The world's largest chip equipment maker, Applied Materials Inc , posted a quarterly loss as cost cuts failed to fully offset a steep drop in revenue, and its shares fell 2.5 percent.

Applied Materials, stung by a severe decline in sales for its core semiconductor manufacturing equipment, has moved aggressively into solar equipment to spur growth. But the solar market has also been pinched by the economic downturn.

The company said it now expects to slash a total of 2,300 jobs by the end of the fiscal year through October, up from the 2,000 it previously announced. It has so far eliminated 1,600 regular full-time employees, and over 300 temporary workers.

Caris & Co analyst Benedict Pang said Applied's report had few surprises, and said the company is facing challenges on two important parts of its business.

The No. 1 thing is still whether or not they can find more thin-film solar contracts ... and No. 2 is the consumer demand for semiconductors.

Applied Materials forecast a loss for the July quarter of 6 cents to 14 cents a share, with revenue flat to down 15 percent from the April quarter's $1.02 billion.

Wall Street was expecting a loss of 8 cents on revenue of around $930 million, according to Reuters Estimates.

Chief Executive Mike Splinter told Reuters in an interview that conditions in the silicon segment are getting better.

What we're seeing at the customer base is increasing utilization pretty much across the board ... We believe demand is improving primarily in China where the stimulus for consumer buying is having an impact.

Separately on Tuesday Intel, the world's biggest chip maker, said orders and billing patterns in the second quarter have so far been slightly better than expected.

In the energy and environmental solutions segment, which includes the solar business, the company expects revenue to fall at least 30 percent sequentially. Splinter said momentum in solar has slowed, because Spain dialed back its incentive program and it remains difficult to get financing to fund large projects.

Research group iSuppli expects revenue from photovoltaic solar installations to sink 40 percent this year

REVENUE OFF MORE THAN 50 PERCENT

Applied posted a net loss of $255.4 million, or 19 cents a share, in its fiscal second quarter ended April 26, compared with a year-ago net profit of $302.5 million, or 22 cents a share.

Excluding certain items, but including stock-based compensation expenses, the loss was 12 cents a share compared with analysts' average forecast for a loss of 10 cents a share, according to Reuters Estimates.

Revenue tumbled more than 50 percent to $1.02 billion -- a level not seen since 2002 -- but was higher than the average Wall Street estimate of $905.3 million.

New orders totaled $649 million. The order backlog at the end of the period was $3.16 billion, down from $4.05 billion at the end of the first quarter.

Shares in the Santa Clara, California-based company fell 2.5 percent to $11.19 in after-hours trade on Tuesday from their close of $11.48 on Nasdaq.

(Reporting by Gabriel Madway; Editing by Richard Chang, Tim Dobbyn and Leslie Gevirtz)

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