Applied Materials Profit Falls 41% in Chip Slump
Applied Materials Inc. said Tuesday that its second-quarter earnings fell 41% as the world’s biggest semiconductor equipment maker suffered from a pronounced slump in the chip industry due to slowing economies and weak demand.
“Our business continued to experience a severe decline during the second quarter,” James Morgan, chairman and chief executive, said, citing “decreased demand for electronic goods [that] resulted in reduced capital equipment investment by semiconductor manufacturers.”
Morgan added, however, that he believes the chip industry is in the bottom of its current business cycle, and he sees the industry turning upward in the next two quarters.
The company said operating profit fell to $269 million, or 32 cents a share, for the quarter ended April 29, from $459 million, or 53 cents, a year earlier. The results were a penny less than the average estimate of analysts polled by First Call/Thomson Financial. Sales fell 13% to $1.91 billion.
Even so, new orders, or bookings, were a pleasant surprise at $1.35 billion, higher than Wall Street expectations of about $1.2 billion, said Robertson Stephens analyst Sue Billat.
Applied shares rose to $51 in after-hours trading immediately after the announcement, then declined to $49.65. The shares had closed at $49.89, up 20 cents on Nasdaq.
Billat said chip equipment companies that focus on the so-called front end of the manufacturing process will fare better than those that focus on the back end.
That’s because chip makers such as Intel Corp. continue to buy equipment so they can move to using larger silicon wafers, smaller geometries and copper instead of aluminum. All of this helps to cut costs, boost efficiency and speed performance.
Other earnings
Other technology sector earnings, excluding one-time gains or charges unless noted, include:
* BEA Systems Inc.’s operating profit climbed 189% to $35.9 million, or 8 cents a share, a penny better than forecasts, as more customers adopted its WebLogic application server. Revenue rose 67% to $257.2 million. BEA also raised the top range of its earnings guidance for the full year.
* Brocade Communications Systems Inc. said profit fell 10% to $12 million, or 5 cents a share, in its fiscal second quarter as research and development costs rose and sales growth slowed. The results met lowered expectations. Revenue rose 86% to $115.2 million.
* Network Appliance Inc., which makes computer data storage devices, said operating profit fell 68% to $7.9 million, or 2 cents a share, in its fiscal fourth quarter as customers placed fewer orders and competition increased. Sales rose 13% to $225.8 million. The company also lowered its sales and profit forecasts for the current quarter.
* QLogic Corp. said earnings grew 55% to $26.6 million, or 28 cents a share, in its fiscal fourth quarter, a penny better than forecasts, on a 5% increase in revenue to $99.7 million.
* 360networks Inc.’s loss widened to $106 million, or 14 cents a share, from $45 million, or 11 cents, a year ago, on a 5% increase in sales to $80 million. The company also lowered its expectations for the full year for a second time.
* Online ad firm 24/7 Media Inc. said its first-quarter loss widened to $24.8 million, or 58 cents a share, from $10.9 million, or 43 cents a share, a year ago. Analysts had expected a 60-cent loss. Revenue fell 45% to $25.3 million.
