Applied Materials Beats Estimates With Profit

Applied Materials Inc. (AMAT), the world's largest producer of microchip-making equipment, Wednesday reported a better-than-expected quarterly profit and forecast higher orders in the current quarter as its customers spent more on new tools.

Applied Materials also issued a profit target that outpaced analyst forecasts and its shares rose 4.7 percent in after-hours trading.

Mark FitzGerald, an analyst with Banc of America Securities, said the company's financial results and outlook were strong, but warned that order growth could taper out in the second half of the year if big orders from Japan and China do not shape up.

"We're looking at orders basically stalling out," he said.

In its fiscal first quarter ended Feb. 1, the company posted a profit of $82.4 million, or 5 cents a share, compared to a year-earlier loss of $65.7 million, or 4 cents a share. Net sales rose to $1.56 billion, up 48 percent from a year earlier.

Excluding a pre-tax $167 million charge taken mainly to consolidate facilities, Applied Materials said its profit was $200 million, or 12 cents a share. The company said it does not foresee the need for any further charges against earnings.

Wall Street on average was expecting a profit excluding the charge in the range of 7 cents to 9 cents a share, with an average estimate of 8 cents a share, according to a poll of analysts by Reuters Research, a unit of Reuters Group Plc. Analysts were expecting sales of $1.32 billion

The Santa Clara, California-based company said new orders, an indicator of future business, reached $1.68 billion in the quarter, up 32 percent from the fourth quarter. It had previously predicted a jump in orders of 20 percent from the fourth quarter.

In after-hours trading, Applied Materials shares rose to $23.38 from a close on Nasdaq of $22.31.

Applied Materials Chief Executive Officer Michael Splinter attributed the company's profit to stronger demand for microchips used in consumer electronics and business computers. Those trends, he said, have boosted chip makers' budgets for capital spending this year.

The semiconductor industry has begun an upturn following a two-year slump, its worst ever.

"During the downturn there was underinvestment in (factory) capacity and customers waited longer than usual to place orders," Splinter said. "Customers have regained the ... confidence and are prudently making investments in capacity."

For the company's fiscal second quarter, Applied Materials forecast earnings of 17 cents to 19 cents a share, with revenue rising 20 percent from the first quarter. Orders were expected to rise by about 30 percent from the first quarter.

Analysts had expected second-quarter earnings of 11 cents a share on revenue of $1.48 billion, according to Reuters Research.