Subdued guidance from Applied Materials ( AMAT) yesterday was no shocker. It only confirms what plenty on the Street already believed: These are trying times for investors in chip-equipment companies, which have lately been pummeled on news of slackening demand for semiconductors.

In midafternoon trading, AMAT shares were off 1.9%, or 26 cents, to $13.20. Other chip-equipment concerns were mixed: Novellus ( NVLS) was up 2%, or 51 cents, to $25.51; Lam Research ( LRCX) was down 1.3%, or 16 cents, to $11.97; and KLAC Tencor ( KLAC) had lost 1.1%, or 39 cents, to $35.02.

In research notes out this morning, analysts focused not on AMAT's largely respectable results -- it beat sales and earnings estimates -- but on the negative near-term outlook for orders. Yesterday the company predicted bookings will fall 5% to 15% for the quarter that's under way.

In fact, that forecast is actually worse than it appears, since AMAT's bookings for the most recent quarter were lower than expected (with only 5% growth compared with a forecast of 10%). If AMAT had met its initial order guidance, the new guidance for the October quarter would represent a sequential drop of 9% to 19%, pointed out Shekhar Pramanick, an analyst at Prudential Securities.

At Needham, analyst Cristina Osmena said she expects AMAT's order book to keep deteriorating for the rest of the year, with growth not likely to resume until the second quarter of 2003. She cut her price target from $25 to $17.

There's "still no rush to own the stock or semiconductor equipment group," summed up Deutsche Bank's Timothy Arcuri. Though AMAT is still one of the best-positioned equipment companies and claims an exemplary balance sheet, it's now at the mercy of end-market demand, he wrote in a research note. And it's not yet cheap, either, trading at three times book value. In the past, the stock has hit troughs as low as 1.8 to 2 times book value.

His conclusion: "We are probably still stuck in a trading range with fundamental hurdles and valuation keeping a lid on the stock." He has a price target of $18 on the stock.

Amid the mostly unimpressed readings of AMAT's results, though, there was one exception: Bear Stearns analyst Robert Maire thinks the shares could zoom to $40 over the next year. That's more than double what many other analysts expect. "Weighing all the factors, the AMAT report was better than expectation, and while things are weakening, we are still way better off than the trough of nine months or so ago," said Maire in a note that pointed to what he called "attractive" valuations.

Besides showing the nasty turn the equipment industry has taken, AMAT's results also revealed the sudden, painful weakening in a key component of its customer base: Taiwanese foundries. While not entirely unexpected, further evidence of the trend will come as a disappointment to investors in Taiwan Semiconductor ( TSMC) and United Microelectronics ( UMC), companies that have offered somewhat of a haven from the growing bearishness on chips. Both have recently been scoring new business as leading chip companies increasingly outsource their manufacturing to save cash.

But they're clearly struggling, too: As a percentage of AMAT's total orders, demand from Taiwanese manufacturers dropped in half from the second to the third quarter, declining from 39% of bookings to only 18%. "The declining orders out of Taiwan corroborates news that equipment industry orders started to falter by the beginning of June and that the major Taiwanese foundries are expecting lower utilization rates in the third quarter," noted Osmena.

Today Taiwan Semi was down 2.4%, or 21 cents, to $8.60, while UMC was up 0.6%, or 3 cents, to $4.88.