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Applied Materials Forecast Falls Short of Estimates

Wednesday, 16 Nov 2011 06:10 PM

Applied Materials Inc., the largest producer of chipmaking equipment, forecast first-quarter sales and profit that fell short of analysts’ predictions, a sign that semiconductor makers are scaling back expansion plans.

Profit before certain costs will be 8 cents to 16 cents a share, the company said in a statement Wednesday. Sales will decline as much as 15 percent from the prior quarter, Applied said, indicating revenue of as little as $1.85 billion. Analysts on average predicted profit of 18 cents on sales of $2.07 billion, according to Bloomberg data.

Many chipmakers are reluctant to increase output until they see evidence that the economy is improving, said Mahesh Sanganeria, a San Francisco-based analyst for RBC Capital Markets. That’s damping demand for the gear needed to manufacture semiconductors.

“Unless there is an inflection in demand, there is no need to spend on capacity,” said Sanganeria. He has a “sector perform” rating on Applied Materials stock and said he doesn’t own any of the shares.

Applied Matierials also supplies makers of solar panels and TV and computer flat-panel displays, markets that are also are suffering amid overproduction and lower prices.

Applied Materials shares slipped in late trading. They had dipped 17 cents to $12.47 as of 4 p.m. New York time. The stock has lost 11 percent this year.

Fourth Quarter

Fourth-quarter net income fell to $456 million, or 34 cents a share, compared with $468 million, or 35 cents, in the same period a year earlier, the Santa Clara, California-based company said. Revenue fell 24 percent to $2.18 billion.

Excluding certain costs, profit was 21 cents a share. Analysts on average had estimated profit of 19 cents on $2.15 billion of sales.

Applied has started using factory shutdowns to reduce expenses, Chief Financial Officer George Davis said last quarter. It is also limiting hiring.

Investors and analysts track semiconductor-equipment orders as an early indicator of demand for electronics. Chipmakers such as Intel Corp. and Samsung Electronics Co. vary their spending on new equipment and plants according to their predictions for demand as much as two years in advance. Their factories can cost more than $3 billion to build and are run 24 hours a day, which makes the companies careful with equipment purchases.

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