KLA-Tencor (KLAC) - Get Report is maintaining its balance, but its customers are shaky.

As the chip equipment industry sways because of lowered projections for total capital spending, KLA-Tencor hopes its unique focus will keep it from falling outright. Then again, the company sells inspection and process-management tools to the chip equipment industry. While it touts the cost advantage to using its products, there will be a degree of uncertainty as capital spending on chip equipment shrinks.

Reporting after the market's close Wednesday, KLA said revenue stacked up to $404 million for its December quarter, a 20% sequential decline and a 29% fall from the same quarter a year earlier. The technology vendor earned 25 cents a share in the quarter, its second for 2002, confidently besting Wall Street expectations of $377.6 million in revenue and earnings of 24 cents a share.

CEO Ken Schroeder relayed news of higher utilization rates among specific segments of the company's customer base, saying they were returning to healthier rates conducive to equipment purchases. During the quarter the U.S. continued to be a solid regional performer, he said, joined by solid progress in Asia. Japan and Europe continued to lag for KLA.

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KLA's gross margins suffered as revenue declined, falling from 55.3% in its fourth quarter to 51.4% in the first quarter to 50.1% in the second. However, comparisons must be made with care. In the fourth quarter of its fiscal 2001, KLA-Tencor refitted its revenues according to new accounting regulation SAB 101. The company recalculated revenues through the beginning of 2000.