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To: FJB who wrote (52731)	7/11/2011 7:09:00 PM
From: Sam	2 Recommendations Respond to of 95622

Here is more on NVLS from Dow Jones, as well as some comments on Microchip. I will listen to the call or read the transcript when they get it up later on tonight. From what I can see, Hill is a straight shooter. But that is the first time I've heard of "weak" smartphone sales, although I am sure that with Japanese demand down and weak European sales, they have to be affected to some degree. UPDATE: Novellus, Microchip Set Negative Tone To Chip Earnings --Novellus reports in-line second-quarter results but projects weaker-than- expected third-quarter results, saying customers--especially foundries--are more cautious --Microchip also provides disappointing guidance for the June quarter, citing broad-based weakness in its businesses --Reports come as big semiconductor companies are expected to report quarterly results later this month By Shara Tibken Of DOW JONES NEWSWIRES nasdaq.com NEW YORK (Dow Jones)--Novellus Systems Inc. (NVLS) and Microchip Technology Inc. (MCHP) provided weak guidance Monday, warning that customers are feeling more cautious and raising concerns about the semiconductor industry's second half of 2011. The comments come early in the earnings season, with larger companies--such as Intel Corp. (INTC), Texas Instruments Inc. (TXN) and Qualcomm Inc. (QCOM)-- expected to post results in the coming weeks. Nonetheless, the comments build on the weakness seen over the past several weeks in the semiconductor industry, which experienced booming growth following the recession. Consumer spending on PCs has remained soft, some large handset makers have been struggling and macroeconomic worries have hurt demand. As a result, analysts have been lowering growth forecasts, particularly for PC sales, and chip stocks have taken a hit. Novellus, which makes tools used in semiconductor manufacturing, on Monday warned for the second quarter in a row that its customers, the companies that actually manufacture processors, are pushing out orders, worried about macroeconomic conditions despite end-market demand "that doesn't seem that bad." "Clearly there is a burgeoning worldwide feeling of caution on economic expansion," Novellus Chairman and Chief Executive Richard Hill said during a conference call. "I see executives' moods on investments deteriorating instead of getting more confident...There are things going on around us tending to make more and more of us pessimistic rather than optimistic, and that's not a good sign." As a result, he forecast third-quarter earnings below analysts' expectations, sending shares down 5.7% to $33.75 after hours. Meanwhile, Microchip--which provides microcontrollers and analog semiconductors that change sound and light into digital signals--cut its view for first-quarter results. It said it saw "broad-based weakness" in the June quarter because of lower automotive production activities, as well as consumer softness amid poorer economic conditions. Gleacher analyst Doug Freedman, who called Microchip "very broad-based," said he expects to hear similar commentary from the rest of the semiconductor industry. Microchip's shares tumbled 7.3% to $34.75 after hours. Other chip companies with automotive and analog exposure also declined, including Texas Instruments, down 1.7% at $31.90, and Analog Devices Inc. (ADI), down 2.7% at $37.52. In general, chip stocks have been under pressure this year. The Philadelphia Semiconductor Index is down 14% from its high in February, worse than the 1.8% decline seen in the broader S&P 500 index. Novellus reported earnings of $64.7 million, or 79 cents a share, up from year-ago earnings of $63.3 million, or 66 cents a share, a year earlier. Revenue rose 9%, to $350.2 million. In May, the company raised the bottom end of its per-share earnings guidance by 5 cents to a new range of 70 cents to 80 cents, and said it still saw revenue between $330 million and $372 million. Gross margin widened to 50.8% from 48.8%. Bookings, a closely watched indicator of future business, decreased 25% from the first quarter. Shipments slid 4.7% from the preceding quarter. Novellus forecast third-quarter per-share earnings of 60 cents to 75 cents on revenue of $300 million to $340 million. Analysts projected earnings of 86 cents a share on revenue of $360 million. Gross margin is expected to be 49%, plus or minus 1%; the Street had forecast 49.9%. Hill said he believed the third quarter represents a trough for foundries and that he doesn't expect delayed orders to be canceled. "I'm surprised Q3 could be as low as we're seeing it now," Hill said. "A month ago, I couldn't have imagined Q3 below Q2...The only way to characterize the sense of the foundries is uncertainty." -By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

To: FJB who wrote (52731)	7/11/2011 7:17:05 PM
From: Sam	2 Recommendations Respond to of 95622

Here is a continuation of that quote, which is more bullish than the part you quoted: He [Hill] also noted that chip factory utilization rates have declined to slightly below-seasonal levels, and that contract prices for both DRAM and NAND memory chips are expected to drop in Q3, due to weak PC and smartphone demand. “With a weaker near-term outlook, growth in our industry could trend toward the midpoint of our forecasted range of 10% to 20% for 2011. So while we have grown more cautious for the current quarter, we are still confident that the long-term drivers of semiconductor equipment business remain intact. To the extent 2011 sees lower year-over-year growth than originally forecasted, we would expect to see that demand pushed into 2012, because of the fundamental drivers, from the standpoint of expansion of network services, the cloud and new applications for NAND flash memory in PCs will continue to evolve and drive the industry.” blogs.forbes.com

To: FJB who wrote (52731)	7/11/2011 8:54:51 PM
From: Sam	1 Recommendation Read Replies (1) \| Respond to of 95622

I just listened to the Novellus call, and encourage everyone who reads this board to listen to it (available on their website). Hill was his usual frank self. When the transcript goes up, I'll post some excerpts from it, although really, there is so much in it that the excerpts will probably be pretty lengthy--I do it as much for my own recall and for future reference as anything else. At any rate, the parts I would emphasize are: he is still bullish on the sector longer term, and thinks that the caution on the part of his customers is very short term and more related to the macro economy than to the semiconductor sector itself. The pushouts that he is seeing are on the foundry side of his business, and NAND is the "most robust" of the subsectors within the semiconductor world.