All's not well that ends. Chip-equipment maker

Novellus

(NVLS)

saw its revenues dry up in 2001, and things are expected to get worse before they get better this year.

The chip-equipment sector suffered in 2001 as its customers' sales plummeted and idle manufacturing facilities ravaged chip companies' bottom lines. The chip business relating to PCs and servers is picking up slightly, but the communications and networking chip business still stinks. And as investors saw last week when

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slashed its capital expenditure plan from $7.3 billion to $5.5 billion, chip companies may expect sales improvement in 2002, but that doesn't mean they'll be spending big bucks on equipment anytime soon.

Novellus finished its fourth quarter of 2001 with $200 million in revenue, missing Street expectations of $203 million, as gathered by Multex.com, but reporting 12 cents a share in profit, beating forecasts by a penny. Novellus' fourth quarter represented a 53% decline in sales from the same quarter of 2000, and an excruciating 84% contraction in profits.

"I wouldn't say I'm calling a bottom," CEO Rick Hill said in a conference call Tuesday. He told the Street not to expect gross margin improvement in the next two quarters. But he did show some excitement about successful customers that "want to accelerate some shipments. That indicates they're anticipating an uptick."

On Nov. 29, Novellus trimmed $25 million from its bookings forecast, leaving it at $100 million to $125 million. In November, the company was on track for 11 cents a share in profit and $165 million in shipments.

Back then, the equipment player broke the news to the Street that so many months after the chip slump began, the company would finally slide into the red. Novellus said it would trim bonuses and profit-sharing plans to hit fourth-quarter profit goals, and that it expected hard times as 2002 opened. Going into Novellus' Tuesday report, Wall Street was taking Novellus' warning about the first quarter seriously, forecasting a 29% decline in revenues from the fourth quarter to the first, and an earnings decline of 127%.