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Merriman Curhan Cuts Opinion on Novellus Systems


Merriman Curhan Ford & Co. cut its opinion on Novellus Systems (NVLS) to neutral from buy.

Analyst David Duley said third quarter revenues of $338.9 million beat his $321.3 million forecast, while the pro forma was in line with his and Street estimates. However, he says the pro forma gross margins were 45%, below his 47.3% estimates, due mainly to higher warranty costs, lower absorption, and SAB101 timing effects. Meanwhile third quarter bookings were down 7% sequentially.

Duley cut his 95 cents earnings per share estimate on $1.336 billion revenue to 82 cents on $1.322 billion revenue, and his $1.27 2006 estimate on $1.474 billion to 98 cents on $1.371 billion revenue. Although memory should be a strong driver in the future, new gaming console intros should drive foundry spending, and the analyst thinks Novellus Systems is underperforming its peers.


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