Applied Materials Meets Forecasts, Raises Red Flag

Applied Materials Inc., the world’s largest maker of semiconductor equipment, said Tuesday it earned $141 million in its fiscal second-quarter, up 27% from a year earlier as sales surged 31%.

The results, which meant income of 37 cents a diluted share, were in line with Wall Street’s expectations, but the company said it was cautious about near-term results because of cutbacks in capital spending by major North American chip makers.

Net income was up from $102 million, or 27 cents a diluted share, a year earlier, and its sales increased to $1.18 billion from $901 million.

New orders during the quarter totaled $1.03 billion, up slightly from $1.01 billion a year earlier, but down 20% from $1.29 billion in the first quarter of this year.

“Semiconductor manufacturers continue to delay capital equipment investment while they assess DRAM [dynamic random-access memory chip] overcapacity, the Asian financial crisis and demand shifts in the PC market resulting from lower priced products,” said Chairman James Morgan. “Recent cutbacks in capital spending by most major North American chip manufacturers further limit our ability to determine the length and severity of the current downturn. Consequently, we are cautious about the near term and will manage the business based on expected revenue levels.”

Analysts said Applied gave lower guidance for its third fiscal quarter, forecasting approximately $850 million to $1 billion in orders for the quarter, and lowered earnings-per- share projections to 20 to 23 cents a share. Applied also said it is controlling expenses and has trimmed its work force.

Shares of Santa Clara-based Applied rose 69 cents to close at $37.94 on Nasdaq. Results were released after markets closed.