Applied Materials Forecast Tops Analysts’ Estimates

Applied Materials Inc., the largest maker of semiconductor-production machinery, predicted fourth- quarter sales and profit that topped analysts’ estimates, signaling that the chip market may have bottomed out.

Profit will be as much as 4 cents a share in the period, which ends in October, the company said today on a conference call. Analysts had projected a loss of 5 cents, according to a Bloomberg survey.

Applied Materials may be recovering from three years of slumping sales, when customers scaled back production plans to cope with lower demand for chips. New orders, an indicator of future sales, will climb this quarter from the previous three months, the company said today.

“There are more indications that demand is growing,” Chief Executive Officer Mike Splinter said on the call. “It’s too soon to conclude that a broad-based recovery is at hand.”

Applied Materials, based in Santa Clara, California, rose 41 cents, or 3.1 percent, to $13.63 in extended trading. The shares, up 31 percent this year, closed at $13.22 today on the Nasdaq Stock Market.

Sales will climb at least 10 percent from the previous three months, Applied Materials said, indicating about $1.25 billion. Analysts had estimated $1.07 billion.

‘Bounce Back’

“There are definitely signs of a bounce back,” said Edwin Mok, an analyst at Needham & Co. in San Francisco. He has a hold rating on the stock, which he doesn’t own.

The company reported a third-quarter loss of $54.9 million, or 4 cents a share, compared with a profit of $164.8 million, or 12 cents, a year earlier. Sales fell to $1.13 billion in the period, which ended July 26. Analysts had predicted a loss of 9 cents a share on sales of $959.9 million.

New orders rose to $1.07 billion, up 65 percent from the second quarter. That compares with a prediction of a 40 percent gain by Patrick Ho, an analyst at Stifel Nicolaus & Co. in Dallas.

Applied Materials didn’t give a specific forecast for orders this quarter. Demand is concentrated among a few customers and they could quickly change their plans if the economy doesn’t recover, Chief Financial Officer George Davis said in an interview.

“Our visibility extends out a few months, rather than a few quarters,” he said.

Industry Slump

Worldwide chip-equipment capital spending will fall 45 percent this year to $24.3 billion, estimates Gartner Inc., a research firm in Stamford, Connecticut.

To offset the swings in demand for chip-making equipment, the company has branched out into solar-panel production machinery in the past three years. The tightening of credit markets prevented alternative-energy companies from getting loans needed to build plants, hampering efforts to expand that business. link....