Interview: applied materials & amat
>> applied materials said% first-quarter profit more than tripled and sales rose at the slowest pace in five quarters as chipmakers curbed expansion. net income increased to 17 cents a share. sales rose to $1.78 billion from $1.55 billion. applied materials or amat is the world’s largest maker of semiconductor producing equipment. our next guest has an overweight weighting on the stock. nikolay tishchenko joins us for reaction, an analyst with global crown capital in san francisco. good to have you with us, nikolay. amat says second-quarter orders may fall to as much as 10% from the first quarter, also expecting earnings per share of as much as 17 cents. what do you make of amat’s guidance?
>> first of all, the guidance at applied materials is better than anyone expected. even our expectations for the next fiscal quarter ending in april of 2005 was lower. we believe that the guidance is very bullish for applied materials and for the rest of capital equipment stocks. the names like kla-tencor, lam research, a.s.m. and others. the reason is simple. what applied materials told on the call, in other words, we are in the trough and further on, we have recovery of capital equipment industry and this is not a surprise at all because what we have here, the demonstration of economics of semiconductor manufacturing in large volume laying in favor of capital equipment stocks. the semiconductor industry has no other way than increase their spending on their capital equipment during 2005 and this is our forecast. we forecast that in 2005 capital spending will grow as opposed to some expectations that capital spending would be flat to down. this is bullish for applied materials and other players in capital equipment so we are confident with our rating of overweight in applied materials and others.
>> has it bottomed out this quarter?
>> no, but it’s likely that orders have bottomed in the first calendar quarter ending in march and it is likely that we’ll see recovery of the orders starting in the second quarter, calendar quarter of 2005.
>> so, overall, should we believe the chipmakers that say the slowdown in profits and earnings was only an inventory correction and temporary?
>> yes, it is. and there were some important signs. if you look during the inventory correction in the second half of 2004, average selling prices for semiconductor devices didn’t go down. they were actually up. this is a sign of health. the only caution that you have in your mind is how the end market will play out but so far, the outlook for the global economy is optimistic and this is the argument in favor of growth of demand of semiconductors, mostly in units and this will drive purchases of capital equipment by chipmakers.
>> how has splinter done in his attempts to broaden the company’s sources of revenue by increasing the service business?
>> applied materials is the single largest manufacturer in―of capital equipment. and it’s very difficult for applied materials to outgrow the industry. and the move into services business is a natural move for the company that wants to grow. applied materials is very good at―applied materials is very good in their applications and this is why they were able to grow by increasing their services business. it’s lower gross margin business but operating margin is very good. it’s approaching the systems growth margins.
>> do you see changes any time soon on the overweight rating on amat following today’s earnings and outlook?
>> no. we believe that the trend is up, talking about applied materials. and we believe that the industry will see growth of capital equipment market for the next two or three quarters. the outlook is actually bullish.
>> how strong will demand be for customers seeking to upgrade their production to machines using the newer 300 millimeter wafers?
>> the demand will be almost entirely driven by purchases of 300 millimeter tools and the reason for this is very simple. it’s the demand from economics of volume of semiconductors. you look at what is happening right now in the industry, the industry is significantly shifting the demand for 300 millimeter-capable tools and the reason for this is economical. if we believe that the end markets will remain healthy in 2005 and going further into 2006, chipmakers will have to buy 300 millimeter-capable tools to provide the i.c. unit output necessary for the end market and because of this, we believe that the outlook for applied materials and other capital equipment stocks is very good.
>> nikolay, good to speak with you, thanks for that. nikolay tishchenko of global crown capital in san francisco.% -coming up, sony is not only about play station games and movies. it also runs one of japan’s 10 biggest pension funds and you may be surprised where the fund manager is putting some of the billions.
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Listen Market briefing --- Cathy (slow)
Parkway --- Haslinda (slow)
>> welcome back. this is “live” in hong kong. i’m catherine yang. here are the headlines. japan releases its first-quarter g.d.p. in less than two hours. we’ll bring you the figures as they break as we continue our week-long focus on japan. applied materials first-quarter profit more than tripled as orders declined. applied materials said sales slowed as customers held back orders to clear stockpiles. b.h.p. billiton reports better-than-expected first-half profit with net income more than doubling with growing demand in china driving up prices of copper and iron ore. b.h.p. billiton’s first-half profit more than doubled to $2.8 billion. surging demand in china boosts prices for raw materials like copper and iron ore. we’ll go to stuart kelly, our stock reporter, for more from sydney. what reaction can we expect in the market from b.h.p. results?
