SAN FRANCISCO, USA: Applied Materials Inc forecast quarterly revenue on the low side of expectations and said booming tablet sales would drive chipmakers to increase capacity next year.
After posting better-than-expected fiscal fourth-quarter results, Applied Materials said its revenue in the current quarter would decline between 8 percent and 15 percent sequentially as it winds down an unprofitable part of its solar panel equipment business.
Analysts on average had forecast revenue equivalent to 9 percent lower from the prior quarter.
The world's top supplier of semiconductor manufacturing equipment expects the booming market for Apple Inc's iPad and other tablets launched by competitors to fuel as much as 90 percent growth in NAND flash memory production next year.
At least 50 million tablets will sold in 2011, driving more than $6 billion of manufacturing equipment spending, according to Applied Materials.
"Customers will be more confident adding the next round of capacity," chief financial officer George Davis told Reuters. "Any time you see a major set of capacity additions coming in, it's a positive for us."
Applied Materials said its net profit, excluding items, was $476 million, or 36 cents a share, in the fourth quarter, compared with $155 million in the same quarter last year.
That was 5 cents above analysts' average expectation for net profit, excluding items, of 31 cents per share, according to Thomson Reuters I/B/E/S.
The company, which makes equipment for manufacturing integrated circuits, LCD displays and solar panels, forecast non-GAAP earnings per share in the current quarter between 30 and 34 cents, in line with expectations.
"They executed very well. The revenue numbers look pretty strong, order numbers look pretty healthy. They did a pretty good job driving earnings leverage," said Patrick Ho, an analyst at Stifel Nicolaus.
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Slow economy
After strong sales in early 2010, chipmakers have wrestled in recent months with tepid demand.
As the U.S. economy remains sluggish, chipmakers have warned that growth in the last quarter will be less than in normal holiday quarters, which could make them more cautious about investing to upgrade their manufacturing facilities.
Applied Materials warned sales in its display business could fall 40 percent in the quarter due to soft demand, although revenue from its main microchip equipment business should remain steady.
"As the holiday season approaches, we are seeing weakness in end markets. TV makers are cutting prices to reduce inventory levels and we expect LCD capex to be down more than 20 percent next year," Chairman and Chief executive Mike Splinter told analysts on a conference call.
Applied Materials' revenue for the quarter ended Oct. 31 was $2.89 billion, beating expectations of $2.60 billion. The company expects 2011 sales to be flat or slightly higher than in 2010.
Applied Materials is shutting down its unprofitable thin-film solar power production lines to focus on its fast-growing crystalline silicon solar business, as well as advanced energy technologies such as LED (light emitting diode).
Sales in the fourth quarter were helped by final payments to its thin-film business and one more job being completed will provide less than $50 million in revenue, Davis said.
Applied Materials shares were flat at $12.38 after bouncing higher, then lower in after-hours trading following the earnings report. They had closed at $12.38 on Nasdaq, down 0.64 percent for the session.
Applied Materials said it was tracking 17 new fabrication facilities and expansion projects that represent $60 bln in future equipment spending.