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Applied Material's net income rises, but its orders drop

Applied Materials Inc, the world's biggest maker of semiconductor-manufacturing equipment, said third-quarter earnings were little changed as lower costs helped make up for a 7.4 percent sales drop.

Net income rose to US$115.2 million, or US$0.07 a share, from US$114.9 million, or US$0.07, a year earlier. Sales in the period ended July 28 fell to US$1.46 billion. New orders rose 5 percent from the second quarter to US$1.78 billion, which was less than analysts expected.

Applied shares fell 4.3 percent after executives said orders this period may drop 15 percent from the third quarter, adding to concern that chip-industry sales may not rebound later this year.

Last month, No. 1 chipmaker Intel Corp pared its spending plans for 2002. A recovery is stalling as economic growth fails to pick up, Applied Chief Executive Jim Morgan said on a conference call.

"I was disappointed with the orders," said John Spytek, who helps manage US$300 million at Balyasny Asset Management, which owns Applied shares. "It's light, but I'll sleep tonight. Things cooled off, but it's not falling off a cliff." Analysts expected the Santa Clara, California-based company to earn US$0.05 a share on sales of US$1.29 billion in the recent period, the average estimates in a Thomson First Call survey. In last year's third quarter, sales were US$1.58 billion.

Applied counts Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co as its customers.

The third quarter marks the sixth-straight period that Applied's sales have fallen from year-earlier levels. Budget reductions at chipmakers caused semiconductor-equipment sales to fall 41 percent to US$28.1 billion in 2001, according to Semiconductor Equipment and Materials International.

Orders rose the past two quarters, leading analysts to say that the worst was over. Bookings have slipped again in recent weeks, and clients such as Taiwan Semiconductor Manufacturing Co have announced more spending cuts.
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