Semiconductor equipment maker Applied Materials Inc. (AMAT), Wednesday reported a slump in third quarter profit, due mainly to persistent economic weakness that dampened sales, restructuring charges, and spending more on research and sales. Nonetheless, excluding items, the company's adjusted earnings for the quarter topped Street estimates, as did sales.
Looking ahead, Applied Materials detailed a weak outlook for the fourth quarter, citing the gloom surrounding the global economy, coupled with a seasonal pullback.
The shriveled third quarter results were not entirely unexpected as Applied Materials last month slashed its full year outlook on weaker than expected near-term demand, mainly among foundry customers.
Commenting on the results, the company's CEO Mike Splinter said, "We delivered solid financial performance in line with our outlook despite challenging industry conditions in semiconductor, display and solar."
Splinter added, ""Economic uncertainty is weighing on top of a seasonal pullback to produce weaker near-term demand."
Applied Materials reported third quarter net income of $218 million or $0.17 per share, sharply down from $476 million or $0.36 per share last year.
Results for the quarter included restructuring charges of $44 million, while the prior year included a gain of $28 million from the sale of certain facilities.
Excluding items, adjusted earnings for the quarter were $300 million or $0.24 per share, compared to $467 million or $0.35 per share a year ago.
On average, 19 analysts polled by Thomson Reuters expected the company to earn $0.22 per share for the first quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter totaled $2.34 billion, a decline from $2.79 billion last year. Eighteen analysts had a consensus revenue estimate of $2.32 billion for the quarter.
Sharp decline in sales were seen at Silicon Systems Group, Applied Global Services, and Energy and Environmental Solutions businesses.
During the quarter, Varian Semiconductor Equipment Associates Inc. generated $294 million in sales and contributed about $0.04 to the Applied Materials' adjusted earnings. Applied Materials completed the acquisition of Varian in November 2011.
For the fourth quarter, Applied Materials expect adjusted earnings in the range of $0.00 to $0.06 per share, while net sales are expected to be lower sequentially by 25 percent to 40 percent. Analysts currently expect earnings of $0.12 per share on revenues of $1.94 billion.
Applied Materials' results come amid weakness plaguing the semiconductor industry which grapples with volatility in Europe and slowdown in channel sales in China. The sector also had to bear the brunt of prolonged supply chain disruptions.
AMAT closed Wednesday at $11.80, up 0.77%, on a volume of over 8 million shares on the Nasdaq. In after hours, the stock slid $0.30 or 2.54%. In the past year, the stock has trended in a range of $9.70 - $13.94.
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