reported financial results at the high end of its targets, but shares fell on wariness about what's ahead for the chip-equipment company.

"The business environment is challenging but we remain cautiously optimistic that capacity expansion will continue in a rational manner," said CEO Rick Hill, according to a statement.

Shares slipped 2% to $23.80 in after-hours trading.

Novellus reported net income of $30.5 million, or 22 cents a share, on sales of $339.7 million. During the same quarter last year, Novellus earned $16.7 million, or 11 cents a share, on sales of $262.9 million.

Analysts had expected Novellus to earn 22 cents a share on sales of $334 million, on average, according to Thomson First Call.

On a conference call with investors, Novellus reportedly guided second-quarter earnings to 17 cents to 20 cents a share. Analysts were forecasting 20 cents a share.

During a midquarter update in early March, Novellus predicted earnings between 20 and 22 cents a share, sales between $330 million and $340 million, orders between $285 million and $310 million, and shipments between $350 million and $360 million.

Novellus reported actual shipments of $360.7 million and it will detail orders during a conference call.

Gross margin was 45.3%, down from 49.9% in the previous quarter and 47.4% in the same quarter last year. The company had previously announced that its gross margins would be hurt during the first quarter due to sales mix and the timing of revenue recognition.