Applied Materials Predicts Rising Sales on Customer Upgrades

Feb 13, 2014 4:14 pm ET

(Updates with closing shares in fifth paragraph.)

Feb. 13 (Bloomberg) -- Applied Materials Inc., the largest supplier of semiconductor-manufacturing equipment, forecast fiscal second-quarter sales growth of as much as 10 percent as memory chipmakers boost spending on factory upgrades.

Revenue in the current period will rise 3 percent to 10 percent from the prior quarter, the Santa Clara, California- based company said in a statement yesterday, indicating a range of $2.26 billion to $2.41 billion. Profit before certain costs will be 25 cents to 29 cents a share. On average, analysts projected sales of $2.32 billion and profit of 27 cents, according to data compiled by Bloomberg.

Demand is increasing from companies that make semiconductors used to store data in mobile phones and from made-to-order chipmakers, or foundries, Chief Executive Officer Gary Dickerson said. A growing list of companies will spend more to keep up on new techniques required to stay competitive in producing chips used in mobile devices, he also said.

“We think there’ll be stronger spend at some of the other foundry customers,” said Dickerson in a phone interview. “If these companies don’t make these investments, they are going to continue to lose share.”

The shares of Applied Materials rose 5.4 percent to $18.87 at the close in New York. The stock has climbed 6.7 percent so far this year.

Net income in the first quarter, which ended on Jan. 26, rose to $253 million, or 21 cents a share, from $34 million, or 3 cents, a year earlier, the company said. Revenue climbed 39 percent to $2.19 billion, topping the average analyst estimate of $2.13 billion, according to data compiled by Bloomberg.

Customer Confidence

Orders in the period rose 9 percent from the preceding three months to $2.29 billion, the company said. Applied Materials maintained its prediction for a 10 percent to 20 percent increase in the total chip-equipment market in 2014.

Analysts and investors track Applied’s earnings and forecasts as an indication of its customers’ confidence in future demand across the electronics industry.

Applied Materials is seeking to capture more market share after agreeing to buy Tokyo Electron Ltd. last year for $9.39 billion in stock. That agreement followed the acquisition of Varian Semiconductor Equipment Associates Inc. in 2011. The Tokyo Electron deal should receive approval from regulators after the middle of the year, Dickerson said.

--Editors: Ari Levy, Ben Livesey