The Wall Street Journal-20080213-Boom in Display Screens Eases Applied Materials- Slump

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Boom in Display Screens Eases Applied Materials' Slump

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Applied Materials Inc. provided further evidence of a spending slowdown by chip makers, though makers of display screens are aggressively ordering manufacturing equipment.

The Santa Clara, Calif., company, a big maker of high-tech production tools, posted a 35% drop in earnings for its first fiscal quarter, including a charge for a cost-reduction plan that included reducing the company's work force by 7%. Revenue slid 8.3%.

But Applied's orders held up better than expected. Though off 2% from the year-earlier period, new orders were up 13% from the fourth quarter ended in October -- while the company had forecast a decline of 5% to 15% over that period.

In an interview, Chief Executive Michael Splinter said the company's business in equipment for making liquid-crystal displays used in flat- panel television sets and computer monitors was "fantastic." He added that a newer business making equipment used to make solar panels "is also going pretty great as well."

The company's business tends to experience sharp fluctuations as chip makers expand and reduce production capacity. Lately, Applied has been hurt as a major group of customers -- makers of chips known as DRAMs, for dynamic random-memories -- have stopped spending on factories as chip prices have fallen dramatically.

Mr. Splinter predicted its sales to chip makers aren't likely to rebound until the second half of the year.

For the fiscal period ended Jan. 27, Applied reported net income of $262.4 million, or 19 cents a share, including $38 million in charges associated with the cost-cutting plan. In the year-earlier period, Applied reported profit of $403.5 million, or 29 cents. Revenue for the latest quarter fell to $2.09 billion from $2.28 billion.

In the current quarter, Applied told analysts it expects earnings per share of 18 cents to 22 cents, down from the 26 cents reported in the year-earlier period. It projected revenue would be flat to up 5% from the first fiscal quarter, while orders would range from off 5% to up 5% over that period.

Applied's shares eased to $18.07, off 36 cents, in Nasdaq Stock Market 4 p.m. composite trading. Following the results, the stock rose 4.5%, or 81 cents, to $18.88 in after-hours trading.