Applied Materials Inc , the world's largest producer of chip-making gear, said it would at least break even this quarter, thanks to new orders and deep cost cuts, sending its shares up almost 4 percent.

The company posted sharply narrower losses in the third fiscal quarter on Tuesday, and forecast earnings per share of zero to 4 cents in the current quarter.

It has posted three consecutive quarters of losses.

But Applied, whose competitors include closest rival Tokyo Electron Ltd <8035.T> and KLA Tencor Corp , also endured a steep fall in new orders for solar gear in the third quarter, boding ill for that closely monitored business.

Shares of the Santa Clara, California-based company rose 3.8 percent in after-hours trading to $13.72, after closing down 1.86 percent at $13.22 on Nasdaq.

Applied Materials said revenue fell 38.9 percent in the fiscal third quarter ended July 26 to $1.13 billion from $1.85 billion a year ago, as the global IT spending downturn and a glut in solar materials continued to take their toll.

But that still surpassed expectations for $953.06 million, according to Reuters Estimates.

It also reported a net loss in the third quarter ended July 26 of $55 million, or 4 cents a share, versus a profit of $164.77 million, or 12 cents a share, a year earlier.

Excluding certain items, the company reported a non-GAAP loss of $2 million -- near break-even on a per-share basis -- versus a $228 million or 17 cent-per-share profit a year ago.

But including the impact of equity-based compensation, Applied Materials had a loss of 3 cents per share, bettering expectations for an 8 cent-per-share loss according to Reuters Estimates.


Overall, new orders for the quarter totaled $1.07 billion -- a quarter of which came from China and southeast Asia -- versus $649 million in the fiscal second quarter.

But sales from its key environmental division fell as expected.

Investors scrutinize the solar business for signs of industry weakness. Applied Materials itself is relying on its solar equipment arm to bolster sales and growth as its traditional chip business falters.

Net sales in the third quarter from its energy and environmental solutions division -- which includes Applied's solar unit -- plummeted 37 percent from the previous quarter to $224 million.

Applied Materials had forecast a decline of at least 30 percent in its energy and environmental solutions business in the third quarter from the second quarter.

New orders held steady at $136 million in the third quarter, compared with $141 million in the second quarter.

On Monday, research firm iSuppli said nearly half of all solar panels made in 2009 will not be sold, a massive glut it expects to persist until 2012.

The oversupply, triggered by Spain's decision to cut subsidies, is also one of the main reasons Applied in April said it expected full-year revenue from photovoltaic solar installations to plummet 40 percent from the year-ago period, to $18.2 billion.

(Reporting by Clare Baldwin; Editing by Edwin Chan and Richard Chang)