Update of my earlier post with conf call comments added by author.
It's hard to see a cyclical downturn starting this year if Splinter and his CFO are accurate in their predictions...
2nd UPDATE: Applied Materials 1Q Profit Soars, Boosts Revenue View
(Updates throughout with comments from conference call.)
By Shara Tibken
NEW YORK -(Dow Jones)- Applied Materials Inc.'s (AMAT) fiscal first-quarter
earnings soared, topping the company's own estimates, as it continued to benefit
from strong demand in its semiconductor equipment and solar businesses.
The company boosted its forecast for the full year, saying it expects record
revenue as customers invest more in equipment. Applied Materials also expects
the second half of the year to be even stronger than the first.
"2010 was a strong recovery year across the board," Chairman and Chief
Executive Mike Splinter said on a conference call. "And 2011 is shaping up to be
even better for our semiconductor, service and solar businesses."
The maker of tools used to produce semiconductors, television screens and
solar panels has seen strong sales and improved margins in recent quarters as
many chip makers increased production on a sharp rebound in demand for
electronic devices. While companies have warned of slower consumer spending on
PCs, Applied Materials and other semiconductor equipment makers are expected to
benefit from big capital-spending plans by chip giant Intel Corp. (INTC) and
other companies.
Chief Financial Officer George Davis said in an interview that 2010 spending
on wafer fabrication equipment came in better than anticipated, and should rise
10% to 15% in 2011, higher than previously seen.
"Q1 is where we really got a new set of demand signals, and that's why our
outlook for the year is up substantially," Davis said. "And customers are
playing catch-up with capacity."
Semiconductor spending should be stronger than previously anticipated, boosted
by demand for mobile devices and server chips to enable cloud computing, Davis
said, and solar demand should also increase. He said the company has been
gaining share from competitors.
Applied Materials shares, up 29% over the past 12 months, slid 1.1% to $15.65
after hours.
In recent years, Applied has expanded into new markets, including the
development of a business selling equipment used to make solar panels. The
company entered thin-film solar panels in an attempt to take share away from
devoted crystalline silicon panel makers. But the business suffered mightily as
silicon costs plummeted, and Applied's core customer base of start-up companies
needing full-service assistance dried up in the economic downturn.
The company in July acknowledged its effort to focus on thin-film solar panel
products was misplaced, saying it would restructure the business.
For the quarter ended Jan. 30, Applied Materials reported a profit of $506
million, or 38 cents a share, up from $83 million, or 6 cents, a year earlier.
Excluding such items as restructuring and asset-impairment charges, per-share
earnings rose to 36 cents from 13 cents. Revenue jumped 45% to $2.69 billion.
The company had forecast earnings of 30 cents to 34 cents a share on $2.45
billion to $2.66 billion in revenue.
Gross margin rose to 42.3% from 38.5%.
Total new orders rose 51% to $2.97 billion. Backlog at the end of the quarter
was $3.54 billion, up $292 million from the prior quarter.
Looking ahead, the company said it expects second-quarter sales to be
somewhere between flat and a 5% increase from the prior quarter, as well as per-
share earnings ranging from 34 cents to 38 cents. Analysts most recently
expected earnings of 31 cents a share on a 6.3% decline in revenue.
The company expects to post full-year revenue of more than $11 billion,
exceeding its previous forecast, whose high end was $9.84 billion, and coming in
about a billion dollars higher than its previous record high.
The company also sees 2011 per-share earnings of more than $1.50, which is
above all the estimates of 22 analysts surveyed by Thomson Reuters.
Splinter said that dynamic random access memory, which is typically used in
PCs, remains a "swing factor" for Applied Materials' results. DRAM has likely
bottomed, he said, and should be stronger in the back half of the year. Spending
for NAND flash memory, which is used in smartphones and tablets, should continue
rising, Splinter added.
"NAND spending has to continue to increase, and part of this assumption is
that NAND density in tablets is going to continue to double, essentially, year
over year," Splinter said. "[Memory spending] is going to be positive in the
second half of the year, and 2012 will be very positive for memory."
Davis, meanwhile, said 2010 wafer fab equipment spending was about $31
billion, and the company expects spending of $34 billion to $35 billion this
calendar year. The company previously said 2010 spending would be $29 billion to
$30 billion, plus or minus 10%, and that 2011 would be in line with that level. |
