Things still aren't looking up for

Novellus

(NVLS)

.

The chip-equipment maker briefed the Street on its performance at the midpoint of the quarter, nudging several key expectations down and lamenting the continuing lethargy of the sector. On Oct. 15, Novellus projected fourth- quarter earnings per share of 11 cents and $160 million in shipments.

After market Thursday, Novellus stuck with the 11 cents-a-share profit and bumped up its shipment forecast to $165 million. However, the business outlook isn't rosy, as the company was forced to trim its expected fourth-quarter bookings from a previous estimate between $125 million and $150 million to a lowered range of $100 million to $125 million.

Novellus attributed the drop in bookings to the sober decision to take certain orders off the books rather than continually push them out. "We've seen some bottoming and reports of bottoming from our customers' customers," conveyed CEO Rick Hill. But he could not say the worst was behind the company.

Despite the continued attempts of chip-market enthusiasts to call the bottom of a markedly brutal cycle, Novellus prepped the Street for worse news. Based on current shipment and revenue levels, Novellus projected for the first time a loss in the first quarter of 2002, without giving specifics. Thomson Financial/First Call and Multex reports pegged analyst consensus for the first quarter of 2002 at 5 cents and 6 cents-a-share profit, respectively. Both report a 10 cents-a-share consensus projection for fourth quarter 2001 earnings, a number Novellus expects to beat by trimming executive bonuses and profit-sharing plans.

"This is one of the toughest businesses in the world. The cycles are so hard. It's one thing when the business slows 10%," said analyst Bryon Walker of UBS Warburg, who has no banking relationship with the company. "I care little about the loss. I'd rather they stay healthy with key people so they remain sound in the upturn."

Hill argued that when fab utilization levels get back to the 80% to 85% range -- he estimates they are at 70% currently -- customer orders will begin to return.