Bloomberg News

Applied Materials Shares Slip as Sales, Forecast Miss Estimates

August 16, 2013

Applied Materials Inc. (AMAT:US) slipped in extended trading after the company reported fiscal third-quarter revenue that missed analysts’ estimates and gave a disappointing sales forecast as customers delay factory upgrades.

The company, the largest supplier of chipmaking equipment, also promoted Gary Dickerson to chief executive officer, replacing Mike Splinter, who will remain chairman.

Revenue in the fiscal fourth quarter (AMAT:US) will be unchanged from the third quarter, when sales were $1.98 billion, the company said yesterday in a statement. Analysts on average had projected sales of $2.06 billion in the third quarter and $2.14 billion in the fourth, according to data compiled by Bloomberg.

Applied Materials’ revenue projection fell short of predictions for a second straight quarter amid muted semiconductor demand and a record slump in the personal-computer market. Companies that make chips on a contract basis, known as foundries, are installing equipment they’ve already bought and will return to ordering later this year, Splinter said.

“We’ve seen this for the last few years where foundry spending in particular drops off in the third calendar quarter,” he said in an interview. “We’re going to see the orders come back before the end of the year.”

Applied Materials shares fell as much as 4.1 percent to $14.70 in late trading after the earnings and executive change announcement. The stock declined 2.6 percent to $15.33 at yesterday’s close in New York, leaving it up 34 percent so far this year.

Smartphone Demand

Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and other companies that make mobile-phone parts may also be waiting for smartphone demand to accelerate before they commit more of their budgets, said Patrick Ho, an analyst at Stifel Nicolaus & Co.

“In the near term, there’s a bit of choppiness,” said Ho, who is based in Dallas. “It’s just part of the nature of doing business when you have such a concentrated customer base.” He recommends (AMAT:US) buying Applied Materials shares.

For the third quarter, which ended July 28, the Santa Clara, California-based company posted profit of $168 million, or 14 cents a share. On average, analysts had projected net income of 17 cents. A year earlier, net income was $218 million, or 17 cents. Revenue fell 16 percent.

Demand Indicator

Applied Materials sells equipment to chipmakers across the semiconductor industry, making its earnings a broad indicator of future demand. Investors also look at the company’s forecasts as a gauge of confidence at its largest customers.

Last month, Applied Materials repeated a prediction that the total market for machines used to make semiconductors will be $27 billion to $30 billion this year.

Splinter, 62, has been CEO of Applied Materials since 2003. Under his leadership, the company has branched out into machinery that makes flat-panel displays and solar panels.

Dickerson, 56, will take over the top job at Applied Materials on Sept. 1 and join the board, the company said in a separate statement. He will retain the role of president, which he took on last year. He joined Applied Materials in 2011 with the acquisition of Varian Semiconductor Equipment Associates Inc.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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Companies Mentioned

  • AMAT
    (Applied Materials Inc)
    • $21.9 USD
    • -0.62
    • -2.83%
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