Applied Materials Revenue Climbs on Display Demand

Applied Materials Inc. (AMAT) gave a forecast for fiscal third-quarter sales that topped the low end of analysts’ estimates as it takes market share and demand for display-making machinery rebounds.

Revenue in the period that ends in July will be $2.24 billion to $2.35 billion, based on the company’s prediction for sales to be down 5 percent to flat from the prior quarter. Analysts were estimating $2.16 billion to $2.46 billion and an average of $2.32 billion, according to data compiled by Bloomberg. Profit before certain items will be 25 cents to 29 cents a share, the company said in a statement yesterday, compared with an average projection of 27 cents.

The largest supplier of semiconductor-manufacturing equipment is benefiting from demand for machines used to make flat-panel displays, unlike many of its competitors, which don’t have a presence in the business. Orders in the quarter that ended in April surged to $340 million in the quarter, up from $79 million in the preceding three months as TV-screen makers add capacity. Applied’s sales forecast didn’t indicate as much of a decline as some analysts had been anticipating, according to Patrick Ho, a Dallas-based analyst at Stifel Nicolaus & Co.

“People were expecting more of a downside,” Ho said. “Flat to down 5 percent is actually quite good.”

Shares of Santa Clara, California-based Applied Materials rose 8.1 percent to $20.21 at the close in New York, the biggest gain since September. The stock is up 14 percent so far this year.

Customer Confidence

Net income in the second quarter, which ended on April 27, was $262 million, or 21 cents a share, compared with a loss of $129 million, or 11 cents, a year earlier, the company said. Revenue climbed 19 percent to $2.35 billion, in line with analysts’ average estimate.

Analysts and investors track Applied’s earnings and forecasts to gauge its customers’ confidence in future demand across the electronics industry. Chipmakers order equipment to upgrade or add to their capacity in anticipation of demand from their device-maker customers.

Applied Materials is sticking to its 2014 forecast for growth of 10 percent to 20 percent in the market as a whole for machinery used in chip factories, Chief Executive Officer Gary Dickerson said.

“It’s just basically what we see after talking with different customers,” Dickerson said in a telephone interview. “We see a broadening of spending in foundries.”

Market Share

Demand for memory chips used as storage in mobile phones is strong, and Applied is also gaining market share at the expense of rivals, he said. Its share of semiconductor-manufacturing equipment sales is now at the highest level since 2006, the CEO said.

Spending by makers of Nand flash, memory used to store files in portable devices, will reach about $7 billion, Dickerson said.

Applied Materials is seeking to capture more market share after agreeing to buy Tokyo Electron Ltd. last year for $9.39 billion in stock. That agreement, which is on track to close in the second half of this year, followed the acquisition of Varian Semiconductor Equipment Associates Inc. in 2011.

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

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson, Jillian Ward

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