Novellus Sees Memory Chip Demand Holding Up

The company backs its quarterly projections.
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SAN FRANCISCO -- Semiconductor equipment maker

Novellus Systems

(NVLS)

raised its fourth-quarter bookings guidance and said that strong personal computer demand is propping up demand for memory chips.

In a midquarter update Thursday, Novellus told analysts that bookings are trending toward the higher end of its previous forecasts, while shipments, earnings and revenue are trending toward the midpoint of the company's forecasted range.

Novellus had previously forecasted a 5%-15% increase in bookings; it continues to expect shipments of $365 million to $390 million.

The company had projected earnings of 34 to 37 cents a share on revenue of $355 million to $365 million. The midpoints of these ranges are slightly below analysts' average estimate 36 cents a share and $362 million in revenue.

Novellus still expects it fourth-quarter gross margin to be 49%, in line with prior guidance.

Chief Executive Rick Hill said PC demand is "quickly depleting DRAM

memory chip inventories," thanks in part of interest in

Microsoft's

(MSFT) - Get Report

Vista operating system. He also said that wireless and telecom products are helping to boost demand.

Consequently, foundries for producing both DRAM and Flash memory chips are operating at "a high degree of utilization" to meet existing demand.

But Hill painted a mixed picture about trends he sees in chipmakers' plans to expand their output capacity. Some Novellus customers plan to cut back capital spending because the price of DRAM chips has fallen dramatically, he said. Others will make incremental additions to the capacity of foundries that make both DRAM and flash chips with the same faculties.

Hill said that Novellus' customers in Asia are concerned that macroeconomic events can drive the U.S. market into a recession, denting demand for consumer electronics.

Novellus shares were recently trading up 13 cents, or .5%, to $26.83 in after-hours trading following the mid-quarter update.