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Applied Materials Sales Forecast May Exceed Projections

Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, forecast fiscal third-quarter profit and sales that may fall short of some analysts’ estimates as contract manufacturers hold off on plant upgrades.

Revenue in the current period will be “up slightly” from the prior quarter’s $1.97 billion, the company said yesterday in a statement. Analysts on average estimated sales of $2.12 billion in the current quarter, according to data compiled by Bloomberg. Profit excluding certain items will be 16 cents to 20 cents a share, while analysts had projected 19 cents.

Taiwan Semiconductor Manufacturing Co., a so-called foundry that makes custom chips for other companies, may be slowing purchases of new machinery ahead of an industrywide transition to new technology, said Edwin Mok, an analyst at Needham & Co. Intel Corp. (INTC), one of Applied Materials’ largest customers, may also be scaling back as it tries to reuse more of its existing equipment, Mok said.

“Intel spending in the first quarter was soft,” said San Francisco-based Mok, who has a hold rating on Applied Materials shares. “Foundry orders are starting to be pared back.”

Intel said on April 16 that it would reduce spending on new plants and equipment in 2013 to $12 billion, plus or minus $500 million. That was $1 billion less than a January prediction.

Applied Materials rose 2.1 percent to $14.96 at the close in New York, leaving the shares up 31 percent so far this year.

‘Challenging’ Markets

“The first half was dominated by foundry spending and a particular customer,” Chief Financial Officer Bob Halliday said in an interview. While total foundry spending will increase in the second half of 2013, growth will depend on orders from a wider pool of companies, he said.

Under Chief Executive Officer Mike Splinter, the company has branched out into machinery that makes flat-panel displays and solar panels. While growth in orders for display equipment has returned, the solar market remains challenging, he said yesterday on a conference call with analysts.

The company is predicting that the total market for machines used to make semiconductors will be $27 billion to $30 billion this year. More than 50 percent of that will come in the second half, Halliday said in an interview.

The company posted a net loss of $129 million, or 11 cents a share, for the fiscal second quarter, which ended April 28. A year earlier, it had net income of $289 million, or 22 cents. Revenue fell 22 percent to $1.97 billion, Santa Clara, California-based Applied Materials said. That compares with an average analyst estimate for sales of $1.91 billion.

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

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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