Applied Materials’ Earnings Drop 18% as Sales Fall 7.8%

Applied Materials Inc., the world’s largest maker of semiconductor-production equipment, said Tuesday that fiscal second-quarter profit fell 18% after chip makers slowed expansion, cutting company sales.

Net income fell to $304.8 million, or 18 cents a share, from $373.3 million, or 22 cents, a year earlier, the Santa Clara, Calif. company said. Sales for the period ended May 1 fell 7.8% to $1.86 billion.

Some semiconductor makers, faced with their own demand shortfalls, cut back on plans to increase output and spent less on Applied Materials’ machines.

Chief Executive Mike Splinter said on a call with analysts that the slump persisted and that orders, a predictor of sales in coming periods, would fall as much as 10% this quarter.

“Fundamentals have deteriorated significantly in the past month,” William Lu, an analyst at Piper Jaffray & Co., wrote in a research report Tuesday.

Excluding certain costs, Applied Materials’ profit was expected to total 17 cents a share, the average estimate of analysts surveyed by Thomson First Call. Analysts expected sales of $1.8 billion.

Shares of Applied Materials fell 32 cents to $15.72 in extended trading. They had fallen 3 cents to $16.04 in Nasdaq trading.

Splinter said made-to-order chip makers, whose ranks include Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., are not using enough of their capacity to warrant increasing spending on new machines.

Orders will fall 5% to 10% this quarter from the preceding quarter, Splinter said. Profit is expected at 12 cents to 14 cents a share this quarter, missing analysts’ estimate of 18 cents.

Third-quarter sales will decline 10% to 15% from the second quarter, the company said.

Orders may reach a “bottom” this quarter, which ends in July, and pick up in the second half, Splinter said.