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Applied Materials Sees Poor Third Quarter

Updated from 4:39 p.m. ET

Chip equipment maker Applied Materials (AMAT) missed its fiscal second-quarter earnings estimate by a penny Tuesday, earning 32 cents a share in the period ended April 29.

It also offered a gloomy outlook for the fiscal third quarter, saying earnings could slip to break even. But in after-hours trading the company's stock was hanging right around its regular-trading close of $49.89

The second-quarter earnings were less than half the 66 cents the company earned in the fiscal first quarter and were down from the 53 cents a share it earned a year earlier. The weaker results were due to a combination of lower sales and weaker profit margins, the company said.

Applied Materials, which makes the equipment on which semiconductors are built, beat analysts' expectations for revenue however, bringing in $1.91 billion compared with the $1.88 billion that analysts had expected, according to Thomson Financial/First Call. In the previous quarter it had $2.73 billion in revenue.

Due to the decline in orders during the second quarter, Applied Materials' outlook for the third quarter ending in July is for earnings and revenue to fall yet again. At best, the company hopes to post earnings per share slightly above break even, Chief Financial Officer Joseph Bronson said during a conference call Tuesday. Revenue, meanwhile, is expected to fall more than 30% to $1.2 billion to $1.3 billion from the $1.91 billion in the second quarter. Analysts had been expecting earnings of 22 cents and revenue of $1.5 billion.

At the same time, Bronson said that he hoped that a bottom was near and that a recovery would occur in the next two quarters, though the "general lack of visibility" makes it difficult to know for sure.

Applied Materials is the first of the chip equipment makers to report a quarter that includes April. These companies have gotten caught up in the semiconductor downturn, which began late last summer and has continued into this spring. The lower the demand for chips, the less new equipment needed to build them.

All the same, Applied Materials said that chipmakers continue to spend on leading edge products, including the larger 300 millimeter wafers and the more advanced copper process for building semiconductors.

Applied Materials also said it took a $58 million, or 5 cents a share, charge to pay for severance associated with the voluntary separation plan for 1,000 jobs announced in March. The company also is closing a printed circuit board equipment inspection business in Tucson, Ariz. .

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