Updated from 4:59 p.m. EST

Lam Research ( LRCX) more than doubled its bottom line, as the company benefited from strong demand for its chip-making equipment and related services.

But the company's stock plunged more than 7% in extended trading Wednesday after management pared back its shipment estimates for the current quarter and served up a cautious guidance for 2007.

"We believe customers intend to moderate their growth rate and spending for capacity additions in 2007," said CEO Steve Newberry in a post-earnings conference call. The cautious tone played into fears on the Street that the chip-equipment industry is headed for a slowdown as chipmakers rein in their spending on capital equipment.

On Tuesday, Deutsche Bank downgraded its rating on Lam from buy to hold, arguing that the company was not immune to the cyclical downturn facing the industry.

Newberry said he expects industrywide capital spending on wafer fabrication equipment to be up 5% in 2007, while spending on the company's core business of etching tools, which imprint semiconductors on silicon wafers, will be flat.

Under this scenario, Newberry said he believed that Lam's "potential performance" could see revenue increase between 10% and 15% in 2007 thanks to market share gains and new product introductions.

The company's guidance for the current quarter was decidedly less optimistic than a few months prior. While Lam had previously expected shipments to rise sequentially 5% to 10% in the current quarter, the company now said it expected shipments to decrease 5% to 7%.

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