Novellus Systems'

(NVLS)

shares rose late Monday after the chip-equipment provider boosted fourth-quarter guidance, citing improving demand around the world.

On a postclose call with analysts, the San Jose, Calif.-based company sharply boosted order guidance for the December quarter, while lifting its sales and earnings outlook to the top end of its previous outlook. Novellus shares added 1% on top of a 2.4% rise during regular trading.

The company now expects fourth-quarter orders to rise 25% from third-quarter levels, to $275 million. That's well above prior guidance, which called for sequential growth of between 5% and 10%, to a range of $230 million to $245 million.

Revenue should be $220 million, about flat with the prior quarter's $221 million and at the high end of Novellus' prior guidance of $210 million to $220 million.

Novellus also said it now expects earnings of 6 cents a share, vs. a prior range of 2 cents to 7 cents.

Heading into the call, Wall Street analysts had projected December quarter sales of $217 million with earnings of a nickel.

On a conference call, Chief Financial Officer Kevin Royal noted increasing demand for Novellus equipment everywhere. "Japan continues to strengthen, driven by digital consumer and investment hibernation over the last few years, so they're into catch-up

mode," Royal said. "Korea is steady and greater China has started to accelerate.

"The U.S. is improving albeit at a slower level and in Europe

also there are signs of improvement from a smaller base," the executive added.

Responding to an analyst question, Royal said the current upturn "doesn't feel like a head fake," as was the case in 2002 when an apparent recovery turned out to be short-lived. "More and more customers are having a broader-based recovery, and that lends itself to be much more sustainable," he added.

Many analysts had expected Novellus to upgrade its outlook to some degree amid improving business for its customers, the semiconductor vendors. Only two weeks ago, lead global chip equipment company

Applied Materials

(AMAT) - Get Report

forecast robust 20% quarterly order growth.

However, the upward guidance delivered today came in at the high end of Wall Street expectations.

Moors & Cabot analyst Patrick Ho said he had considered a boost in guidance to the range of 15% to 20% to be the most likely scenario, though he had held out the potential for a surge as strong as 25% -- the order growth rate that Novellus actually promised after the bell today.

"I think Novellus and AMAT have a lot of the same customers and are exposed in the same regions, so I think AMAT's earnings should reflect positively on Novellus," he said.

Ho noted after the call that Novellus could yet see further upside as the quarter progresses, possibly leading to an order rate as high as $280 million to $285 million.

"It's a pretty favorable midquarter update," he concluded, while adding, "a lot of the positive news and expectations are factored into the stock."

Moors & Cabot hasn't done banking for Novellus.

In regular trading, the stock closed up $1 to $43.54. After the bell, Novellus shares tacked on 42 cents to $43.96.