Applied Materials reports loss for 1Q

Applied Materials Inc reported a fiscal first-quarter loss as the biggest maker of semiconductor-manufacturing tools cut jobs and demand for its equipment slumped. Orders inched up from the fourth quarter's, sending Applied shares higher.

The loss in the period ended Jan. 27 was US$45.5 million, or US$0.06 a share, compared with net income of US$156.8 million, or US$0.19, a year earlier. Sales fell 58 percent to US$1 billion from US$2.36 billion.

Chief Executive Jim Morgan eliminated thousands of jobs and trimmed salaries last year, trying to cut costs during the chip- equipment industry's steepest slump. New orders climbed to US$1.12 billion from the fourth quarter's US$1.1 billion, and may rise 10 percent to 15 percent this quarter from the period just ended, Chief Financial Officer Joe Bronson said on a conference call.

"There are some encouraging signs," said Tim Gaumer, an analyst at Transamerica Asset Manage-ment, which owns Applied shares and manages US$12 billion. "It's the first time we've seen an increase in orders."

The shares of Santa Clara, California-based Applied rose as high as US$45.20 on Tuesday after the earnings report. Earlier, they fell US$0.97 to US$$44.71 in regular US trading. They've gained 11 percent so far this year.

Applied recorded US$55 million in costs from firing workers and US$6 million in acquisition expenses. Excluding those costs, the company said it would have earned US$15 million, or US$0.02 a share.

On that basis, which doesn't comply with generally accepted accounting principles, analysts expected Applied to break even, the average estimate in a Thomson Financial/First Call survey.

Bronson said he expects second-quarter sales to be US$1 billion "or slightly higher," and said the company will be profitable if sales meet those targets.

Executives are increasingly optimistic about the chance of a rebound in the second half of this year, as consumer spending on electronics rises and business demand improves.

"I share that sense of cautious hope, but I think it will take another quarter or two before there are signs of sustained growth in the end markets," Morgan said on a conference call.

Chip stockpiles continue to shrink. Inventories have dropped to levels last seen in 1999, falling to an estimated US$10.7 billion last month from US$36.3 billion a year earlier, according to VLSI Research.

"The market has gone from burgeoning glut to emerging shortage, which explains why there is suddenly so much order activity in equipment," VLSI President Dan Hutcheson wrote in a report Tuesday.

Taiwan accounted for 27 percent of new orders during the period, with Southeast Asia and China at 25 percent, North America at 22 percent, Europe at 15 percent, Japan at 6 percent and South Korea at 5 percent.

Gross margin, or the percentage of sales left after subtracting manufacturing costs, widened to 39 percent from 37 percent in the fourth quarter.

Most semiconductor makers haven't been investing enough money in moving to newer production techniques, Morgan said. Only 5 percent of all chip capacity is based on the latest methods, he said. That gives Applied a chance to build its market share as chipmakers buy the latest tools to upgrade plants, he said.

"We'll have more share in the advanced lines as these move to production," Morgan said.