Applied Materials Inc, the largest producer of chipmaking equipment, forecast first-quarter sales and profit that fell short of analysts’ predictions, a sign that semiconductor makers are scaling back expansion plans.
Profit before certain costs will be US$0.08 to US$0.16 a share, the company said in a statement on Wednesday. Revenue will decline as much as 15 percent from the prior quarter, Applied said, indicating sales of as little as US$1.85 billion. Analysts on average predicted profit of US$0.18 on sales of US$2.07 billion, according to Bloomberg data.
Many chipmakers are reluctant to increase output until they see evidence that the economy is improving, said Mahesh Sanganeria, a San Francisco-based analyst at RBC Capital Markets. That is damping demand for the gear needed to manufacture semiconductors.
“Unless there is an inflection in demand, there is no need to spend on capacity,” Sanganeria said.
He has a “sector perform” rating on Applied Materials stock and said he does not own any of the shares.
Applied Materials also supplies makers of solar panels and TV and computer flat-panel displays, markets that are suffering amid overproduction and lower prices.
“Display and solar equipment have been really tough,” said Needham & Co analyst Edwin Mok, who has a “buy” rating on Applied Materials.
New equipment orders troughed in the fiscal fourth quarter, and Applied Materials expects additional demand for semiconductor and display machinery in the current period, Applied Materials chief executive officer Mike Splinter said in an interview.
“Revenue will still be down a bit, but we’re seeing the bottom in orders,” he said.
The key indicator of whether the recovery is sustainable will come during the end-of-year holiday shopping season, he said.
“The big question is how strong the buying is through Christmas and Chinese New Year at the end of January,” Splinter said. “We’ll know an awful lot more about consumer confidence by that time.”
Investors and analysts track semiconductor-equipment orders as a harbinger of demand for electronics. Chipmakers such as Intel Corp and Samsung Electronics Co vary spending on new equipment and plants according to their predictions for demand as much as two years in advance. Their factories can cost more than US$3 billion to build and are run 24 hours a day, which makes the companies careful with equipment purchases.
Net income fell to US$456 million, US$0.34 a share, in the fourth quarter, which ended on Oct. 30, Applied Materials said on Wednesday.
That compares with US$468 million, or US$0.35, a year earlier, the Santa Clara, California-based company said. Revenue fell 24 percent to US$2.18 billion.
Excluding certain costs, profit was US$.021 a share. Analysts on average had estimated profit of US$0.19 on US$$2.15 billion of sales.
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