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Novellus Reaffirms Guidance

The chip-equipment company said it will post break-even earnings for its third quarter.

Updated from 5:37 p.m. EDT

Amid upbeat remarks about the economy, semiconductor-equipment maker

Novellus Systems

(NVLS)

on Thursday reaffirmed its existing guidance for the third quarter.

As expected, the company said it expects to break even on sales of about $220 million during the current quarter which ends Sept. 30. Revenue and earnings were equal to the expectations of analysts polled by Thomson First Call, which were for flat earnings on $219.36 million in revenue.

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Although the company did not make a forecast for the fourth quarter, CEO Richard Hill said in a conference call that, "the overall tone in business is positive. ... I think we are in the throes of a recovery."

"All things are pointing to the positive. We're hearing that business levels have picked up," Hill said, "... and we expect a good Christmas season, and there is some pent-up demand in Asia."

In a midquarter conference call, the company said it expected to take a $70 million restructuring charge in the third quarter, primarily for a writedown of inventory related to the shift to 300 millimeter wafers from 200 millimeter. Novellus also will take a $63 million charge as certain off-the-balance sheet real estate costs are moved on to the balance sheet.

For Novellus, Hill said he expects gross margins, now in the mid-40% range, to move "north of 50%" in three or four quarters. Improvements in cycle time, process, the move to 300 mm, and some consolidation of operations will lead to the improvement, he said.

Hill did not say if the restructuring would include cuts in personnel.

Novellus gained 15 cents, or less than 1%, during the trading day, but slipped 70 cents after hours.