Shares of KLA-Tencor ( KLAC) dipped Tuesday on reports that the company's new orders stayed flat in the just-ended fourth quarter. KLA offered the comments in a presentation at SEMICON West, a semiconductor equipment conference being held in San Francisco. The stock, which traded as low as $42.72 earlier in the day, was recently off $1.62, or 3.6%, to $43.03. Other equipment stocks held up slightly better, though the group was clearly under pressure. In recent trading, Applied Materials ( AMAT) was off 26 cents or 1.4% to $17.92, Novellus ( NVLS) down 50 cents or 1.7% to $29.22, and Lam Research ( LRCX) off 42 cents or 1.7% to $23.84. In April, KLA rattled Wall Street with an
unusually wide orders forecast, saying bookings could rise as much as 10% or fall by as much as 15% in the June quarter. On Tuesday, Smith Barney said the wide range was likely due to questions about the company's ability to close on two large orders, one from Samsung and one from Taiwan Semiconductor ( TSM). Smith Barney said it believed KLA managed to close the first order, but not the second, adding that the guidance for flat bookings was in line with its own estimate. Indeed, while investors punished KLA shares, the zero-growth bookings news didn't come as a huge surprise. Many analysts believe orders growth for chip equipment has slowed or will soon begin slowing. On Monday, Merrill Lynch sparked a selloff when it downgraded the sector from an overweight to a neutral rating, saying it expected the group to hit a revenue peak early next year. On a related note, the trade group Semiconductor Equipment and Materials International said Monday it expects sales to vault 63% this year to $36.2 billion, but that growth should taper off sharply the following year. Merrill likewise expects strong growth of 49% this year, followed by milder growth in 2005. Yet Novellus management insisted on a Monday conference call that the company hadn't yet seen signs of a downturn. Chief financial officer Kevin Royal said he remains "cautiously optimistic" about his firm's near-term prospects.