SAN JOSE, Calif. Shares fell at Novellus Systems Inc. following a disappointing forecast and order delays for the chip-equipment vendor.
Novellus’ share price fell by up to 3.6 percent in after-hours trading, shortly after it released its updated forecast on Tuesday (August 30). The stock rebounded and hit $26.75 on Wednesday (August 31) afternoon, down 2.73 percent from Tuesday.
As reported, Novellus (San Jose) projected its third-quarter orders would range from $285-to-$290 million, compared to its previous forecast of $280-to-$310 million set in July. The new bookings forecast is down 6-to-8 percent sequentially due to some orders being pushed out from the month of September to October.
The company is now projecting earnings of $0.20-to-$0.21 in the quarter, below the $0.22 figure that analysts had expected. It forecasts revenue of $320 million, below the average analyst forecast of $323.2 million (see August 30 story).
The chip-equipment vendor was originally expected to raise its Q3 order outlook despite a setback at Toshiba Corp. Novellus reportedly lost a PVD tool order to Applied at Toshiba (see August 29 story).
Analysts were disappointed with Novellus’ new forecast. The company blamed the forecast on economic factors and order push outs from the current quarter to the fourth period.
“Earnings are likely to be impacted due to higher-than-expected contribution from PVD tools during the quarter, which tend to have margins that are below the corporate average,” said Avinash Kant, who watches the fab-tool industry for investment banking firm Adams Harkness Inc., in a report.
“Management said some order push outs into Q4 were responsible for orders likely coming in at the lower half of the previous guidance,” Kant said. “We would point out that while order push outs from the month of September into October may take away some from the current quarter, this clearly increases the chance that Q4 will be a sequentially up quarter for orders.”
During a conference call on Tuesday, Novellus CEO Rick Hill's “overall tone was downbeat on macro economic sentiments, which he believed would eventually impact current consumer spending and ultimately chip equipment investments,” said analyst Bill Ong of American Technology Research Inc., in a report.
“Novellus stated that Japanese spending remains firm, thus the push-out, which we believe is a combination of Korean memory makers and Taiwanese foundries, likely UMC delayed ordering,” Ong said. “Novellus' bookings outlook also appears to be considerably weaker than other major fab tool makers.”
In comparison, KLA-Tencor Corp. expects a sequentially flat or plus or minus 10 percent change in orders, while Lam Research Corp. projects a sequentially flat-to-down 5 percent September quarter. Applied Materials Inc. has a more upbeat outlook and guidance is for up 5-to-10 percent in its October quarter, he said.
Overall, the sky is not falling at Novellus, added Stuart Muter, an analyst with RBC Capital Markets. “The street was too optimistic about Novellus' Q3 order book, based on a simplistic extrapolation of Applied’s order guidance, which was not appropriate,” Muter said in a report.
“We believe that the large drop in orders from Japan from Q2 to Q3 was simply too much to be offset by the improvement in orders from Taiwan for Novellus to match Applied's order guidance,” he said. “Investors should not panic and we believe that Q4 orders will be up for Novellus.”