Applied Materials Posts Higher Profit

Buoyed by sales of higher-margin equipment for building and testing the next generation of semiconductors, Applied Materials Inc. on Wednesday posted increased profit in its fiscal fourth quarter but warned of hard times ahead.

The Santa Clara, Calif., company said it expected sales in the current quarter to drop 20% from the fourth quarter because of spending cutbacks by chip companies coping with a prolonged slump in PC sales.

Applied’s recently announced plans to lay off 1,750 workers will result in a charge that could push the company into the red for the period ending Jan. 26, said Chief Financial Officer Joseph Bronson.

In the quarter ended Oct. 27, Applied reported net income of $147 million, or 9 cents a share, compared with a loss of $82 million, or 5 cents, in the fourth quarter a year ago. Sales rose 15% to $1.45 billion from $1.26 billion last year.

For the full fiscal year, Applied had net income of $269 million, or 16 cents a share, down 47% from $507 million, or 30 cents, in 2001. Sales declined 31% to $5.1 billion from $7.3 billion.

In a conference call with analysts, Applied Chief Executive James C. Morgan said the percentage of manufacturing capacity sitting idle could top 45% by the end of the calendar year.

“The semiconductor industry continues to face uncertain economic conditions,” he said.

Analysts hope the company’s grim forecast for the current quarter is the last of the bad news.

“They’ve done very well in this downturn, but the question is whether this quarter will be the bottom,” said David Wu, an industry analyst at Wedbush Morgan Securities in Los Angeles who doesn’t own stock in the company or do business with it. “I hope that it will be, but it’s awfully weak out there.”

Shares of Applied fell 37 cents to close at $14.70 on Nasdaq before the results were announced. They dropped to $14.14 in after-hours trading.