Applied Materials reported Q1 net income nearly tripled to $403 million, or $0.29/share, beating analysts' average estimates of $0.27 (Thomson) to $0.28 (Bloomberg), on a 23% rise in revenue to $2.28b, which missed analysts' estimates of $2.34b (Thomson) to $2.37b (Bloomberg). An optimistic outlook helped its shares gain 4.6% to $19.02 on volume of 3.6m shares in after-hours trading, after gaining 1.6% to close at $18.18 in normal trading. 
Applied was helped by strong demand from DRAM chip manufacturers, but was hurt by a "significant" drop of 81% (sequentially) in orders from flat-panel TV manufacturers. CEO Michael Splinter said he expects sustained strength in DRAM and also NAND flash memory orders, and sees a gradual improvement in orders from flat-panel makers. Overall orders in the current quarter, Q2, are forecast to rise 2% to 7%, with sales flat or rising 5%, and EPS between $0.27 to $0.28. A poll by Thomson shows analysts expected EPS of $0.27. Separately, Applied announced it will close a R&D facility in England and will record costs of $90m to $130m over the next four quarters.
Sources: Applied Materials F1Q07 (Qtr End 1/28/07) Earnings Call Transcript, Press releases [I, II], Bloomberg, MarketWatch, The Wall Street Journal
Commentary: Opportunity for Varian Semi: Applied Materials Shuts Ion Implant Business • Applied Materials to Report Earnings Today: Is the Chip Sector Headed for Memory Troubles? • Applied Materials: Market Considered Oversupplied Ahead of Earnings Report Tuesday
Stocks/ETFs to watch: Applied Materials (AMAT). Competitors: KLA-Tencor (KLAC), LAM Research (LRCX), Novellus Systems (NVLS). ETFs: Semiconductor HOLDRs (SMH), iShares Goldman Sachs Semiconductor (IGW), PowerShares Dynamic Semiconductors (PSI)
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