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Applied Materials brushes past forecasts in 2Q

Applied Materials Inc. (Nasdaq: AMAT) roared past analyst estimates in the second quarter.

In fiscal second quarter results released after market close Tuesday, the world's largest maker of equipment for chip manufacturing posted ongoing net income of $141.6 million, or 36 cents per diluted share. First Call's survey of 25 analysts predicted a profit of 27 cents a share for the quarter ended April 30.

Second quarter sales of $1.12 billion were down 5 percent year-over-year, but up 51 percent sequentially from $742 million in the first quarter, when Applied Materials earned $42.5 million, or 11 cents a share. The company reported strong demand from all segments of the chip market, largely fueled by the industry's move to more compact circuits.

"During the quarter, we were able to capitalize on our extensive product strength and global support to capture both manufacturing capacity and technology advancement purchases," James C. Morgan, chairman and chief executive officer. "In addition, we are now beginning to realize improved productivity and operating performance as a result of the restructuring actions taken in the last half of fiscal 1998."

New orders for the second fiscal quarter of 1999 reached $1.39 billion, an increase of 35 percent from $1.03 billion for both the first fiscal quarter of 1999 and second fiscal quarter of 1998, and surpassing most analysts' expectations.

Geographically, North America generated 30 percent of the Company's new orders in the second quarter. Europe came in at 14 percent, Japan 17 percent, Korea 8 percent, Taiwan 25 percent and Southeast Asia and China 6 percent. Backlog increased to $1.36 billion, from $1.15 billion at the end of the first quarter.

The robust results reflect continuing recoveries for the chip industry and the world economy in general, Morgan said. "We believe Applied Materials, with our technology leadership and global infrastructure, will have an excellent opportunity to capitalize on this growth," he said.

Applied Materials achieved a gross margin of 46.3 percent, compared to 43.2 percent in the first quarter, and 47.1 percent in the second quarter of fiscal 1998. Ongoing net income as a percentage of net sales was 12.7 percent for the second quarter, compared to 12 percent a year earlier and 5.7 percent for the first quarter.

Shares of Applied Materials slipped 1/8 to 63 1/8 in Tuesday's trading prior to the earnings report. Of 27 analysts polled by Zack's Investment Research, 18 recommend Applied Materials as a "strong buy", seven rate it a "moderate buy" and two maintain the equivalent of a "hold" rating.>