Applied Materials Forecast Shows Chipmakers Less Optimistic

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Applied Materials Inc., the largest maker of machinery used to build computer chips, forecast fiscal fourth-quarter sales that may fall short of analysts’ estimates on lower-than-expected orders from some outsourcing chipmakers.

Revenue in the three months ending in October will be unchanged to down 7 percent from the previous period, the Santa Clara, California-based company said in a statement Thursday. That indicates sales of as low as $2.32 billion, compared with an average analyst estimate of $2.52 billion.

Applied Materials’ leading position in the $30 billion market for equipment makes its earnings an indicator of confidence in future demand for electronics. Some contract manufacturers of chips for other companies are cutting back orders as they adjust their capacity needs based on customer demand, Chief Executive Officer Gary Dickerson said on a conference call.

“When foundry spending slows down, that weighs on the overall results,” Dickerson said in an interview. The company is now predicting the overall market for equipment will be unchanged from last year and may even shrink, he said.

Applied Materials’ shares fell in extended trading following the report. The stock declined 1.5 percent to $17.05 at the close in New York, leaving it down 32 percent this year.

Indicator

Sales at Applied Materials and its peers are seen as an indicator of future demand for electronics, because chipmakers order machinery multiple quarters in advance of when they think they’ll need it.

Net income in the third quarter, which ended on July 26, rose 9 percent to $329 million, or 27 cents a share, from $301 million, or 24 cents, a year earlier, the company said. Revenue climbed 9.9 percent to $2.49 billion. Analysts on average had projected net income of 30 cents on sales of $2.54 billion.

Applied Materials is also the largest maker of equipment used to manufacture flat-panel displays, helping diversify its revenue sources. The move to larger-screen televisions has helped fuel demand for more capable machinery in that industry.

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