Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, forecast first-quarter sales and profit that fell short of analysts’ predictions, a sign that semiconductor makers are scaling back expansion plans.
Profit before certain costs will be 8 cents to 16 cents a share, the company said in a statement yesterday. Revenue will decline as much as 15 percent from the prior quarter, Applied said, indicating sales of as little as $1.85 billion. Analysts on average predicted profit of 18 cents on sales of $2.07 billion, according to Bloomberg data.
Many chipmakers are reluctant to increase output until they see evidence that the economy is improving, said Mahesh Sanganeria, a San Francisco-based analyst at RBC Capital Markets. That’s damping demand for the gear needed to manufacture semiconductors.
“Unless there is an inflection in demand, there is no need to spend on capacity,” said Sanganeria. He has a “sector perform” rating on Applied Materials stock and said he doesn’t own any of the shares.
Applied Materials slipped in extended trading after the report. It had dropped 17 cents to $12.47 at the close in New York yesterday. The stock has lost 11 percent this year.
Applied Materials also supplies makers of solar panels and TV and computer flat-panel displays, markets that are suffering amid overproduction and lower prices.
Orders Trough
“Display and solar equipment have been really tough,” said Edwin Mok, an analyst at Needham & Co. in San Francisco who has a “buy” rating on Applied Materials.
New equipment orders troughed in the fiscal fourth quarter, and Applied Materials expects additional demand for semiconductor and display machinery in the current period, Chief Executive Officer Mike Splinter said in an interview.
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