Novellus ups orders forecast, cites broad growth
Monday November 24, 5:59 pm ET
By Daniel Sorid
(Adds investor comment, details on geographic trends, updates stock price, adds byline)
SAN FRANCISCO, Nov 24 (Reuters) - Novellus Systems Inc., a maker of tools used to produce microchips, on Monday boosted its forecast for equipment orders and said profit would be at the high end of its previous guidance, supporting expectations for a strong turnaround in the semiconductor industry.
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In a scheduled mid-quarter update, Novellus (NasdaqNM:NVLS - News) Chairman and Chief Executive Richard Hill said the company expected orders, an indicator of future revenue, to rise 25 percent to $275 million from third-quarter levels of $220 million. Previously, the company had forecast growth of 5 percent to 10 percent.
Hill also said the company now expected to earn 6 cents a share in the quarter on revenue of $220 million, at the high end of its earlier target.
"Business levels overall continue to improve," Hill said. "It doesn't feel like a head fake at this particular point in time. It's much more broad-based."
Novellus shares rose $1.00, or 2.4 percent, to $43.54 on Nasdaq on Monday. In after-hours trading following the update, the stock rose another 1.3 percent to $44.11.
BRACING FOR RECOVERY
Returning from its worst downturn on record, the semiconductor equipment industry has to date shown relatively mild growth in orders, but investors have driven up the price of the stocks in recent months amid expectations for a strong turnaround. As recently as June, Novellus shares could be bought for under $30.
Analysts who cover the $20 billion semiconductor equipment industry had expected Novellus to lift its order forecast for the quarter.
The forecast nevertheless confirmed expectations that the semiconductor and semiconductor equipment industries, which tend to move in sharp business cycles spanning several years, have clearly turned the corner on their worst downturn on record, said Graham Tanaka, president of Tanaka Capital Management, which owns more than 200,000 shares of Novellus.
"It's just one more data point that tells us that we're beginning what we believe is the next multiyear bull market in the stock market and the multiyear recovery in semiconductors," Tanaka said.
Hill described the growth in orders as geographically broad.
Orders from Japanese chip makers were growing strongly, he said, and orders from China, which is seen as a future power center for chip makers, were accelerating.
The U.S. chip industry, which is dominated by Intel Corp. (NasdaqNM:INTC - News), were growing capital investment but at a slower rate, while Europe, which has been one of the weakest regions, was starting to showing signs of improvement, he said.
The world's largest maker of microchip-making equipment, Applied Materials Inc. (NasdaqNM:AMAT - News), said earlier this month that orders grew 21 percent in its last quarter, and predicted another 20 percent rise in new orders in its current quarter. |
