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Applied Materials warns on orders

The chip equipment maker reports a profit in its fourth quarter, reversing a year-earlier loss, but says new orders are expected to fall.

Applied Materials, the dominant chip equipment maker, reported a profit in its fiscal fourth quarter, reversing a year-earlier loss. But new orders fell in the quarter, and the company said orders and revenue would fall further.

The unrelenting slump in the semiconductor industry caused new orders in the company's fourth quarter to drop 12 percent to $1.56 billion from its third quarter.

Applied Materials warned that it expected orders to fall another 20 percent in the first quarter, with revenue down at least 20 percent. While it expects to remain profitable excluding a charge related to recent job cuts, the company said it planned to report a small net loss in the first quarter.

The Santa Clara, Calif.-based company said it earned $147.2 million, or 9 cents a share, in the fourth quarter that ended Oct. 27, as a lower tax rate lifted results by 2 cents a share.

A year earlier, Applied Materials had a loss of $82 million, or 5 cents a share. That loss included a $149 million charge related to job cuts and facility closures.

Fourth-quarter net sales fell 1 percent from the third quarter to $1.45 billion, but were up 14 percent from $1.26 billion in the year-ago fourth quarter.

Applied Materials shares dipped to $14.16 in after-hours trading, after closing down 2.5 percent at $14.70 in regular trading on the Nasdaq composite index.

Analysts were expecting a profit in the range of 5 cents to 10 cents a share, with an average estimate of 8 cents, according to market tracker First Call. The average First Call revenue estimate was $1.47 billion.

"The one negative was that revenue number looks a bit light," said Charles Ryan, an analyst for BB&T Asset Management's Large Company Growth Fund, which holds about 155,000 shares of Applied Materials. "However, it looks like the new orders, while it was negative, was a little bit better than some of the street guidance."

Applied Materials--the largest of the companies that make tools to build and test chips--has announced three rounds of layoffs since September 2001, chopping 5,500 jobs off a work force of about 20,000 employees.

Earlier this month, the company said it would cut around 1,750 more jobs. The company's head count is expected to drop to between 14,000 and 14,200 after the latest job cuts.

The cuts were a response to a nearly 2-year-old slump in demand for chips, the worst downturn on record for the industry. A combination of overproduction of electronic components and a economic slump have slammed chipmakers and their chipmaking equipment suppliers.

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