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Aug 16, 2018

Applied Materials posts weak sales outlook; customers trim spending

Applied Materials

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Applied Materials Inc. (AMAT.O), the biggest maker of machinery used to manufacture semiconductors and displays, gave a disappointing sales outlook, causing concern that the chip market has peaked.

Revenue in the fourth quarter, which ends in October, will be US$3.85 billion to US$4.15 billion, Applied Materials said Thursday in a statement. That compares with an average analyst estimate of US$4.45 billion, according to data compiled by Bloomberg.

Applied Materials is one of the first suppliers that chip companies turn to when they’re ramping up production or making new semiconductors. It also first to feel the effects when firms delay or cancel plans. These are long-term projects, so investors scrutinize Applied Materials results for early clues on the health of the chip industry.

“We have seen some near-term adjustments in customer spending," Chief Executive Officer Gary Dickerson said in the statement.

After pouring money into new facilities over the last four years, chipmakers may now be slowing further purchases of equipment as they wait to see if there’s enough demand for the production capabilities they’ve already built.

Applied’s projection may add to concern that a four-year surge in chip demand is beginning to slow. The company gets most of its revenue from the semiconductor industry’s biggest producers -- Samsung Electronics Co., Intel Corp. and Taiwan Semiconductor Manufacturing Co. Customers order equipment months ahead of when they need to produce chips.

The shares fell more than 3 per cent in extended trading after closing at US$47.43 Thursday in New York. The stock is down this year, following jumps of 58 per cent in 2017 and 73 per cent in 2016.

Fiscal third-quarter profit, excluding certain items, was US$1.20 a share. Revenue rose 19 per cent to US$4.47 billion in the period that ended in July, slightly beating the average analyst projection.