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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (11319)	8/29/2003 11:53:29 AM
From: The Ox	Read Replies (2) \| Respond to of 95663

excerpt from SSB on NVLS writeoff: Inventory Writedown due to Slower Anticipated Ramp. As previously disclosed, included in the current quarter's results will be a one time charge of $96M (or $63M after taxes) for retroactive depreciation. However, Novellus also indicated that it would be taking additional charges of approximately $70M comprised of the following: * Majority related to an inventory write down of 200mm products. * Write down of $5M related to investment in a joint development program for advanced cleaning. The company's decision to write down the 200mm inventory was driven by two factors, 1) slower expected 200mm demand amidst a muted recovery overall and 2) the company's transition to a global service infrastructure where less inventory is required. We note that Novellus has only taken a previous write down of $7.1M in 3Q01(Sep) related to inventory. With respect to the 200mm inventory, Novellus indicated its surprise at the rate of 300mm activity, which has become the predominant portion of its business. We note that Applied Materials has seen similar trends in its business, where 300mm accounted for 60% of its orders in its July quarter. The company noted that as technological hurdles have been overcome, the relative transition to 300mm is accelerating. Management further noted that an effect of this is an accelerated increase in effective capacity (recall that the area of a 300mm wafer is 2.25x that of a 200mm wafer) with less incremental increase in revenue in this period of depressed pricing. Additionally, difficulties in developing designs for leading edge devices (90nm and below) are causing chipmakers to delay further leading edge expansion. While other equipment companies are expecting a comparable ramp, we note that Novellus has taken a less positive spin on this improvement that we expect from other equipment companies given our recent discussions.