Applied Materials' Revenue Fails to Meet Expectations--Update

By Don Clark 

Applied Materials Inc., which closely tracks the moods of chip makers, is seeing signs of a bearish trend.

The big maker of semiconductor manufacturing tools on Thursday reported a 10% rise in its third-quarter revenue and a 17% jump in orders for new equipment. But analysts had expected slightly higher revenue and Applied issued a forecast for the fiscal fourth quarter that was also lower than Wall Street projections.

Gary Dickerson, Applied's chief executive, said the company had been expecting some growth in total industry spending on equipment this year but decided to lower its forecast. His company now thinks spending will be "flat to down," he said in an interview.

Mr. Dickerson said the cautious customers are mainly foundries, a large category of companies that make chips to order for others for applications like mobile phones. Some of the foundry customers are worried about excess chip inventories, he said.

Makers of memory chips, on the other hand, are still boosting their spending, Mr. Dickerson said.

In after-hours trading, the company's shares, which have fallen about 32% this year, fell about 1%.

Applied, based in Santa Clara, Calif., often experiences wide swings in its financial results as makers of chips or computer displays react to demand by building or cutting production capacity.

In April, Applied and Tokyo Electron Ltd. of Japan abandoned a $29 billion merger that would have created a giant supplier of equipment used by chip makers, citing Justice Department antitrust concerns.

Since then, Mr. Dickerson has been stressing a strategy based on exploiting changes in semiconductor technology. Makers of memory chips, for example, have begun creating products with many vertical layers of circuitry rather than squeezing the size of transistors in a single layer. More of Applied's tools are needed for such tasks, the company says.

Applied on Thursday reported that earnings rose 9% to $329 million, or 27 cents a share, compared with profit in the year-earlier period of $301 million, or 24 cents a share. Excluding special items, earnings were 33 cents. Revenue increased to $2.49 billion from $2.27 billion a year earlier.

Analysts polled by Thomson Reuters projected earnings of 33 cents a share on revenue of $2.54 billion.

For the current quarter, the company expects sales to be flat to down 7% from the previous quarter, and earnings in the range of 27 to 31 cents a share. Analysts had called for earnings of 33 cents a share on $2.51 billion in revenue.

Angela Chen contributed to this article.

Write to Don Clark at [e-mail]

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