NVLS ($29-$24)PE=32 Cap=3.45Bil Turns Cautious With Lower 3rd-Quarter Orders Outlook
By: Mark Boslet
Dow Jones Newswires
PALO ALTO , Calif. -- Citing a renewed caution among chip companies and their customers, Novellus Systems (NasdaqNM: NVLS - News) Inc. offered a downbeat outlook for third- quarter growth, even after matching second-quarter expectations.
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The maker of semiconductor-production equipment said it expected third-quarter orders would fall 9% from the second quarter's $275.9 million, or to $250 million. Many investors on Wall Street had expected at least 5% growth and punished Novellus stock by pushing it down 7.6% to $27.30 in after-hours trading. The shares had slumped 24 cents, or 0.8%, in the regular session to $ 29.55.
"Some of our customers' customers are pulling in their horns," Novellus Chief Executive Richard Hill told analysts on a conference call. "I think there is just a much greater amount of caution going forward."
He said the dramatic fall in the stock market in recent weeks has made raising capital more difficult for corporations, whether for expanding chip production capacity or spending on information technology, and thus buying finished semiconductors.
"The general trend of the past few weeks has been slowing" business conditions, he said. "Obviously, we need leadership from the government to keep from going down a spiral."
For the second quarter, Novellus posted net income of $12 million, or eight cents a share, down 80% from $59.2 million, or 40 cents, a year earlier. The results were up from the first quarter and matched analysts' expectations, which Novellus set on May 28 when it lifted its outlook for the quarter.
Revenue came in at $222 million, down 41% from $367.9 million in the same quarter last year.
Mr. Hill said he expects earnings in the third quarter will be two cents a share, including a $17.7 million charge, and 10 cents without the charge. Revenue is to be $250 million. Wall Street had expected earnings before charges of 15 cents and $257 million in revenue.
Still, the real shock to investors was the orders number as it better forecasts future business trends in the highly cyclical semiconductor-equipment industry. Many have been hoping for signs of a coming rebound and have held the stocks of equipment suppliers at elevated price-to-earnings ratios anticipating a pickup in business.
Mr. Hill said so far he has seen only two "push-outs," or project delays, as a result of the more cautious business climate. Both were for chip plants making use of aluminum chip-coating procedures, an older technology. More up-to-date plants use copper, and these projects aren't slowing down, he said.
Mr. Hill added that the company's cash and short-term securities fell in the quarter by 7.6% to $1.8 billion because it completed a new facility in Tualatin, Ore. The company pledged the securities against a synthetic lease on the building.
-By Mark Boslet, Dow Jones Newswires, 650-496-1366; mark.boslet@dowjones.com |
