Applied Materials pleases analysts as chip sector recovers

Applied Materials' first quarter sales and earnings dropped dramatically from a year ago, but the company managed to top Wall Street estimates as its business turns around.
Written by Larry Dignan, Contributor

In the quarter, Applied Materials, the world's largest chip equipment maker, reported first quarter earnings before charges of $52.9 million (£32.3 million), or 14 cents a share, well ahead of Wall Street estimates of 6 cents a share.

Including acquisition charges, the company reported earnings of $42.5 million (£25.9 million), or 11 cents a share. In the same quarter a year ago, Applied reported profits of $197.8 million (£120.1 million), or 52 cents a share.

Sales were $742 million (£452 million), down 43 percent from $1.31 bn (£797 million) a year ago, but up 10 percent from $673 million (£410 million) in the fourth quarter.

The company said orders were picking up as the semiconductor sector breaks out of a slump. New orders of $1.03 bn (£628 bn) for the first quarter, up from $684 million (£417 million) in the previous. Orders were still down from $1.29 billion (£786 million) in the first quarter a year ago.

By region, North America represented 38 percent of the company's total new orders, Europe 17 percent, Japan 20 percent, Korea 6 percent, Taiwan 14 percent and Southeast Asia and China 5 percent. Backlog at the end of the first quarter jumped to $1.15 billion (£701 million), from $917 million (£559 million) in the fourth quarter. "We are pleased with our first quarter results, especially the order momentum exiting the quarter," said James C. Morgan, CEO of Applied in a statement. "We believe the industry is in a recovery stage due to stabilisation of memory prices and customer migration to 0.18 micron technologies."

Morgan also said he expected the chip recovery to continue. "The near-term outlook for our industry is favourable, with an improved DRAM pricing environment, healthy PC demand and a strong U.S. economy," said Morgan. "Our product positioning, combined with the benefits of our global infrastructure, should enable the company to take advantage of this opportunity."

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