, including the departure of veteran semiconductor equipment executive St. Dennis.

St. Dennis, who announced his intention to resign, will be replaced as senior vice president and general manager of Applied's Silicon Systems group (SSG) by Randhir Thakur, effective Oct. 2, Applied (Santa Clara, Calif.) said. Thakur previously served as senior vice president and general manager of Applied's Display and SunFab Solar group.

''We view some of the shuffling in management as an acknowledgement of a lack of share gain in both etch and in inspection,'' said C.J. Muse, an analyst with Barclays Capital, in a report. ''Given Lam Research's and Tokyo Electron's strength in etch, we believe the management change in SSG was an acknowledgement of no traction in achieving market share gains, and the same story holds true verses KLA-Tencor in metrology and inspection, in our view.''

St. Dennis' departure won't solve the problem in the short term. The company continues to lose share in etch, a sore point for the chip-equipment giant. Applied has seen its share of hits and misses in metrology.

The real issue for Applied is the lack of major breakthrough products in recent times. Years ago, the company hit a number of ''home runs'' -- or major successes-- in terms of product rollouts. Today, for example, it is the clear leader in CMP, CVD, PVD and other markets.

What happened to the magic? In some ways, the product pipeline seems bare than its past glory days. In part, blame it on the ''brain drain'' or current management. And like other fab tool vendors, Applied is also the victim of a maturing industry. It is difficult to find new and growing markets in the fab tool arena.

Clearly, though, Applied has seen its share of setbacks, which, in part, led to the management shakeup. In 2005, Applied exited the electron-beam and laser pattern-generation equipment markets, ending a painful and loss-ridden period in the competitive sectors.

In 2007, Applied announced its intention to cease future development of ion implanter products and closed its operations in the arena. Last year, the company also exited the electrochemical plating (ECP) equipment market, according to an analyst. It sold the so-called SlimCell line of ECP tools, but the product never gained traction against the likes of Novellus Systems Inc.

It has also exited the wet-clean market. In July, Applied backed away from the wafer track sector. It reduced its stake in its wafer track venture with Dainippon Screen Mfg. Co. Ltd. (DNS), thereby giving the Japanese company control of the business. The venture has also cut or ''streamlined'' jobs amid the downturn.

Despite a recent rebound in business, Applied is set for more layoffs and cost-cutting moves, according to an analyst. ''While we had expected further cost cutting announcement prior to the end of September, we now believe that the timing may slip as downstream mgmt changes take longer to percolate, but still likely before end of FY09,'' Muse said.

Recently, Applied reported results for its third fiscal quarter ended July 26, 2009. Net sales were $1.13 billion, and the GAAP net loss was $55 million, or $0.04 per share.

SSG's sales were $498 million in the quarter, compared to $260 million in the previous quarter and $756 million a year ago. The operating profit for the quarter was $56 million, compared to minus $96 million in the previous quarter and a profit of $172 million a year ago.