SAN FRANCISCO -- Friday's expectedly ugly jobs report will include its share of unemployed from the semiconductor equipment industry. Sector player Novellus ( NVLS) has given us even more reason to believe the next few months will see the chip business adding to the job-loss logs. Shares of Novellus were trading roughly flat at $13.81 on Thursday, a day after the company offered an incredibly bleak first-quarter forecast in connection with a fourth-quarter loss announcement. The company said it expects to post a first-quarter loss of 45 cents to 60 cents a share (analysts were expecting a loss of 19 cents a share) on revenue of $95 million to $110 million (the Street was expecting $155 million). In addition, first-quarter bookings look to be off 25% to 40% from the fourth quarter, while gross margin will be about 25%, give or take 2 percentage points. Novellus had a gross profit margin of 36.4% in the latest fourth quarter. Here, though, is where it gets really good (bad): Novellus said a worst-case scenario for full-year revenue would be about $600 million while a best case would bring around $860 million. Multiply those figures by 10 and imagine what sort of market reaction would follow if Intel ( INTC - Get Report), for example, came out with a quarterly revenue forecast of $6 billion to $8.6 billion. What we have here, in other words, is another example of how little semiconductor-related companies know about what their market will be in 2009. (Intel, you'll remember, declined to give an official forecast for its current quarter, instead announcing that it was using a $7 billion figure for "planning purposes.")
However, Novellus did have some certainty in one area: Nothing suggests there will be any increase in underlying demand in the immediate future. During its conference call, Novellus executives painted a troubling picture for the industry, saying bluntly that no evidence exists that anything has gotten better. Novellus CEO Rick Hill told analysts that the days of subsidized capital are over, and semiconductor companies are now going to have to rely on their cash flow. As a result, some chipmakers and chip equipment companies are going to make it through this, and some clearly won't. This echoes comments on Tuesday from industry researcher Carl Johnson cited by Barron's blogger Eric Savitz that suggests several smaller chip equipment players -- Axcelis ( ACLS - Get Report), Aviza Tech ( AVZA) and Asyst ( ASYT) -- are already in trouble. Further, Johnson said that Applied Materials ( AMAT), they of the recent profit warning on Monday, plans a one-to-three-week shutdown in April and another of nearly a month beginning June 8. How does that second-half recovery scenario look now? Interestingly enough, for chip investors that view seems to be somewhat intact, with traders so far unwilling to revisit late-November lows. The Semiconductor HOLDRs ( SMH - Get Report) exchange-traded fund, which was up 3.5% on Thursday, has now risen 4.5% in 2009 and has climbed nearly 12% since Jan. 16. Just don't try to sell the idea to companies in the industry.