Applied Materials Sales Forecast May Exceed Projections

Applied Materials Inc., the largest producer of chipmaking equipment, forecast fiscal second-quarter sales that beat most estimates, indicating that some customers are expanding output on brisk demand for mobile devices.

Sales in the current period will rise 15 percent to 25 percent from the prior quarter, the company said in a statement yesterday, indicating revenue of $1.81 billion to $1.97 billion. Analysts on average estimated sales of $1.81 billion, according to data compiled by Bloomberg.

Some of Applied Materials’ biggest customers, including Intel Corp. and Taiwan Semiconductor Manufacturing Co., have budgeted more on new plants and machinery for 2013 than expected, sparking optimism that the industry is through the worse of a slump in orders. Sales of smartphones, tablets and other mobile computers are driving demand for equipment, according to William Kreher, an analyst at Edward Jones & Co.

“Strong demand for products like smartphones and tablets are leading to the strength in the guidance,” said Kreher, who rates Applied Materials a hold.

Shares of the Santa Clara, California-based company climbed 2.8 percent in late trading. They rose less than 1 percent to $13.77 at yesterday’s close in New York, leaving them up 20 percent this year. That compares with a 2.8 percent advance in the Standard & Poor’s 500 Information Technology Index in the same period.

Mobile Demand

Growth of the smartphone and tablet markets, and the competition among chipmakers that supply them, is fueling demand for the company’s machinery, Applied Materials President Gary Dickerson said in an interview.

“If you look at smartphones and tablets, the growth is very strong,” Dickerson said. “With the trends in mobile right now, every company has to drive to compete on low battery life.”

Profit, excluding certain items, in the current period will be 9 cents to 15 cents a share, the company said. That compares with an average analyst estimate of 11 cents, according to data compiled by Bloomberg.

Applied Materials reported first-quarter net income of $34 million, or 3 cents a share, from $117 million, or 9 cents, a year earlier. Revenue in the period that ended Jan. 27 fell 28 percent to $1.57 billion. That compares with an average analyst estimate for a loss of $275,000 on revenue of $1.55 billion.

“They are coming through their trough and I expect, as 2013 progresses, things will get better for them on the semiconductor side,” said Patrick Ho, an analyst at Stifel Nicolaus & Co. He recommends buying the shares.

In October, the company said it plans to eliminate 900 to 1,300 jobs, or 6 percent to 9 percent of its worldwide workforce.

Applied Materials said it’s making progress on finding a finance chief, after the Jan. 30 announcement that Chief Financial Officer George Davis will leave the company in March to join Qualcomm Inc.

“We expect to appoint a new CFO in the coming weeks,” Michael Splinter, chief executive officer of Applied Materials, said on a conference call.

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