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Applied Materials posts profit on demand

Applied Materials Inc. on Tuesday reported a quarterly profit versus a year-earlier loss amid improving demand for chips.
/ Source: Reuters

Applied Materials Inc., the world’s largest producer of microchip-making equipment, Tuesday posted a profit compared with a year-earlier loss, as revenue nearly doubled driven by improving investment in Asia.

The Santa Clara, California-based company also forecast revenue growth in the current quarter of slightly more than the average Wall Street analyst expectation.

Analyst Suresh Balaraman of ThinkEquity Partners said investors were most concerned about evidence as to whether the new growth pattern would last, after the industry was battered by a prolonged downturn.

“I think they did give the impression that they expect this to be a long and sustainable upturn,” he said, noting that there was little surprise in the numbers the company posted for the last quarter or forecast for the current one.

For the company’s fiscal second quarter ended May 2, Applied Materials reported a profit of $373 million, or 22 cents per share, compared to a year-earlier loss of $62.1 million or 4 cents per share.

Revenue rose sharply to $2.02 billion from $1.11 billion in the same period last year.

Wall Street analysts on average had been expecting earnings of 19 cents per share on revenue of $1.89 billion, according to a poll of analysts by Reuters Research, a unit of Reuters Group Plc.

“While spending has followed more rational patterns than in past upturns, the semiconductor industry is still underinvesting relative to historical industry norms,” Chief Executive Mike Splinter said on a conference call with analysts.

Splinter told Reuters that chipmakers were having to balance caution in the wake of the downturn with demand so strong that some chip companies have admitted trouble with adequate supplies.

“I think they’re really trying to be rational and cautious,” he said. “I think that they have to meet the demands of their customers.”

New orders totaled $2.21 billion, an increase of 32 percent over the prior quarter, with the greatest percentage of orders coming from southeast Asia and China.

The company’s book-to-bill ratio in the quarter, which measures new orders against sales recorded, was 1.10.

For the current quarter, the company forecast order growth of 5 percent to 10 percent and revenue growth of 5 percent. The revenue outlook implies a figure of $2.12 billion, compared to the average view from Reuters Research of $2.11 billion.