UPDATE 2-Applied Material posts higher quarterly revenue, stock gains

Thu May 15, 2014 5:48pm EDT

(Adds details from analyst call, comment; updates stock move)

By Noel Randewich

SAN FRANCISCO May 15 (Reuters) - Top chip gear-maker Applied Materials on Thursday posted higher fiscal second-quarter revenue as investments to make more smartphones and memory chips helped offset a slow personal computer market.

Shares of the company rose after its report reassured investors who were cautious following recent disappointing quarterly forecasts from other companies.

"We've had a lot of mixed commentary through earnings season and some pretty concerning outlooks," said Pacific Crest analyst Weston Twigg. "That's particularly true for (semiconductor capital) names where there's been concern about demand dropping off."

Leading contract chipmaker Taiwan Semiconductor Manufacturing Co Ltd and its rivals are working on new cutting-edge manufacturing technology that will allow them to make more advanced chips for mobile gadgets.

But due to the complexity of the new technology, the timing of each company's investments and eventual launch of new production lines has remained unclear to investors.

On a conference call with analysts on Thursday, Chief Executive Officer Gary Dickerson said he expects contract chip manufacturers to increase their investments by up to 20 percent this year, driven by smartphones and other connected mobile devices.

While a slow PC market is muting demand for Intel Corp's processors, the growth of mobile devices is driving more investment in NAND and DRAM memory chips.

Applied Materials agreed in September to buy No. 3 chip equipment maker Tokyo Electron Ltd in an all-stock deal worth more than $10 billion as the number of major customers making advanced chips declines. Dickerson said he continues to expect regulatory approval in the second half of 2014.

Applied Materials said its revenue for the quarter ended in April was $2.35 billion, up from $1.97 billion in the year-ago period. Analysts expected second-quarter revenue of $2.349 billion, according to Thomson Reuters I/B/E/S.

The company had a net profit for the quarter of $262 million, or 21 cents a share, compared with a net loss of $129 million, or 11 cents, in the same quarter last year.

Excluding items, the company earned 28 cents per share, in line with expectations.

The company said it expected revenue in the current quarter to be flat or down 5 percent from the previous quarter, implying revenue of $2.23 billion to $2.35 billion. Analysts on average expected $2.318 billion.

Shares of Applied Materials rose 3.26 percent after closing down 1.37 percent at $18.69 on Nasdaq. (Reporting by Noel Randewich; Editing by Marguerita Choy and Mohammad Zargham)

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