-KLA-Tencor quarterly outlook misses Street expectations

Reuters

By Noel Randewich

SAN FRANCISCO, Oct 24 (Reuters) - KLA-Tencor Corp forecast earnings and revenue for the current quarter that wereweaker than expected by Wall Street, saying foundry customerswere taking longer to validate and pay for newly delivered chipmanufacturing tools.

The company, whose products are used by chipmakers tomeasure the effectiveness of complicated manufacturing processesand reduce defects, said it expects an improvement in orders,but its stock fell in extended trade after it gave its earningsand revenue outlook on a conference call with analysts onThursday.

KLA-Tencor said it saw strong demand from contractmanufacturers, known as foundries, and memory chipmakersimplementing new technology while orders from logic chipcompanies declined as a proportion of its overall business.

Leading foundry TSMC has been preparing newcutting-edge manufacturing lines although it recently warned ofa fourth-quarter revenue slide as smartphone sales weaken.

Chipmaker Intel Corp, struggling with slower PCsales as consumers turn to tablets, last week trimmed its 2013capital spending plan for the third time in six months.

KLA-Tencor expects revenue in a range of $670 million to$730 million, Chief Executive Rick Wallace told analysts.Analysts expected revenue of $760 million for the currentquarter, which ends in December.

Executives on the call said some revenue recognition in thecurrent quarter would be delayed until the March quarter ascustomers complete "formal acceptance" of newly releasedproducts.

Many of the tools TSMC is buying for its new 20 nanometerproduction lines are newly designed and take longer than normalto install, test and validate, leading to delays in payments toKLA-Tencor, said Northland Capital Markets analyst Ben Pang.

"Even though the reason for their revenue guidance makessense, it's still delayed," Pang said, who has a neutral ratingon KLA-Tencor's shares.

The company estimated orders of $800 million to $950 millionin the current quarter, up from $790 million in the Septemberquarter and higher than some analysts had predicted. RBC analystMahesh Sanganeria had expected $820 million in orders for thecurrent quarter.

"We expect the strong demand environment to continue asmomentum for new technology development continues to strengthenacross multiple customers," Wallace said.

Fiscal first-quarter revenue was $658 million compared with$721 million a year earlier. Analysts, on average, wereexpecting first-quarter revenue of $657 million, according toThomson Reuters I/B/E/S.

KLA-Tencor reported net income of $111 million, or 66 centsa share, compared with $135 million, or 80 cents a share, in theyear-ago quarter.

Non-GAAP earnings per share were 68 cents in the firstquarter. Analysts had expected earnings per share of 66 centsfor the first quarter.

Wallace said he expected current-quarter non-GAAP earningsof 67 cents to 87 cents a share. Analysts had expected 96 cents.

Shares of KLA-Tencor fell 3.5 percent in extended trade afterclosing up 1.08 percent at $63.73.

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