Applied Materials Says Profit Tripled
Applied Materials Inc., the world’s biggest maker of semiconductor-production equipment, said Tuesday that its fiscal first-quarter profit more than tripled. Sales, however, rose at the slowest pace in five quarters as chip makers curbed their expansion.
Net income for the quarter ended Jan. 30 increased to $288.8 million, or 17 cents a share, from $82.4 million, or 5 cents, a year earlier. Sales rose 14% to $1.78 billion from $1.55 billion, the Santa Clara, Calif.-based company said.
Chief Executive Mike Splinter said customers were increasingly confident about demand from their clients. Chip makers have held off expanding capacity to clear out stockpiles of unsold semiconductors. Some may soon begin expanding again, Splinter said, helping sales and profit rise faster than analysts thought.
“The guidance is better than anyone expected,” said Nikolay Tishchenko, an analyst at Global Crown Capital of San Francisco. “The industry will see growth in the capital equipment market for the next two or three quarters. The outlook is bullish.”
Profit this quarter will be 16 cents to 17 cents on sales that will be flat to “slightly up” from the first quarter, Chief Financial Officer Nancy Handel said in a conference call with analysts. Analysts had expected profit of 15 cents on sales of $1.68 billion. Orders should be unchanged to down 10% from the first quarter, Handel said.
The company plans to buy back $300 million to $500 million in stock.
Shares of Applied Materials, up 2.3% this year, rose 15 cents to $17.64 in extended trading after the news was released. In regular Nasdaq trading, shares rose 36 cents to $17.49.
“The outlook is improving,” Splinter said during the call. “Our customers remain confident about health of the market.” Some “softness” exists in Asia, and some Japanese chip makers delayed orders, Handel said.
First-quarter profit beat the 16-cent average estimate of 30 analysts surveyed by Thomson First Call. Sales were forecast to be $1.74 billion. Demand came from customers seeking to upgrade their production to machines that use 300-millimeter silicon wafers. Demand for older, 200-millimeter machines waned. Semiconductors power products such as computers and mobile telephones.
Orders in the first quarter fell 36% from the fourth quarter to $1.68 billion. Gross margin in the quarter was 44.4%, compared with 46.6% in the fourth quarter.
Marketing and selling costs declined 12% to $88.4 million. Research spending fell less than 1% to $241.8 million. General and administrative costs rose 10% to $88.4 million.
Analysts have been split about whether chip companies will accelerate spending this year. Santa Clara-based research company VLSI Research Inc. forecast Jan. 10 that the market would grow 3.8% to $53 billion in 2005. Gartner Inc. on Dec. 16 predicted a 15% decline, and the industry association, Semiconductor Equipment and Materials International, forecast that the market would contract 5% in 2005. The industry association’s forecast is based on a survey of company executives.
Splinter, former head of production at Intel Corp., said he was going after more of the money chip makers spend on their plants by servicing other companies’ equipment.
