Applied Materials Q3 profit jumps 79 percent

Applied Materials Q3 profit increased by 79% to $301 million (24 cents per share) from $168 million (14 cents per share) in Q3 2013, fueled by strong demand for computer chips and chip-making machines. The company’s fiscal Q3 ended on July 27, 2014.

President and CEO, Gary Dickerson, says that recent changes in semiconductor technology have favored Applied Materials, while cost reductions have helped the firm increase its gross margins to a six-year high.

Unlike several of its rivals, Applied Materials is benefiting from strong demand from flat-panel display makers as they build new plants.

Mr. Dickerson said:

“We have focused our strategy and investments in areas that have the largest impact for customers while driving improvements in execution and speed across the company.”

“With these actions, we have improved our operating margins for seven quarters in a row and are making substantial progress towards our long-term financial model.”

Third quarter orders for the world’s number one maker of semiconductor-manufacturing equipment, at $2.48 billion, were 6% down on Q2, but 24% up compared to Q3 2013. Net sales, at $2.27 billion, were 4% less than in Q2, but 15% higher than in the same quarter last year.

Business Outlook

Applied Materials expects net sales to be flat in Q4 2014 compared to Q3 2014, and between 10% to 17% higher than in Q4 2013.

It forecasts non-GAAP adjusted diluted earnings per share to be between $0.25 to $0.29, which would be a year-over-year increase of 32% to 53%.

Applied Materials Q3 Results

(Data source: Applied Materials Inc.)

Tokyo Electron takeover

Applied Materials says it plans to by rival company Tokyo Electron Ltd. for approximately $9.3 billion. The transaction, which is still being reviewed by regulators, when completed will create a new entity called Eteris.

Mr. Dickerson, who explained that his company is still engaged with regulators in several countries, expects the merger to be completed by the end of this calendar year.

In 2011, Applied Materials acquired Varian Semiconductor Equipment Associates Inc. for $4.9 billion.

The Santa Clara, California-based company’s shares rose 6.3% to $22.48 at close on Friday in New York. Shares have increased by 27% since the beginning of the year, well ahead of the 11% gain in the S&P 500 Information Technology Index.