Novellus Systems Inc.NVLS

Morningstar Rating

Stock Research and Analysis

by Andy Ng

Novellus Systems is a leader in its segment of the chip equipment market and is positioned to gain from advances in semiconductor fabrication technology. However, the firm is presently mired in a severe cyclical downturn that is hurting the entire semiconductor equipment industry. Read more

Bulls Say

Novellus has a strong technological position that it has maintained through large R&D expenditures.

Novellus should see strong demand for its equipment as chipmakers transition to new technologies such as copper and low-k dielectric materials and 300-millimeter wafers.

The firm uses an outsourcing model to reduce costs and maintain flexibility in a deeply cyclical business.

Novellus has some of the most productive systems on the market. Read more

Bears Say

Demand for Novellus' products is driven by the deeply cyclical semiconductor equipment industry, subjecting the firm's financial results to tremendous volatility.

Novellus' margins may come under pressure as the firm enters new markets or experiences pricing pressure from Applied Materials.

The firm faces stiff competition from Applied Materials, the largest chip equipment firm in the world, which has vastly more resources than Novellus. Read more

Strategy

Novellus' target is to grow faster than the industry average by maintaining its leadership in chip-manufacturing technology and anticipating industry trends, such as the move toward copper, 300-millimeter wafers, and low-k dielectrics. Read more

Management

Richard Hill has been CEO since 1993 and chairman since 1996. Chief administrative officer Jeffrey Benzing added CFO duties to his responsibilities when former CFO William Kurtz stepped down from Novellus in early 2008. Much of the management team has been with the firm since the 2000s. Read more

Profile

Novellus manufactures chemical and physical vapor deposition systems used in the production of semiconductors. The firm's chemical and physical vapor systems deposit a variety of conductive and insulating films on semiconductor wafers. Read more

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