Applied Materials Forecasts Sales, Profit In Line With Estimates

Applied Materials Inc. (AMAT), the largest supplier of semiconductor-manufacturing equipment, forecast fiscal first-quarter sales and profit that were in line with estimates amid rising machinery orders from contract chipmakers.

Revenue in the current period will climb 3 percent to 10 percent from the prior quarter, the company said yesterday in a statement, indicating a range of $2.05 billion to $2.19 billion. Profit before certain costs will be 20 cents to 24 cents a share. On average, analysts projected sales of $2.19 billion and profit of 23 cents, according to data compiled by Bloomberg.

Applied Materials is benefiting from an increase in demand from companies such as Taiwan Semiconductor Manufacturing Co. (2330) that build semiconductors for other chipmakers, as they upgrade plants for new production processes. While chip-equipment orders -- an indication of future sales -- are growing, bookings slipped in the company’s display division, which makes machinery used to produce flat-panel screens.

“Display is trending weaker, but semiconductor is trending fine,” said Edwin Mok, an analyst at Needham & Co. in San Francisco. He has a hold rating on the stock. “Orders came a little bit weaker, but it was mostly display” that held them back, he said.

Applied Materials shares were little changed in extended trading. They had fallen less than 1 percent to $17.56 at yesterday’s close in New York. The stock has gained 53 percent this year.

Display Revenue

Net income in the fourth quarter, which ended on Oct. 27, was $183 million, or 15 cents a share, compared with a loss of $515 million, or 42 cents, a year earlier, the company said. Excluding some costs, profit was 19 cents. Revenue climbed 21 percent to $1.99 billion, the first year-over-year increase since 2011. On average, analysts had predicted profit of 18 cents of sales of $1.97 billion.

Silicon systems group orders in the fourth quarter were $1.39 billion, a gain of 16 percent from the preceding period, the Santa Clara, California-based company said. Display orders slumped 55 percent from the third quarter to $114 million.

“TV unit growth is less than what we hoped it would be,” Chief Executive Officer Gary Dickerson said in a telephone interview. “But we think 2014 will be a good year for the display business.”

Larger screens in smartphones, bigger televisions and the introduction of curved displays will drive demand for screen machinery, Dickerson said. Industrywide spending on equipment for chip plants will grow 10 percent to 20 percent in 2014, he said.

Tokyo Electron

In September, Applied Materials said it would acquire rival Tokyo Electron Ltd. for $9.39 billion in stock. That follows its acquisition of Varian Semiconductor Equipment Associates Inc. in 2011.

The consolidation among chip-equipment makers mirrors the increasing concentration of their customer bases. Intel Corp., Taiwan Semiconductor Manufacturing and Samsung Electronics Co. now buy more than 60 percent of chipmaking machines ordered by the industry, according to Patrick Ho, an analyst at Stifel Nicolaus & Co. in Dallas.

Applied Materials is also the world’s largest maker of equipment used to manufacture liquid crystal displays, and it supplies machinery used to produce solar panels.

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

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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