Applied’s Shares Up 16% on Profit Report

Applied Materials Inc. shares rose 16% on Wednesday after the Santa Clara-based company said first-quarter profit fell less than expected and that results for fiscal 1997 will be better than it first thought.

Shares of the world’s largest maker of chip-making equipment climbed $7 to $52.125 in Nasdaq trading, their highest since August 1995.

Shares of other chip equipment and computer-related companies, beaten down in recent days amid concern over slowing sales growth, also rose. Investors saw Applied’s optimistic forecast as an indicator that chip makers are expecting demand to pick up.

“If Applied is reporting better-than-expected earnings and order rates, that means companies are confident about ordering new equipment and expect strong growth in demand,” said analyst Ron Bohn at Dataquest.

Applied boosted its revenue target for the fiscal year ending this October to $3.6 billion to $3.7 billion, from $3.2 billion to $3.4 billion. It raised earnings estimates to $2.10 to $2.20 a share, from earlier forecasts of $1.80 to $1.90.

Equipment makers had reported lower earnings in the last several quarters as chip companies scaled back plans to build new plants in light of falling prices and weak demand. The chip market fell about 7% last year to $137 billion.

Now, as prices are stabilizing, companies are looking to either upgrade existing plants with more advanced technology or build new ones.

“They are kicking butt,” said analyst Jay Deahna at Morgan Stanley. He noted that Applied’s earnings and bookings were better than expected in the first quarter.

Applied reported late Tuesday that its profit from operations for the three months ended Jan. 26 fell 48% to $89.1 million, or 48 cents a share, down from net income of $171.6 million, or 93 cents, in the year-earlier period.