NEW YORK (CNN/Money) - Applied Materials, the largest maker of semiconductor equipment, reported fiscal first-quarter earnings Tuesday that missed forecasts on Wall Street.

The company also lowered sales and earnings targets for its second quarter, further confirmation that IT spending remains weak.

Applied Materials posted a net loss, including restructuring charges, of $66 million, or 4 cents a share. Excluding the charge, the company reported earnings of $6 million, or breakeven on a per-share basis. Wall Street analysts were expecting a profit of 2 cents a share, up from a penny a year ago, according to earnings tracking firm First Call.

Applied Materials also missed sales estimates in the quarter ended in January, reporting revenue of approximately $1.1 billion. The consensus revenue estimate was $1.2 billion. Applied Materials had sales of $1 billion a year ago.

During the company's conference call Tuesday, Applied Materials CFO Joseph Bronson said earnings for its fiscal second quarter would be in a range of 1 to 2 cents a share. Analysts were expecting earnings of 3 cents a share, unchanged from last year. Bronson also said sales would be higher than first-quarter sales of $1 billion but declined to be more specific. The current consensus estimate is $1.2 billion, also unchanged from last year.

Investors were already prepared for a disappointment, since Santa Clara, Calif-based Applied Materials warned last month orders in the first quarter would drop 35 percent sequentially, much worse than the company's initial projection of a 20 percent decline.

The company wound up reporting orders did indeed fall 35 percent from the fiscal first quarter of 2002, to $1 billion. For the second quarter, Bronson said he expected orders to be above the first-quarter levels of $1 billion but would not say by how much.

Applied Materials CEO and Chairman James C. Morgan said business continues to be tough. "Weakness in the global economy and in the demand for chips used in consumer and business technologies has caused a number of our customers to postpone capital expenditures," Morgan said in a written statement.

To that end, customers such as No. 1 semiconductor manufacturer Intel and chip foundries Taiwan Semiconductor and United Microelectronics recently announced they would probably spend less on equipment this year than they did last year.

"The food chain is a mess. A lot of their customers are in flux," says Alex Vallecillo, senior portfolio manager with National City Investment Management, which owns shares of Applied Materials in its Armada family of funds.

Morgan said that due to the cloudy near-term outlook, the company will continue to cut costs. As a result, Applied Materials will shut down its operations for two weeks during the current quarter, which ends in April.

However, there may be some glimmers of hope. Bronson said he expected capital spending industrywide would actually increase this year after three consecutive years of declines.

Some analysts say the worst is over for Applied Materials and other semiconductor equipment companies. Nikolay Tishchenko, an analyst with Fulcrum Global Partners, an independent research firm, points out that while Intel is getting a lot of headlines for its lower capital spending budget, Korea's Samsung Electronics is planning on doing exactly the opposite.

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Samsung, which is the second-largest spender on chip equipment behind Intel, announced last month it plans to spend $3.6 billion on chip equipment this year, up 90% from the $1.9 billion in capital expenditures last year.

Tishchenko says investors should not get too excited about Samsung's planned increase or Intel's expected cuts either because these plans are not set in stone.

"Everything depends on market conditions," says Tishchenko. "Market conditions are subject to change and with that, companies will change their capital spending budgets." Tishchenko does not own shares of Applied Materials and his firm has no investment banking relationship with the company.

Suresh Balaraman, an analyst with ThinkEquity Partners, also thinks the next few quarters should show improvement in orders and sales. "Booking at these levels are unsustainably low," says Balaraman. He does not own shares of Applied Materials and ThinkEquity has not performed investment banking for the company.

Shares of Applied Materials (AMAT: Research, Estimates) fell about 2.8 percent in after-hours trading after losing 11 cents, or about 1 percent, in regular trading Tuesday. The stock closed at $11.94, off 57 percent from its 52-week high.

But Vallecillo says the fact that Applied Materials said orders in this quarter should be at least $1 billion should soothe investors somewhat. "If the orders number was below $1 billion, that would spook people," he says.