NVLS Cuts FYQ3 Revenue View; Caution On Weakening PCs
By Tiernan Ray
Shares of chip equipment maker Novellus ( NVLS) are down 28 cents, or 1%, at $27.69 [EDIT: Ray added the following in an edit to his piece to reflect the pricing change] up 12 cents, or 0.4%, at $28.09 after the company this afternoon raised the lower end of its projected range for profit for its fiscal Q3 ending in September, but also cut its revenue estimate below consensus.
Q3 revenue is now seen in a range of $300 million to $320 million, down from a prior $300 million to $340 million range, while EPS is seen in a range of 65 cents to 75 cents, up from a prior range of 60 cents to 75 cents. Analysts on average have been modeling $322 million and 68 cents a share.
The company expects to maintain its gross margin at about 49% this quarter, and the upside in EPS is coming through tighter operating expense control.
On the call, CEO Rick Hill remarked that since the company’s Q2 call on July 12th, Novellus customers have “become more cautious” as a result of “persistent weakness in consumer PC demand in developed markets.”
Hill said tablets and smartphones remain two “robust” areas of the chip market. Overall, though, utilization rates for Novellus’s chip customers’ factories “remain below seasonal level,” he said, although it has risen slightly recently. DRAM prices are continuing to decline. NAND flash memory production remains a relative “bright spot.”
Hill thinks that greater level of caution means wafer fab equipment, the general metric used for referring to chip equipment sales, will come in at $30 billion to $32 billion this year. Any growth lost this year in chip equipment sales should turn up in 2012, said Hill, given that fundamental drivers are still in place for chip sales, including “cloud” computing, networking, and uses of NAND flash memory.
Asked whether equipment orders and shipments have bottomed, Hill indicated the answer is yes, but with qualifications:
To say I can’t see them getting worse is like encouraging them to get worse. But I think we are at a bottom and I think that the opportunity is on an upward trend, but it requires confidence and an ability for us to see long term stability the marketplace. [EDIT: My bolding here.] You guys know better than us the amount of capital that’s sitting on the sidelines and because of that and people watching the market daily whether it be in the United States, Europe, Japan, wherever, if they see their Balance Sheet going down, their confidence to withstand the future is always a question and there for, they start to pull in their spending patterns and I think until that can be stabilized, it’s going to be difficult to project what’s going to happen going forward and that’s just a gut feel for what we’re up against right now.
http://blogs.barrons.com/techtraderdaily/2011/08/31/nvls-slips-q3-revenue-view-weak/?mod=BOLBlog
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