Google sees slower growth
Search engine warns increased competition could see revenue gains at a slower pace in 4Q, future.
November 18, 2004: 7:21 AM EST
NEW YORK (CNN/Money) - Search engine Google Inc. warned Thursday that it sees slower growth ahead.
The company, which has seen share prices more than double since its August initial public offering, said in a filing with the Securities and Exchange Commission that while it believes revenue will continue to grow, the growth rate will not keep accelerating as it has been.
Shares of Google (Research) lost $5.50, or about 3 percent, to $167 in pre-market trading on Inet following the filing.
"Our revenue growth rate has generally declined, and we expect it will continue to do so as a result of increasing competition and the inevitable decline in growth rates as our revenues increase to higher levels," said the company's filing.
"Consequently, we believe that our revenue growth rate from the second quarter to the third quarter of 2004 may not be sustainable into the fourth quarter of this year and in future periods. "
The company's filing also said it was offering to repurchase 23.4 million shares of stocks that had been held by current and former employees and contractors, as well as 5.2 million unexercised options.
That share repurchase offer is more than the 19.6 million shares it sold in its IPO. At current market prices the company will not have to repurchase any of the shares, since its offering only the price paid for the shares, between 30 cents and $80 a share.
But the offer stays open through December, so if the shares were to have a sharp fall in the next six weeks, the company could face some additional share repurchases.
Applied Materials warns on 1Q
Chip equipment maker sees a 35% drop in orders, says sales and profit will fall shy of estimates.
November 18, 2004: 6:17 AM EST
SAN FRANCISCO (Reuters) - Applied Materials Inc., the largest producer of chip-making equipment, said Wednesday that demand for advanced manufacturing tools pushed quarterly profit and sales higher, but warned that chip oversupply would slow sales and orders in the current quarter.
The Santa Clara, Calif.-based company said new orders would fall an estimated 35 percent in the current quarter from the recently concluded fourth quarter, with sales and profit both targeted below analyst expectations.
Applied Materials (Research) shares fell to $16.81 in after-hours trading from a close of $17.34 on Nasdaq.
The fall-off in business was primarily due to a sharp decline in sales of older generation manufacturing equipment as chip makers pause factory expansion plans, Applied Materials chief executive Michael Splinter said on a conference call.
Surplus chip stockpiles reached above $1 billion in the third quarter of the year, raising concerns of overproduction in the chip industry..
Still, Splinter said the second half of next year should be better. "The second half should still be reasonable and strong," Splinter said.
The stock, which has lost about a quarter of its value this year, is priced at a level consistent with a gloomy first half of 2005, and could rise if Applied's expectations for a stronger second half turn out to be true, said Suresh Balaraman, an analyst with ThinkEquity Partners.
"The stock is probably factoring ... a pretty horrible next six months," Balaraman said. "Once you start to look past April, I think there's a lot of upside to the stock."
Earnings in the fiscal fourth quarter ended Oct. 31 were $455 million, or 27 cents a share, compared to a year-earlier profit of $15.5 million, or 1 cent a share. Net sales rose to $2.20 billion from $1.22 billion in the same quarter last year. The results were in line with analyst estimates.
The results included a 2-cent per-share gain from special items, which included a favorable tax rate adjustment and a litigation settlement.
New orders, an indicator of future revenue, rose 7 percent from the fiscal third quarter to $2.62 billion, ahead of the company's target of 5 percent.
Applied's customers became more cautious over the last three months in response to swelling inventories of unsold chips, Splinter said. He added that the company was able to gain market share, and that chip makers would still make big investments in advanced chip-making tools.
Analysts on average had been expecting fourth-quarter earnings of 26 cents a share on net sales of $2.29 billion, according to Reuters Estimates.
For the first quarter, analysts were targeting sales of $2.14 billion, down 3 percent, and earnings of 23 cents a share.
Wary of dividend
Splinter said the company was not inclined to start paying a dividend, because of the inherent volatility of the semiconductor manufacturing equipment industry.
"With a dividend, it almost gets to be an entitlement and that once you start, you have to continue doing the dividend on and on and on, and so that makes it become more difficult for us to decide to do," Splinter said, adding that the company prefers to use excess cash to buy back stock.
Splinter also said he expects the company to outperform the overall semiconductor manufacturing equipment industry in 2005, which he said is expected to shrink as much as 10 percent.
"Wherever the market ends up, we'll outperform it," Splinter said. "We have been taking share from our competitors during this last year and the products that we've introduced are going to take more share."
Nonetheless, the company plans to keep costs low, through cutting temporary jobs and bonuses and short-term office shutdowns, Splinter said. There are no plans for layoffs of permanent employees, he said.
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