Applied Materials Sees Sales Above Estimates on New Orders

  • Display makers pile on requests for manufacturing gear
  • Earnings, orders at all-time high driven by new technology

Applied Materials Inc., the biggest maker of machinery used to manufacture semiconductors, predicted revenue and profit that may surpass estimates, banking on increased business from chipmakers upgrading their equipment and stronger demand from companies that produce flat-panel screens. The shares jumped as much as 6.4 percent in extended trading following the announcement.

The Key Points

  • Revenue in the fourth-quarter ending October will rise 15 percent to 19 percent from the prior period, indicating sales may increase to as much as $3.36 billion, Santa Clara, California-based Applied Materials said Thursday in a statement. That compares with an average analyst estimate of $2.86 billion, according to data compiled by Bloomberg.
  • Profit, excluding certain costs, will be 61 cents to 69 cents a share, the company said. Analysts on average projected 48 cents.
  • Third-quarter profit was $505 million, or 46 cents a share, compared with $329 million, or 27 cents a share a year earlier.
  • Revenue in the period rose 13 percent to $2.82 billion

The Big Picture

Applied Materials’ earnings and predictions are used by investors as an indicator of confidence in future sales across the electronics industry. While there’s little evidence of a surge in demand for computers or mobile phones driving chipmakers to expand their factories’ capacity, they’re being forced to spend on more advanced production techniques to remain competitive.

The Details

  • Applied got $3.66 billion in orders in the third quarter, an increase of 26 percent.
  • The display equipment division, whose machinery is used by companies such as Samsung Electronics Co. to supply screens to customers such as Apple Inc., received orders of $803 million.
  • Semiconductor systems won orders of $2.2 billion, an increase from the preceding quarter and the same period a year earlier. Outsourced manufacturers of chips, or foundries, contributed 57 percent of that total.

CEO Interview

  • “This is not an industry story, it’s an Applied Materials story,” said Chief Executive Officer Gary Dickerson in a phone interview.
  • Applied’s earnings and orders aren’t being lifted by a surge in demand for products that need semiconductors and displays, he said. Instead, semiconductor and display makers are upgrading to new production techniques as the existing ones reach their limits.
  • In display, manufacturers are shifting to organic light-emitting diode displays that are more energy efficient and deliver a more vivid picture than the more widely used liquid crystal technology. Crucially for Applied, OLED is more difficult to make, requiring more of its machinery, Dickerson said.
    Before it's here, it's on the Bloomberg Terminal.