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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (54181)	10/16/2001 3:11:27 AM
From: advocatedevil	Read Replies (1) \| Respond to of 70976

Pricing pressure is something to keep an eye on. I bolded a comment in the following brief that I believe is worth noting: 7:53PM Novellus Systems (NVLS) 30.30 -1.34: Chip equipment maker Novellus Systems reported its Q3 earnings results after the close, and the initial take is that investors aren't impressed. Having listened to the company's conference call, it is probably safe to say that investors are disappointed more by what they heard there than what they read in the press release. The latter, in fact, contained mostly positive elements. For instance, NVLS reported an in line profit of $0.24 per diluted share, net sales of $303.7 mln that were slightly ahead of consensus expectations, and shipments of $192.9 mln that weren't too far off the mark from a prior estimate of "just below $200 mln." With those headlines hitting the wires, it wasn't surprising to see NVLS trade higher initially in after hours action, yet that positive response was short-lived as the tide turned quickly in the wake of the added detail provided on the conference call. Specifically, it was unnerving to hear that Q3 bookings were $124 mln-- well below the worst case estimate of $160 mln made during the mid-quarter update in August. The tragic events of Sept. 11 were the main factor behind the shortfall as two big chunks of business were pushed into Q4. Unfortunately, it didn't sound as if business was on the verge of ramping up again, and two items, in particular, suggested as much. First, NVLS forecast Q4 bookings in the range of $125-$150 mln--a somewhat disappointing outlook in light of the fact that Q3 business got pushed into Q4. Secondly, there was an indirect admission that competitive pricing from Applied Materials (AMAT) in the deposition market had forced NVLS to respond aggressively to preserve its market share. Aside from that, NVLS's CEO later admitted that he has never seen a pricing environment as bad as this one during his tenure at the company. Nevertheless, aided by a reduction in operating expenses, NVLS expects to report a Q4 profit of $0.11 per share, which is in line with the current consensus estimate. That earnings forecast, and the company's belief that business can't remain as depressed as it is for much longer, have helped mitigate some of the selling pressure after hours. This latest report from NVLS, however, isn't the cure-all for what has been ailing the chip equipment sector as there is no clear sense yet as to exactly when demand will pick back up in meaningful fashion. NVLS thinks it could be soon, but in the absence of any real convincing data, there isn't much incentive at this juncture to buy its stock with much conviction.-- Patrick J. O'Hare, Briefing.com biz.yahoo.com AdvocateDevil