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Applied Materials' Optimism
Bodes Well for Techs
By Jamie Paton
TheStreet.com/NYTimes.com Staff reporter
8/9/00 6:36 PM ET
Wednesday's big tech earnings event provided more
grounds for optimism among tech investors.
Chip-equipment maker
Applied Materials
(AMAT:Nasdaq - news)
Wednesday afternoon said
third-quarter earnings more
than doubled from a year ago, edging past Wall
Street estimates as sales continued to balloon.
Perhaps even more important, the biggest maker of
the gear used to produce semiconductors used its
postearnings conference call to forecast strong
earnings and sales growth in coming quarters,
leading into next year.
Tuesday evening had provided a similar boost for
tech stocks, when networking giant Cisco
(CSCO:Nasdaq - news) beat fourth-quarter earnings
estimates as the Internet building boom accelerates
growth. The tech-littered Nasdaq Composite
Index opened strongly higher Wednesday morning,
as Cisco led a number of other networking stocks
to 5%-10% gains. But tech stocks eventually
frittered away most of their gains and ended only
fractionally higher.
Still, strong reports from leaders such as Cisco and
Applied Materials suggest that the so-called tech
bellwethers remain healthy, an indication that
should at the very least keep tech shares on solid
ground for now.
Better Than Estimates
Excluding one-time items, Applied Materials' net
income reached $604 million, or 70 cents a share,
in the lastest third quarter, up from $256 million, or
31 cents a share a year ago. The consensus
earnings estimate among analysts polled by First
Call/Thomson Financial was 68 cents.
Applied Materials,
based in Santa
Clara, Calif.,
recorded
third-quarter sales
of $2.7 billion, an
83% rise from the
comparable quarter
of last year and a
25% increase from
the second fiscal
quarter of this year.
Applied Materials said demand for semiconductors
is only likely to grow. "I see a decade of opportunity
ahead," Chairman and Chief Executive James C.
Morgan said in a conference call with analysts
Wednesday.
New orders, the company said, climbed 116% to
$3.3 billion in the latest quarter, eclipsing the $3
billion mark for the first time it its history. North
America accounted for about a third of the new
orders, while orders from Japan made up about a
quarter of total new orders.
Shares of Applied Materials rose 1 9/16, or 2.2%, to
72 1/8 Wednesday ahead of the earnings
announcement, and they climbed even higher in
after-hours trading, hitting 73, according to Instinet.
Strength in Orders
Still, with tech stocks priced somewhat
precariously and so much expectation riding on a
strong number, there's some sense that
Wednesday's trading, with its whimpering finish,
could provide the blueprint for Thursday.
"I think there's a sense of relief, but I don't think the
results will be enough for a big rally for equipment
gear," says Michael O'Brien, an analyst with Wit
SoundView. "But business is still good. It's
certainly a good quarter."
Applied Materials officials said they expect to
deliver earnings between 73 cents and 75 cents a
share in the next quarter, on revenue of $2.8 billion
to $2.9 billion.
Applied Materials predicted a strong next quarter
and following year amid renewed growth in Japan, a
shortage of memory chips and a strong world
economy. Applied Materials also forecast new
orders would rise to $3.5 billion from this quarter's
record level, leading to revenue gains in following
quarters as well. The comments seem to suggest
that the semiconductor industry, like Cisco's
networking sectory, remains healthy amid
observers' concerns that an economic slowdown will
weigh on earnings. |
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