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Applied Materials profit nearly triples

The top supplier of equipment for making microchips posts a quarterly profit that nearly tripled and says revenue could rise as much as 5 percent.

3 min read
Applied Materials, the top supplier of equipment for making microchips, on Tuesday posted a quarterly profit that nearly tripled and said revenue could rise as much as 5 percent in its current quarter.

Shares of Applied Materials rose more than 4 percent after the company said it anticipated persistent strength in memory chip demand and a rebound later this year in the flat-panel display market.

"Memory orders were strong," Chief Executive Mike Splinter told a conference call. "We expect the overall memory business to remain relatively strong and balanced over the year."

The company expects to earn 27 cents or 28 cents per share in the second quarter, with revenue staying flat or rising as much as 5 percent from the first quarter, Chief Financial Officer George Davis said.

That would put sales at $2.28 billion to $2.39 billion.

Analysts, on average, had been looking for a profit of 27 cents on revenue of $2.35 billion, according to Reuters Estimates.

The first-quarter profit of $403.5 million, or 29 cents per share, compared with $143 million, or 9 cents per share, a year earlier and topped the average analyst forecast by 2 cents despite revenue of $2.28 billion that was a bit weaker than expected.

New orders were up nearly a quarter from a year earlier, but down 6 percent from the previous quarter, driven by a 22 percent drop in orders for flat-panel equipment, Davis said.

Just more than half of new orders were for equipment to make DRAM, the kind of memory found in personal computers, while another 20 percent was from makers of NAND flash, the type of memory prevalent in consumer devices.

"The story for this quarter is just memory," Davis said in an interview.

"It's really just reflective of how strong DRAM spending is right now. Obviously we expect that to moderate out over the end of the year," Davis said, adding that typically orders for memory equipment account for a little over half of new orders.

Applied Materials shares rose 4.2 percent to $18.92 in extended trading after the outlook was given. The stock, which closed up 1.9 percent at $18.18 on Nasdaq, has fallen almost 9 percent over the past year. That compares with a rise of 25 percent in Netherlands-based ASM International, a gain of 11 percent in Novellus Systems and a fall of 5 percent for Lam Research.

Splinter expected orders from flat-panel makers to rise slightly in the second quarter, while contract chipmakers--also known as foundries--would start spending again in the third quarter after a protracted period of belt-tightening.

"The foundries...continue to hold back on capital investment and are very much at the bottom of the trough," Splinter said.

Industry data released last month showed new orders at U.S. equipment suppliers totaled $1.52 billion in December, up from $1.45 billion in November, but down almost 15 percent from the level in June.

The industry was also spooked last month when Lam Research, which specializes in equipment to etch circuitry, gave forecasts that fell short of Wall Street expectations.