Applied Materials Outlook Disappoints, Shares Fall

Applied Materials, the largest supplier of tools for making microchips, gave a profit forecast on Wednesday that was far below Wall Street expectations, sending shares down 5 percent.

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The estimate came after the company reported a 6 percent drop in net income, matching a similar drop in revenue, for its fiscal fourth quarter ended Oct. 28, amid a cyclical industry downturn.

"We see the first part of fiscal 2008 as challenging," Chief Executive Mike Splinter told a conference call.

He said he expected a continued pullback in spending on dynamic random access memory (DRAM), which is used in personal computers, but ongoing strength in flash memory, the kind found in many consumer electronic devices, would help.

"We expect foundries will remain cautious until their demand picture regains clarity," Splinter said.

Applied Materials said it saw profit in the current quarter at between 16 cents and 20 cents per share, with revenue falling between 13 percent and 18 percent.

Wall Street was looking for fiscal first quarter profit of 27 cents excluding items, according to Reuters Estimates.

The company said net income dropped to $422 million, or 30 cents per diluted share, for its fiscal fourth quarter, from $449 million, or 30 cents per diluted share, a year earlier.

Net sales declined 6 percent to $2.37 billion, roughly in line with the $2.38 billion expected by Wall Street analysts, according to Reuters Estimates, and with the company's own forecasts issued in August.

Semiconductor production is undergoing a cyclical downturn in capital spending that has even affected Applied Materials, the industry bellwether.

Deutsche Bank projects a 15 percent decline in investments in new plants and tools in 2008.

In recent quarters, Applied has said declines in spending by memory-chip producers, contract chipmakers and flat-panel display manufacturers was partly offset by a surge in demand for equipment to make solar panels.

Shares in Applied fell to $17.90 after the outlook. Amid a broad market sell-off Wednesday, the stock rose nearly 1.1 percent to close at $18.81 on Nasdaq.

The stock has fallen more than 11 percent in the last three months, compared with a fall of 11 percent for rival Lam Research Corp and a rise of 1 percent for Novellus Systems.