Monday, October 16, 2006

Calls of Note Part 5

CIBC out on Novellus (NASDAQ:NVLS), saying that looking past the current momentum trade, they see intensifying reasons to sell/short NVLS into '07: 1) NVLS has lost focus in its high margin, core CVD business, and lost share at key accounts; 2) it is more exposed than most to big '07 capex cut at Intel; and 3) Downward pressure on gross margin.

Firm's checks point to critical losses at Texas Instr (low-k CVD), and Samsung (oxide CVD). They view this as the death knell of NVLS' low-k tool ($70M/yr, 5% rev) with last key customer UMC following suit. Loss at Samsung indicative of increasing competitive gap with AMAT's new Producer tool.

NVLS' above-industry exposure to big Intel capex cut in '07 yet another negative. Intel is a 10%-15% customer for NVLS, compared to <10% style="color: rgb(255, 0, 0);">

Notablecalls: Lots of notes on semis today. I don't think CIBC will move NVLS, rather I'd put it in the good to know but not actionable category.

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