KLA-Tencor (NASDAQ:KLAC) released its first-quarter earnings report after the market closed yesterday, beating analysts' estimates for both earnings and revenue. Revenue was $484 million, and earnings came in at $77 million, or 38 cents per diluted share (factoring in a charge of 12 cents per share for stock options). Analysts were estimating earnings of 49 cents, excluding stock option expenses, so KLA came in a penny higher than expected. Still, the stock is down about 4% today, because the company issued disappointing guidance for upcoming second-quarter revenues.

First-quarter sales fell 6.7% year over year, while earnings (again, excluding stock option expenses) fell by almost 14%. The weaker results this year weren't surprising, given semiconductor equipment companies' downturn throughout the year.

So when will things pick up? Not next quarter, apparently. KLA expects revenue to contract to between $455 million and $470 million, with half the revenue coming from memory-chip manufacturers. Normally, memory chips would total about a third of revenues, so demand for the company's other products must be weak. One can only hope that demand from other types of semiconductor manufacturers will come back to life soon.

Capacity utilization rates at the manufacturing plants of some semi companies are picking up, although it seems to be a bit of a mixed bag. Contract manufacturers like Celestica (NYSE:CLS), FlextronicsInternational (NASDAQ:FLEX), and Solectron (NYSE:SLR) are still struggling with disappointing demand for their services. On the other hand, Taiwan Semiconductor (NYSE:TSM) reported utilization rates of 96% for its just-completed quarter, with the rate expected to approach 100% in the current quarter.

If end-customer demand holds up, Taiwan Semiconductor probably will need to add manufacturing capacity by buying new equipment from KLA and others. Should Taiwan Semi's success indicate an industrywide pickup, other chip makers may also need to order new equipment.

I'm hoping that KLA's near-term difficulties will lower its share price into value territory. After all, demand will pick up someday, and this company has the financial strength to weather a downturn. Furthermore, KLA has a very strong competitive position in process control. As chip sizes continue to shrink, identifying and removing chip-killing defects becomes increasingly challenging, which ensures that companies will need to invest in KLA's products to remain competitive.

Still, there's no way to know when an upswing will arrive. I'm holding off on KLA for now.

Semirelated Foolishness:

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Fool contributor Dan Bloom owns shares of Solectron but not in any other companies mentioned. The Fool has a disclosure policy.