Applied Materials Finds Reason For Optimism As Trends Improve
Applied Materials Inc. swung to a quarterly loss, but joined the ranks of technology companies reporting improved demand, driven by makers of chips and displays that use its manufacturing equipment.
Though the Silicon Valley company's revenue was off 39% from the year-earlier period, Applied's loss was much narrower than it reported for the second quarter, and revenues rose from that period. Both figures were well above Wall Street estimates.
[Applied Materials]
"For the first time in a long time, we see positive trends in our business," said Michael Splinter, Applied's chief executive.
Applied posted a loss of $54.9 million, or four cents a share, for its fiscal third quarter ended July 26, compared with a profit of $164.8 million, or 12 cents a share, in the year-earlier period. Revenue declined to $1.13 billion from $1.85 billion.
During a conference call with analysts Tuesday, Applied projected the company would post a profit in the current quarter and revenue would rise 10% to 20% from the third period.
The company, based in Santa Clara, Calif., has the largest market share among suppliers of machines that are used to fabricate chips on silicon wafers. That business was in a severe slump even before the economic downturn began, because makers of memory chips that had previously stocked up on production tools wound up with excess manufacturing capacity and sharply cut back their orders.
Other Applied tools are used to make flat-panel displays for TVs and computer monitors. That business posted its lowest revenue since 2002 in the quarter ended in April.
Sales of semiconductor and display manufacturing equipment both picked up in the third quarter, Mr. Splinter said. One factor was improved demand by semiconductor manufacturers called foundries, which build chips to order for other companies. New orders for chip-manufacturing equipment more than doubled from the second quarter, the company said, and display orders were up seven-fold over that period.
Makers of chips and displays in China were particularly active in the latest quarter, aided by government stimulus spending, Mr. Splinter said. China also purchased more solar panels -- another field where Applied's manufacturing tools are used. Overall, however, the company said demand for solar panels remains hampered by the tough environment and tight credit market.
Though conditions are improving, Mr. Splinter noted that the company's business is still operating at historically low levels. The company in February disclosed plans to cut about 14% of its work force, or about 2,000 workers. Mr. Splinter suggested the company is evaluating further restructuring steps.
"We believe this is the right time to consider the unprecedented change the downturn has caused," he said.
The company's shares traded at 4 p.m. Tuesday at $13.22, up 25 cents, on the Nasdaq Stock Market. Following the announcement, the stock rose in after-hours trading to $13.67.
