ASML's results soared above expectations as its customers in the semiconductor sector ramped up investments, and the Dutch chip equipment maker forecast a further flood of orders in the fourth quarter.
Echoing strong earnings overnight from one of its main clients -- world No. 1 chip maker Intel -- that fuelled hopes of a tech sector recovery, ASML said on Wednesday that it registered bookings for 35 new machines in the third quarter worth a combined 777 million euros ($1.2 billion).
That beat average expectations of 637 million euros and the highest forecast of 716 million euros in a Reuters poll.
ASML astonished on all fronts. Results, order value as well as their outlook were above our estimates, ING analysts said. It's an ongoing success story.
Intel said late on Tuesday that demand for personal computers was recovering.
Those remarks bolstered expectations of a sector-wide upturn, as did speculation on Wednesday that German tech and engineering conglomerate Siemens -- a bellwether of industry for Europe's largest economy -- might raise its guidance, traders said.
Evidence of a broader upturn came from China on Wednesday, when the world's third largest economy reported surprisingly strong September trade figures, with imports falling far less steeply than expected.
On Thursday, global stockmarkets reached a 12-month peak and oil set a 2009 high.
ASML's order book is viewed as a barometer for the business prospects of Intel and other big chipmakers such as Taiwan Semiconductor Manufacturing, the world's largest contract manufacturer.
New orders in the quarter included 18 high-spec immersion machines, which allow manufacturers to produce chips with ever-finer structures.
ASML shares, which have gained almost 70 percent this year, rose 3.8 percent in early deals, hitting a 23-month high as one of the top gainers in the DJ Stoxx European technology index .SX8P. By 0834 GMT the shares had trimmed gains to 0.75 percent and were lagging the index, which was up 2 percent.
Analyst Victor Bareno at local broker SNS Securities said it believed ASML's current valuation already prices in a rebound to previous peak profits while Petercam's Eric de Graaf said end-demand for chips had not yet shown signs of fundamental improvement.
But ASML Chief Financial Officer Peter Wennink said on the company's web site that demand for its customers' products, such as PCs and mobile phones was stronger than we anticipated at the beginning of the year, and access to capital for its clients also had improved.
Global chip sales posted their sixth consecutive monthly increase in August, and analysts forecast September chip sales will likely rose more than 6 percent from August.
They cited chip orders ahead of the holidays as well as the upcoming release of Microsoft Corp's Windows 7 operating system as sales drivers.
Q4 LOOKING GOOD
ASML Chief Executive Eric Meurice said he expected the order intake in the fourth quarter to be at least of similar value to the third and that this would translate into significant sales growth versus third quarter levels.
This substantial order increase does not factor in a full worldwide economic recovery, which, if it materializes, could sustain the first half sales level into the second half of 2010, Meurice said.
ASML's third quarter net profit rose to 20 million euros, beating an average forecast of 16 million and compared with a loss of 104 million euros in the previous quarter. Revenue rose to 555 million euros from 277 million euros.
ASML, which competes with Japan's Nikon Corp and Canon Inc, said it expects fourth quarter net sales of around 550 million euros and gross margin of about 37 percent.
For a graphic showing ASML price performance in 2009, click here: link.reuters.com/zyf73f ($1=.6717 Euro)