>> as you said, b.h.p. billiton reported a short time ago, saying first-half profit more than doubled on surging demand for raw materials particularly from china. the result came in at $2.8 billion u.s. that beats analysts’ forecasts by 10% or so. also, the a.d.r.’s of b.h.p. billiton shares in new york rose about 1.9%, so it’s just two indication that’s shares may rise somewhat again today. however, there is another tad more interesting side of the coin. you may remember, on february 3, rio tinto group reported profit more or less the same as b.h.p.’s this morning. the shares have since fallen 2.3%, that’s rio’s shares, after a 22% year-long rally. at the time, merrill lynch did warn that some investors may take that opportunity to take some cash out of the stock. now, we’re pointing out that b.h.p. shares have risen about 45% in the past 12 months. so it begs the question whether investors will start to think the same there. catherine?
>> now, we’re also expecting profit reports from woodside petroleum. what’s. expected there?
>> woodside petroleum is australia’s second biggest oil and gas producer after b.h.p. billiton. it’s expected to report first-half profit at around about 11:30 a.m. sydney time. we’ll bring that to you then. but so far, analysts are expecting the company to say second-half profit rose 41% to $282 million u.s. because of record oil prices. also, an interesting development in the market this morning around boral, australia’s biggest building materials maker. it’s been one of the stock exchange’s biggest star performers in the past two years, rising 41% as the economy has surged. now, concerns of an interest rate rise have sparked a fall in the shares today. credit suisse started a buy on the shares, though. that’s all from me, catherine.
>> thank you. parkway holdings reports first-quarter profit after singapore stocks close today. the hospital may say 2004 hospital rose because of admissions and demands of specialized medical services. haslinda amin has a preview. what are analysts estimating?
>> good morning. those surveyed by thomson financial expect profit to rise to 29.5 million dollars from 20.4 a year earlier. parkway is benefiting from the accelerating economy as it recovers from the sars outbreak. singapore’s g.d.p. is projected to have grown 8.1% last year, the fastest pace in four years. still, parkway’s trying to attract more overseas patients amid a limited domestic market of four million. the healthcare provider is focusing on providing treatments for critical illnesses. it’s offering high-end services such as liver and bone marrow transplants at the singapore hospitals. cathy, it said recently that demand will rise as most people delayed getting medical treatment during the economic downturn and are now returning to hospitals for services. separately, the singapore government estimates an increase of a million foreign patients annually by 2012. analysts say parkway will benefit from the pickup. cathy?
>> the company is also expanding into the region, which includes china, india and thailand, among others. what are the prospects for the company? what are analysts saying?
>> it’s early to assess parkway’s overseas plans. some analysts say that the market has identified a new, not just to parkway, but to foreign healthcare companies in general. one analyst told me that, in the case of china, it already has its own established healthcare system so it will be difficult for parkway to penetrate into the market . for the next two to three years, businesses in singapore will still drive the company’s growth and expansion will be contributed by foreign patients, especially those from indonesia. the emergence of low-cost carriers in asia will encourage patients to the island for medical treatment. the analyst says the challenge is to be more competitive. hospitals in the region are increasingly offering similar services at lower prices. cathy?
>> thank you, haslinda. microsoft is planning to offer an internet browser that improves online security. the new version of the internet explorer aims to block so-called spy ware which can collect data from internet users.
>> it’s slowing down machines, causing pop-ups people don’t want, it’s compromising our privacy. this is a very serious problem. a lot of malicious code out there preying on these systems.
>> internet attacks and security breaches are causing users to switch to other products such as a browser by fire fox. microsoft plans to launch a new anti-virus program this year to compete with trend micro, mcafee and symantec.
>> we applaud microsoft’s security initiatives. they are very necessary. but in my opinion, not sufficient for large enterprise. they don’t offer across-platform heterogeneous solution and genetically they may be incapable of doing so.
>> microsoft has made changes in its online security plans in the past three months and in december picked japan’s trend micro to provide anti-virus services for hot mail and earlier this month, his microsoft bought sybari. up next, applied materials said first-quarter profit more than tripled but sales growth slowed. we’ll speak with an analyst in san francisco.
