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Updated from 9:50 a.m. EST

Shares of

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

fell Thursdayafter the company forecast a painful 35% decline infirst-quarter orders. However, analysts were split on whetherthe shares were getting cheap enough to buy.

The stock was recently faring better and was down 36 cents, or 2.1%, to $16.98, after earlier approaching its 52-week low of $15.34. First Albany lowered the stock toneutral from buy, while Needham and J.P. Morgan opinedthat the worst of the company's news is probably out.

At First Albany, Auguste Richard said he thinksthe shares "will trade sideways until bookingsmomentum returns."

He added that the quality of fourth-quarterearnings was weak. Applied had guided EPS to 24 centsto 26 cents, but after stripping out a lower-than-expected tax rate, earnings would have been 23 cents --a penny below the company's guidance. His firm hasn'tdone banking for Applied.

In the opposite camp, Needham's Robert Mairewrote, "While the knee-jerk reaction is likely to bevery negative, we would not be surprised to see someupgrades from other analysts calling for an earlybottom. This is true in that the stocks tend tobottom a quarter or two before reality bottoms in thisgroup." Recently, he pointed out, fellow equipment maker


(TER) - Get Teradyne, Inc. Report

reported a similarlydisastrous outlook but saw its stock price gain onthe news.

To be sure, Applied's order guidance for a slideof 35% was a "shock" to investors who had expected adecline on the order of 15% to 20%. But if ordersbottom out as predicted, implying a quarterly bookingslevel of $1.7 billion, the situation would still bemuch better than the previous cycle in which Applied'sorders bottomed out at $1 billion and thecompany saw a loss, he said.

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"The most downside we can see is likely to be aretreat away from the gains seen in the recent days,if there is any retreat at all," concluded Maire, whomaintained his buy rating on the stock. His firmhasn't done recent banking for Applied.

"We would buy AMAT into any weakness, as we arecertainly now much closer to the bottom," he wrote."This call may have served to get all the bad newsout of the way, much of which has already been pricedinto the stock."

Late Wednesday the Santa Clara, Calif.-basedchip-equipment maker, the world's largest, postedsharply higher net income in its fiscal fourth quarterbut said it had recently seen demand decelerate.

For the just-ended fiscal fourth quarter, Applied delivered net income of $455 million, or 27 cents a share, up from year-ago levels of $15.4 million or 1 cent.

Revenue totaled $2.20 billion, up 80% from last year's levels and down 1% from the preceding quarter.

Analysts were looking for 26 cents a share in earnings on $2.28 billion in revenue.

New orders in the fourth quarter increased 7% to $2.62 billion.

However, Applied's guidance fell far short of expectations.

In a postclose conference call, Chief Financial Officer Nancy Handel explained, "In the near term, we're entering a period of lower capital investment as our customers focus on reducing chip inventories."

Handel said orders should tumble 35% in the first quarter of fiscal year 2005 from fourth quarter levels. Revenue should fall 20% to 23%, to a range of $1.76 billion to $1.7 billion, with earnings of 15 cents to 16 cents.

The guidance is dramatically below the consensus estimate for $2.16 billion with EPS of 23 cents.

Asked why Applied's outlook is so much worse than analysts had expected, CEO Mike Splinter said the company's fourth quarter came in slightly better than executives had anticipated, making the drop-off appear more dramatic. Also, the demand picture has worsened within just the past month or so. "If we were making this projection thirty days ago, it would have been quite different," said Splinter.

Most of the slowdown in demand has occurred in relatively older 200-millimeter equipment rather than in the more advanced 300-millimeter gear, he added. In the fourth quarter, 84% of Applied's orders were for leading-edge 300-millimeter products.

In other news, Applied repurchased 31 million shares of common stock in the quarter at an average price of $16.13 each, for a total purchase price of $500 million.