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Technology Stocks : Novellus
NVLS 2.400+2.1%Jul 24 5:00 PM EST
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To: FJB who wrote (2330)8/3/1999 10:15:00 PM
From: A. Edwards  Read Replies (1) of 3813
 
Merrill reiterated 1-1 on NVLS, target $100:

Intel Decision on PVD Imminent

Merrill Lynch & Co.
3 August 1999
Mark F. FitzGerald, Vice President
Thomas R. Diffely, Industry Analyst
Reason for Report: New Technology

Investment Highlights:
· The selection of the copper barrier/seed PVD tool of record at Intel is imminent. The contenders are Applied Materials and Novellus Systems. We think that the odds are better than 50-50 that Novellus will win this bake-off or at least split the business.
· PVD is estimated to be a $1.2 billion market in 1999. AMAT dominates the segment with >80% market share. AMAT's Endura PVD tool is one of the most successful products in the company's history, perhaps the industry's history, in our view.
· A win at Intel by Novellus would be big news because it would go a long way to supporting street estimates that are now moving north of $3.00 in CY'00. In our own model we estimate that Novellus will sell about $30 million in PVD in CY'99 and $100 million in CY'00.
· Novellus System remains one of the least expensive names in the group. The company has a deep pipeline of new products above and beyond the new PVD system. We are re-iterating our $100 price objective.

Fundamental Highlights:
· Intel is abandoning its "copy exact" manufacturing strategy. Where ever possible the manufacturing group is trying to qualify two vendors in order to win the best pricing. A second PVD vendor at Intel would likely knock as much as $1 million off the $3-5 million average selling price of the Applied Materials system. We think that is reason enough for Intel to qualify Novellus assuming their tool is competitive.
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