By Neha Alawadhi
(Reuters) - Chip gear maker Applied Materials <AMAT.O> said it expects foundry customers to hold back spending in the current quarter as they switch to making smaller chips.
Shares of the company, which develops, manufactures and sells a wide range of equipment for making integrated circuits, fell about 3 percent in extended trading on Thursday.
Demand for chips using the next-generation 20-nanometer (nm) process technology, which crams more computing power into smaller micro-circuits, is expected to rise in the second half of this year.
"We are seeing a near-term slowdown in investment by our foundry customers as they focus on ramping (production using) new capacity installed over the past two quarters," said Michael Splinter, Applied Materials' chief executive of more than 10 years.
Applied Materials president Gary Dickerson will replace Splinter as CEO on September 1.
The company said it expects current-quarter revenue to be little changed from the $1.98 billion it reported for the third quarter.
The company, whose customers include Samsung Electronics Co Ltd <005930.KS> and Taiwan Semiconductor Manufacturing Co Ltd <2330.TW>, forecast fourth-quarter adjusted earnings of 16-20 cents per share.
Analysts on average were expecting earnings of 21 cents per share on revenue of $2.14 billion, according to Thomson Reuters I/B/E/S.
Orders will remain "flattish" in the three months ending October after a decline in the third quarter as foundry customers switch to 20 nm process technology, RBC Capital Markets analyst Mahesh Sanganeria said in a pre-earnings note.
Applied Materials expects customer spending to pick up in the last three months of 2013, Splinter said on a conference call.
The company's net income fell to $168 million, or 14 cents per share, in the third quarter from $218 million, or 17 cents per share, a year earlier.
Excluding items, the company, which also provides manufacturing equipment and services for flat panel displays, solar photovoltaic and related industries, earned 18 cents per share.
Revenue fell 16 percent to $1.98 billion in the quarter ended July 28.
Analysts had expected earnings of 19 cents per share on revenue of $2.06 billion.
Applied Materials shares closed at $15.33 on the Nasdaq on Thursday.
(Reporting by Neha Alawadhi and Supantha Mukherjee in Bangalore; Editing by Joyjeet Das)