BUSINESSWEEK ONLINE : DECEMBER 18, 2000 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET Pummeled Novellus Chipmakers had no place to hide when the market perceived that capital equipment spending had tightened, sharply hitting computer sales. Their shares got slammed. One that was pummeled: Novellus Systems (NVLS), a maker of equipment for producing semiconductors. Its stock took a dive, from 62 1/2 in early September to 26 in November, before inching up to 30 on Dec. 6. Analysts scaled back their earnings estimates after Novellus confirmed that Korea's Hyundai had delayed orders. ''Orders for semi equipment could be flat for the next few months, given global uncertainties and slowing growth in semiconductor markets,'' warns Susan Crossley at First Security Van Kasper. But not everyone ran for the exits. ''I have not seen this stock selling this cheap,'' says money manager Graham Tanaka. ''While the industry is slowing down, Novellus is seeing a surge in orders and market share on the strength of its new products,'' says Tanaka. These products take advantage of two industry changes: a switch to copper-based manufacturing, which bolsters chip performance, and a conversion to larger, 12-in. wafers, doubling the output of chipmaking machines. In all, Novellus ''is at the forefront of new technology that packs more power into chips,'' says Tanaka. Orders should pick up by mid-2001, says Tanaka, whose Tanaka Growth Fund racked up a 20.85% yearly growth since its start on Dec. 29, 1998, through Nov. 30. He figures that with Novellus' earnings and growth potential, the stock could hit 78 in a year and 97 in two. The stock is trading at 12 times Tanaka's 2000 earnings estimate of $2.34 a share, 10 times his 2001 estimate of $3, and 8 times his 2002's $3.75. The stock, he says, deserves the market's price-earnings ratio of 26. By GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Pummeled Novellus CHART: When Investors Got Rattled INTERACT E-Mail to Business Week Online

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