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Applied Materials crushes 4Q predictions

Earnings for Applied Materials (Nasdaq: AMAT) tore past analyst consensus in the fourth quarter.

After market close Wednesday, the chip capital equipment giant reported fiscal fourth quarter earnings of $307 million, or 77 cents per share, excluding one-time costs which totaled less than a penny per share. The 77 cents a share figure includes 8 cents a share from discontinued operations. Earnings from continuing operations were 69 cents a share.

In any case, the results were much better than expected. First Call's survey of 29 analysts predicted a profit 65 cents per share for the quarter ended Oct. 31.

Fourth quarter revenue rose ot $1.57 billion, up 9 percent sequentially and a gain of 133 percent from the year-ago period, when Applied Materials earned $8 million, or 2 cents per share.

Industry wide improvement throughout the fourth quarter helped Applied Materials, said James C. Morgan, CEO and chairman. Asia's continuing economic rebound, higher memory chip prices and reduced supplies of other chips allowed customers to increase capital budgets, Morgan said.

New orders increased 13 percent from the third quarter, to $1.65 billion from $1.46 billion. North America generated 28 percent of new orders, followed by Taiwan with 25 percent and Europe with 2 percent.

Applied Materials increased its gross margin to 50.1 percent in the fourth quarter, compared to 48.7 percent in the third, and 42.3 percent a year earlier.

For the full fiscal 1999, Applied Materials earned $748 million, or $1.89 per share, on revenue of $4.86 billion. The company has increased its market share, said Morgan, who predicted that new communications and Internet devices would combine with PCs to drive chip demand.

Shares of Applied Materials rose 4 1/2 to 110 in Wednesday's regular trading prior to the earnings report. Among 32 analysts polled by Zack's Investment Research, 14 recommend Applied Materials as a "strong buy", 14 maintain the equivalent of "moderate buy" ratings, and four have "hold" advisories on the stock.

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