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Applied Materials Forecasts Sales That May Top Estimates

Applied Materials Inc. (AMAT), the largest maker of semiconductor-manufacturing equipment, forecast fiscal fourth-quarter sales that may top estimates as it steals orders from rivals and demand rises for machines that make displays.

Sales in the period that ends in October may rise or fall by 3 percent from the third quarter’s, indicating a range of $2.2 billion to $2.33 billion, the company said yesterday in a statement. That compares with an average analyst estimate of $2.28 billion, according to data compiled by Bloomberg.

Under Chief Executive Officer Gary Dickerson, Applied is supplying more machines to help chipmakers overcome the challenges of continually improving production. The company, unlike some competitors, is benefiting from demand from makers of flat-panel displays as they build new plants, said Patrick Ho, an analyst at Stifel Nicolaus & Co. in Dallas.

“The company has performed well in share gains,” said Ho, who recommends buying the stock. “Display could support the top line.”

The shares of Santa Clara, California-based Applied Materials rose 5.1 percent to $22.23 at 9:51 a.m. in New York. The stock was up 20 percent this year through yesterday, beating the 11 percent gain in the Standard & Poor’s 500 Information Technology Index.

Profit excluding certain items in the current period will be 25 cents to 29 cents a share, the company said. On average, analysts had predicted profit of 26 cents.

Production Upgrades

Chip and flat-panel display makers are changing the types of materials they use to enable them to keep advancing the performance of their products. They’re rushing to make those upgrades in response to demand from smartphone makers, which are under pressure to keep consumers excited with new models, Dickerson said in a telephone interview. That’s fueling demand for new machinery, and the company is sticking to its prediction that the chip-equipment market will grow 10 percent to 20 percent this year, he said.

“We really see 2015 is going to be even better,” he said.

Net income in the third quarter, which ended on July 27, increased to $301 million, or 24 cents a share, from $168 million, or 14 cents, a year earlier, the company said. Revenue rose 15 percent to $2.27 billion. Analysts on average had projected net income of 24 cents and sales of $2.29 billion.

Investors track Applied’s earnings and forecasts to gauge the chip industry’s confidence in future demand from the electronics market. Chipmakers order equipment to upgrade or add to their capacity months before they think they’ll need it.

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

Applied had 19.3 percent of the market for semiconductor-manufacturing equipment in 2013 by revenue, according to data compiled by Bloomberg Intelligence. ASML Holding NV, based in the Netherlands, had 18.8 percent, and Tokyo Electron was third with 11.3 percent.

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 Jillian Ward, Reed Stevenson

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