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 Don.Clark@wsj.com
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