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Sales Double at Applied Materials

Bucking a tech industry trend, the firm offers an upbeat forecast, citing market share gains.

August 18, 2004|Alex Pham | Times Staff Writer

In one of the few upbeat earnings reports of the summer, Applied Materials Inc. on Tuesday posted a doubling of revenue and its fourth consecutive quarterly profit.

The Santa Clara, Calif., company attributed its turnaround to an increase in its share of the market for machines that make semiconductors.

Applied posted fiscal third-quarter profit of $441 million, or 26 cents a share, on sales of $2.24 billion. In the same quarter last year, it lost $37 million, or 2 cents, on sales of $1.09 billion.

For the third quarter in a row, Applied beat the expectations of analysts, who had forecast profit of $425 million, or 25 cents a share, on $2.1 billion in sales.

"I am pleased about our performance and confident about our future," Applied Chief Executive Michael R. Splinter said during a conference call with analysts.

The company's recent performance and optimism run counter to mixed results and glum forecasts from other technology companies that have sent industry shares into a slump.

Intel Corp. last month said its gross profit would be lower than expected, and Cisco Systems Inc. last week warned investors of rising inventories.

Companies like Hewlett-Packard Co. and National Semiconductor Corp. were among the tech companies recently reporting weaker-than-expected earnings, which hinted at a renewed weakness in high-tech spending.

Applied's shares, which rose 43 cents to $16.07 on Nasdaq, gained another 10 cents in after-hours trading after the earnings release. The stock, though, remains depressed from its high this year of $24.15 on Jan. 20.

Ali Irani, managing director at CIBC World Markets, said much of Applied's growth came from grabbing market share from rivals such as KLA Tencor Corp. and FEI Co. rather than increased spending by Applied customers. Applied is the world's largest maker of semiconductor equipment.

"Applied Materials is on a market share tear and has been all year," Irani said. "The overlying concern is the recent macroeconomic weakness and the higher energy prices as they relate to consumer discretionary spending."

Nonetheless, Applied's chief financial officer, Joseph Bronson, projected a revenue increase of up to 5% in the current quarter from the fiscal third quarter, a 5% gain in new orders and per share earnings of 24 cents to 26 cents.

Bronson predicted solid growth for the rest of the year and into 2005, driven by demand for flat panel displays, growth in Asia and a transition to new chip-making technology.

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