Applied Materials Projects Strong Sales on Renewed Demand

(Bloomberg) -- Applied Materials Inc., the biggest maker of machines used to manufacture semiconductors, gave a stronger-than-expected forecast for the current period, indicating that chipmakers are betting an industrywide slowdown in demand will end soon.

The company’s results and forecasts provide a window into the plans of some of the biggest companies in the semiconductor industry. Samsung Electronics Co., Intel Corp. and Taiwan Semiconductor Manufacturing Co. are among those that need to buy gear from Applied Materials well ahead of building new factories and production lines.

Key Insights

  • Applied Materials projected fiscal third-quarter sales of about $3.525 billion, the company said Thursday in a statement. That compares with analysts’ average estimate of $3.53 billion, according to data compiled by Bloomberg.
  • Adjusted earnings per share will be 67 cents to 75 cents, the company said. Analysts projected 70 cents a share.
  • “Applied Materials delivered results toward the top-end of our guidance range, reflecting solid execution across the company in a business environment that remains challenging,” Chief Executive Officer Gary Dickerson said in a statement. “Looking ahead, we maintain a positive view of our markets as powerful new demand drivers for semiconductors and displays take shape, creating tremendous opportunities.”
  • Historically chip-equipment makers have had some of the most volatile earnings in the technology industry. Their machines, which cost tens of millions of dollars each, take months to make and even longer to install. So when a semiconductor company wants to cut costs quickly, an obvious option is to delay Applied Materials orders.
  • Net income in the fiscal second quarter was $666 million, or 70 cents a share, compared with $1.1 billion, or $1.06 cents a share, in the same period a year earlier.
  • Revenue declined 23% to $3.54 billion in the three months ended April 28. That compares with an average of analysts’ estimates of $3.49 billion.

Stock Reaction

  • Shares rose more than 4% in extended trading following the announcement. They had closed at $41.66 in New York.

More Information

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  • To see the statement, click here.

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