Novellus Systems ( NVLS) today reiterated its complaint that the SARS (severe acute respiratory syndrome) epidemic in Asia is dragging down business, though rivals haven't voiced similar concerns. "I wish we could be more optimistic about the quarter we're in today, but the volatility is still there and the uncertainty is still there," said President Peter Hanley. After hours, Novellus shares lost 29 cents, or 0.9%, to $31.88. Earlier, on a day that saw robust gains across techland, the stock had gained a healthy $1.10 or 3.5%. The comments on SARS came as the semiconductor-equipment maker endorsed guidance given on its last earnings call. The company said in April it expects flat sequential revenues and earnings of 9 cents a share for the second quarter, a forecast that fell short of the Wall Street consensus estimate at the time of 5 cents a share in earnings. "SARS concerns in the second quarter have slowed bookings," said Hanley, citing the difficulty of travel to the region and greater caution on the part of customers. He added, in response to an analyst's question on the conference call, "Frankly, I can't explain why our competitors aren't seeing the same things we are." "I don't think
SARS is going to change end demand long term," he explained in response to another question about how SARS affects Novellus. " But there are people sitting there saying, should I aggressively ramp my factory or should I hold back and ramp only to the level I have to meet the demand I see." Hanley added: "That caution I believe is going to overheat this thing when it finally turns out." Though many analysts have thrown up their hands on the idea of a second-half rebound, Hanley issued a heavily qualified forecast noting potential upside. "We look for strengthened bookings in the second half of the year but visibility remains poor. Several 300 milimeter fabs could drive significant second half upside but order timing remains uncertain."
Another analyst asked about reports that customers are pointing to a glut of available semiconductor equipment on the market as a way to force better deals on new buys from Novellus. "Very seldom do we get frozen out of a new fab by used equipment," countered Hanley. But CFO Kevin Royal acknowledged gross margins in the quarter are under pressure, partly due to a shift towards lower-priced products, and will likely fall about 1 percentage point from last quarter's 46.1%. Beyond just Novellus, the outlook for the semiconductor-equipment industry remains cautious, with orders still down considerably from a year ago and few signs of a pickup on the horizon. In April, the three-month average of worldwide bookings fell 5% below the prior month and stood 26% below last year's level.