By Noel Randewich
SAN FRANCISCO (Reuters) - Applied Materials forecast current-quarter revenue below expectations and its chief executive hinted the top chip-gear maker could shed poorly performing non-core businesses.
Applied Materials had warned of a slowdown in its chip equipment business, and in its report it also said its small solar panel equipment group and display group saw their sales fall during the quarter.
In July, the company slashed its full-year targets due to a sudden decline in orders from foundries.
On Wednesday, the Santa Clara, California, company said it expects current, fourth-quarter revenue to be 25 percent to 40 percent lower than in the third quarter, a drop that surprised some analysts.
But Applied Materials is also struggling to sell equipment to manufacturers in the sluggish television and solar panel industries.
"We all understand the industry is under pressure. Their outlook is worse because of not only the chip environment but their display and solar businesses," said Patrick Ho, an analyst at Stifel Nicolaus.
On a conference call with analysts, Chief Executive Mike Splinter said that Gary Dickerson, recently appointed president of Applied Materials, was reviewing the effectiveness of the company's R&D investments in its different businesses.
Asked by an analyst whether Applied Materials is prepared to exit underperforming non-core businesses, Splinter said, "Everything is on the table."
Dickerson was formerly head of Varian Semiconductor Equipment Associates, acquired by Applied Materials for $4.9 billion in 2011, and is a respected executive in the chip gear industry.
Applied Materials posted fiscal third-quarter revenue of $2.34 billion, down from $2.79 billion in the year-ago period.
The midpoint of the range of Applied Materials' revenue forecast for the current quarter is about $1.58 billion.
Analysts had expected third-quarter revenue of $2.32 billion and fourth-quarter revenue of $1.94 billion, according to Thomson Reuters I/B/E/S.
"From European austerity to slowing growth in China and the U.S., economic uncertainty is weighing on top of a seasonal pullback to reduce weaker near-term demand. And our customers are choosing to delay their investments until they see stronger demand signals," Splinter said.
He said business would likely bottom out in the current quarter and then begin to improve as foundries resume investments in equipment to manufacture cutting-edge chips for smartphones and tablets.
Applied Materials said net income for the quarter ended in July was $218 million, or 17 cents a share, versus $476 million, or 36 cents a share, in the same quarter last year.
Non-GAAP earnings per share in the third quarter were 24 cents. Analysts on average expected 22 cents.
The company said non-GAAP earnings per share in the current quarter would be between zero and 6 cents.
Applied Material's stock fell 3.30 percent to $11.41 after closing up 0.77 percent on Nasdaq.
(Reporting by Noel Randewich; Editing by Gary Hill and Phil Berlowitz)