Applied Materials Sags on Weak Demand

Shares of Applied Materials were up 1.5%, or 30 cents, at $20.16 in extended trading Tuesday.

Applied Materials' stock price has risen about 23% since January amid bullish expectations for the company's nascent business developing tools and factories to produce solar energy panels. In March, Applied announced a $1.9 billion contract to build a massive solar panel fabrication facility for an unnamed customer.

The bulk of the revenue from Applied's solar business won't show up until 2009, however. In the meantime, the company's solar group is posting an operating loss as it pours resources into the business.

"Right now we're in the investment phase," CFO George Davis said in an interview with TheStreet.com. "We have eight major factories under construction around the world that we're supporting,"

Applied Materials has said it expects to the solar business to at least break even by 2009.

The Santa Clara, Calif., company said sales in the three months ended April 27 totaled $2.15 billion, vs. $2.51 billion at this time last year. The average analyst expectation called for sales of $2.13 billion, according to Thomson Reuters.

Applied Materials earned net income of $303 million, or 22 cents a share, during the quarter, meeting the average analyst expectation. In the second quarter of 2007, Applied Materials had net income of $411 million, or 29 cents a share.

Applied Materials, along with other chip equipment makers such as Novellus(NVLS Quote) and KLA-Tencor(KLAC Quote), have been stung by the glut of memory chips currently flooding the market. The oversupply has depressed prices for the chips, and caused chipmakers to scale back plans to expand their manufacturing capacity.