Updated from 4:21 p.m. EST

:

Chip equipment maker

Applied Materials

(AMAT) - Get Report

Tuesday beat Wall Street's earnings estimates by 4 cents but offered a dim outlook featuring sharp drops in earnings and revenue.

The company earned 66 cents a share for the first quarter ended Jan. 28. Analysts had been expecting earnings of 62 cents, according to

First Call/Thomson Financial

. That's up from the 39 cents the company earned in the year-earlier quarter but down from the 77 cents it brought in during the fourth quarter of 2000.

Revenue, meanwhile, were higher than projected, at $2.73 billion. That was down 6% from fourth-quarter levels but up 59% from the year-ago period. The reduced analyst consensus was for revenue of $2.69 billion, according to First Call. Applied Materials dropped fractionally in after-hours trading on

Island

, hitting $40.57, after sliding $2.75 during regular trading Tuesday to $41.25.

Forecasting

Applied Materials Chief Financial Officer Joseph Bronson declined to offer a broad forecast for 2001, saying that he didn't subscribe to either of the theories going around: that interest rate cuts and tax rate cuts would create a second-half turnaround, or that the chip industry is entering an extended downturn that will take a year to work itself out.

Either way, Bronson gave a dreary near-term forecast during the company's conference call, saying that in the second fiscal quarter, earnings will fall to the range of 32 cents to 37 cents a share. That's down 44% to 52% from the first quarter. Meanwhile, revenue will fall 27% to 30%, to the range of $1.9 billion to $2 billion.

That's below the 49 cents in earnings and $2.42 billion in revenue analysts were expecting for the quarter, according to First Call.

Darkness on the Edge of Town

From what Applied Materials CEO Jim Morgan said, it's clear his company remains as in the dark as the chip makers it depends upon. Last month, companies like

Intel

(INTC) - Get Report

declined to give guidance for their 2001 earnings, citing a lack of visibility, or the ability to forecast future demand.

"From our customers, it's not clear what they're going to do this quarter, so we don't know what they're going to do next quarter," Morgan said.

In the interim, the company is cutting costs, by reducing the temporary workforce, deferring merit pay increases, reducing corporate vice president and director salaries by 10% and mandating five days of shutdowns in the second quarter.

Grate Expectations

The company had warned at the end of January that slower chip demand in the most recent quarter had resulted in delayed and canceled equipment orders. That caused the company to trim its revenue estimate for the period by 7%-10%, from the $2.9 billion-$2.95 billion range.

Applied Materials and other chip equipment makers have been hurt by a slowdown in the semiconductor sector that began late in the second half of 2000 as inventories built up along the supply chain and demand for personal computers waned. At this point, most chip companies have said they don't expect those inventories to burn off until the end of the first quarter.