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Applied Materials Profit Nearly Triples; Sales Rise

Applied Materials, the top supplier of equipment for making microchips, on Tuesday said first-quarter profit nearly tripled and that second-quarter revenue could rise as much as 5%, sending its shares up 4.5%.

Applied Materials said net profit for its first fiscal quarter ended Jan. 28 was $403.5 million, or 29 cents per share, compared with $142.8 million, or 9 cents per share, a year earlier. Analysts expected Applied Materials to earn 27 cents per share on revenue of $2.35 billion, according to Reuters Estimates.

The profit topped analysts' forecasts, despite revenue that was weaker than expected, and the company's anticipation of persistent strength in memory chip demand and a rebound later this year in the flat-panel display market helped allay two recent concerns of investors.

Revenue was $2.28 billion, up 23% from a year earlier, but lower than the $2.35 billion expected by analysts. The lower revenue pushed gross margin down to 46.7% from 47.1 percent, the company said.

The company expects to earn 27 cents, or 28 cents per share, in the second quarter, with revenue staying flat or rising as much as 5% from the first quarter, Chief Financial Officer George Davis said. That would put sales at $2.28 billion to $2.39 billion.

"Memory orders were strong," Chief Executive Mike Splinter told a conference call. "We expect the overall memory business to remain relatively strong and balanced over the year."

New orders were up nearly a quarter from a year earlier, but down 6% from the previous quarter, driven by a 22% drop in orders for flat-panel equipment, Davis said.

Applied Materials shares rose 4.2% to $18.92 in extended trading on the Nasdaq after the outlook was given. The stock, which closed up 1.9% at $18.18 on Nasdaq, has fallen almost 9% over the past year.

That compares with a rise of 25% in Netherlands- based ASM International, a gain of 11% in Novellus Systems and a fall of 5% for Lam Research.

Splinter expected orders from flat-panel makers to rise slightly in the second quarter, while contract chipmakers -- also known as foundries -- would start spending again in the third quarter after a protracted period of belt-tightening. "The foundries ... continue to hold back on capital investment and are very much at the bottom of the trough," Splinter said.

Orders at U.S. chip equipment suppliers have fallen steadily since the middle of 2007 as chip makers ease back on capacity additions amid concerns of an inventory glut and a bubble in memory chips.

Industry data released last month showed new orders at U.S. equipment suppliers totaled $1.52 billion in December, up from $1.45 billion in November, but down almost 15% from the level in June.

The industry was also spooked last month when Lam Research, which specializes in equipment to etch circuitry, gave forecasts that fell short of Wall Street expectations and sparked a sell-off in the sector.

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