Novellus Posts Slowest Growth in a Year

Chip manufacturer Novellus reported 8.7% growth in Q2 net income, its smallest gain in four quarters, as the industry absorbed excess capacity amid an order slowdown. Profit came in at $57.3 million ($0.45/share) versus $52.7 million ($0.42) in the year-ago quarter, slightly ahead of analyst expectations of $0.43. Revenue was flat at $416.3 million, ahead of Street forecasts of $412.6 million. Q2 bookings dropped 19% to $332.2 million from Q1, and CEO Richard Hill forecasts a similar figure in Q3, "plus or minus 5%." Shipments came in at $436.4 million, up over 12% from Q1. "Bookings and shipments have come in at the low end of our guidance as some absorption of excess capacity is taking place," said Hill. He added that he expects the chip-equipment industry's "pause" in orders to continue for another one or two quarters. The company said last month it is taking steps to manage the decline in demand, including shutdowns and executive pay cuts. Novellus shares gained 1.8% to $29.69 in regular trading Monday and added another 1% to $30.00 after hours.

Sources: Press release, Novellus Q2 2007 Earnings Call Transcript, Bloomberg, TheStreet.com, Reuters
Commentary: Bearish on Semi Equipment Stocks With High Exposure to DRAM Capex • Novellus Lowers Order Guidance As Expected • Semi Equipment Order Downturn Unlikely To Be Just One Month
Stocks/ETFs to watch: Novellus Systems, Inc. (NVLS). Competitors: Applied Materials Inc. (AMAT), Semitool Inc. (SMTL), ASM International (ASMI). ETFs: HOLDRS Semiconductors (SMH), iShares Goldman Sachs Semiconductor Index Fund (IGW), PowerShares Dynamic Semiconductor (PSI)

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