Chip equipment maker Applied Materials (AMAT.O) forecast revenue for the current quarter that exceeded Wall Street's expectations, citing growing demand for its solar panel manufacturing equipment in China.
The company is focusing on its fast-growing crystalline silicon solar business, as well as advanced energy technologies such as LEDs (light emitting diodes) while it winds down its unprofitable thin-film solar power production lines.
Applied Materials, based in Santa Clara, California, said its energy and environmental solutions group, which includes solar, had record orders of $668 million in the first quarter and that the group's sales would increase at least 10 percent sequentially in the current quarter.
"We've seen major increases in spending from our customers both in the semiconductor area ... and much higher-than-expected solar equipment demand," Chief Financial Officer George Davis told Reuters in an interview.
China in recent years has become a major manufacturer of solar modules sold to customers in Germany and other parts of Europe.
In the second quarter, growth in the solar industry is expected to make up for flat sequential sales at Applied Materials' Silicon Systems Group, which includes equipment for making logic and memory chips.
EYE ON MARGINS
The company, the world's top supplier of semiconductor manufacturing equipment, said it expects revenue in the fiscal second quarter to be flat to up 5 percent sequentially, implying revenue of $2.69 billion to $2.82 billion.
Analysts on average forecast revenue of $2.52 billion for the quarter, according to Thomson Reuters I/B/E/S.
Chip makers rebounding from the recession increased investments in chip equipment by around 130 percent last year. But in 2011, chip equipment spending is expected to grow a much slower 10 percent to 15 percent, company executives said.
Investors will be looking to see if Applied Materials can improve gross margins in its fast-expanding solar business, said Stifel Nicolaus analyst Patrick Ho.
"If there's one thing they can do going forward, it's how do they improve that segment's operating model to bring it in line with the rest of the business?"
Applied Materials reported revenue for its fiscal first quarter, ended Jan. 30, of $2.69 billion, compared with $1.85 billion in the year-ago period. Analysts expected $2.60 billion.
It said first-quarter profit, excluding items, was $484 million, or 36 cents a share, compared with $179 million, or 13 cents, in the same quarter last year.
Analysts on average expected first-quarter earnings, excluding items, of 33 cents per share.
The company forecast non-GAAP earnings per share in the current quarter of 34 cents to 38 cents.
Shares of Applied Materials were steady in after-hours trade after ending up 1.21 percent at $15.83 on the Nasdaq. (Reporting by Noel Randewich; Editing by Steve Orlofsky and Matthew Lewis)
