Applied Materials Predicts Profit That Tops Analysts' Estimates

Applied Materials Inc., the world’s largest producer of chipmaking equipment, forecast fourth- quarter profit that beat analysts’ estimates as semiconductor manufacturers order gear to expand their output.

Profit in the current period will be 28 cents to 32 cents a share, excluding certain items, the Santa Clara, California- based company said today in a statement. That compares with an average estimate of 26 cents in a Bloomberg survey.

The company got “strong” orders from all of its customers, including makers of memory chips, made-to-order chips, flat screens and solar panels, said Chief Financial Officer George Davis in an interview. While equipment buyers are concerned that consumer demand may weaken, Applied is still anticipating rising orders in its fourth quarter, he said.

“They beat by a healthy amount,” said Edwin Mok, an analyst at Needham & Co. in San Francisco. “The equipment industry has been reasonably positive.”

Much of the company’s gains in the third quarter came from its silicon-based solar-panel machinery business, said Mok, who has a “buy” rating on the stock.

The company said in July that it’s giving up on an attempt to break into a new part of the solar-panel equipment business and will stop selling its SunFab lines, which use so-called thin-film technology. Applied is cutting as many as 500 jobs globally as part of the shutdown. It said today that closing the unit would cost $405 million.

Extended Trading

Applied rose 4 cents to $11.42 today in late trading after releasing the results. Earlier, the shares slipped 1 cent to $11.38 in Nasdaq Stock Market trading. They have fallen 18 percent this year through the Nasdaq close.

Third-quarter net income was $123.1 million, or 9 cents a share, rebounding from a $54.9 million loss a year earlier, the company said. Sales more than doubled to $2.52 billion in the quarter ended Aug. 1 from $1.13 billion a year earlier.

New orders in the third quarter rose to $2.7 billion, the highest total since 2000, the company said in an e-mailed statement.

Applied said fourth-quarter revenue will rise about 5 percent from the previous period. That indicates sales of about $2.64 billion, compared with an average estimate of $2.44 billion from analysts surveyed by Bloomberg.

Under Chief Executive Officer Mike Splinter, Applied has sought to reduce its reliance on the chip-equipment business. It adapted some of its machinery to make semiconductors and flat- panel displays for use in the production of solar panels.

The flat-panel technique produced solar panels that failed to attract enough customers, forcing the company to abandon that business.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

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