Novellus Swings to a Loss

Revenue falls 38% from a year earlier.
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swung to a loss in the second quarter, as a sharp drop in sales and restructuring charges weighed the company down.

The San Jose, Calif., provider of chip manufacturing equipment said revenue in the three months ended June 28 declined 38% year-over-year to $257.7 million. The average analyst estimate called for Novellus to post $251.5 million in sales.

Novellus had a loss of $2.4 million, or 2 cents a share, vs. net income of $57.3 million, or 45 cents a share at this time last year.

The loss included $13.6 million of impairment and severance charges, Novellus said, stemming from a decision to focus on core products and reduce the company's cost structure going forward.

Excluding the charges, Novellus said it earned 6 cents a share, 2 cents higher than the average analyst expectation.

Shares of Novellus were off 9 cents at $19.40 in extended trading Monday. The stock is off roughly 42% from its 52-week high of $33.48.

Like most providers of chipmaking tools, Novellus has been stung by the lack of demand for new manufacturing capacity due to the current glut of memory chips flooding the market. Many chipmakers are scaling back capital spending budgets, putting pressure on equipment providers like Novellus,


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"We viewed these challenging business conditions as an opportunity to improve our operational excellence, continue executions of our product strategies, and capitalize on the market transition toward higher productive mega-fabs aimed at lowering manufacturing costs for our customers," said CEO Richard Hill in a statement.

While Novellus' market share gains have been "muted" because of the cyclical downturn, Hill said he expects the company's gains will be magnified when industry conditions improve.

Novellus said orders in the second quarter decreased 21% sequentially to $234.6 million.

The company did not provide financial guidance for the current quarter, although management was scheduled to hold a conference call to discuss the results Monday.