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Friday, November 21, 2008

Novellus (NVLS) orders crash

On their mid-quarter update Novellus lowered order guidance to down 25-35% versus prior guidance of up 5 to down 15% for the quarter. Memory orders utterly fell apart as the sinking DRAM and NAND markets force memory manufacturers into cash conservation mode. Furthermore, their Europe-centric industrial manufacturing business got dramatically weaker in the last couple of weeks. Revenue and gross margin forecasts are also coming down as orders are tanking. Novellus suggests the industry is getting to maintenance levels of business. I would posit that in a downturn this severe with so much oversupply on the way in, balance sheets so weak and the financing markets shut down that the semicap industry will not bottom until some Asian manufacturers go belly up.

Novellus trades at a little over 2 * cash.

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