Here's the Positive Tech Sign You've Been Looking for

As the third earnings season of 2010 starts turning its heavy gears, there's an early sign of life for the entire technology sector. Novellus (Nasdaq: NVLS  ) , the maker of semiconductor manufacturing equipment, just posted a stellar second quarter -- and told us to expect more good news from the rest of the industry.

Sales bounced back from last year's gloomy lows with a 169% year-over-year improvement to $321 million. Order bookings landed at $385 million, producing a book-to-bill ratio of 1.2. That means more revenue in coming quarters, and is a data point of utmost importance to a manufacturing specialist like Novellus.

CEO Richard Hill predicted that we're at the start of a "multi-year recovery in the semiconductor equipment industry," thanks to global trends such as Chinese consumer strength and a worldwide "gentrification" of communications equipment. Networking specialists Cisco Systems (Nasdaq: CSCO  ) and Huawei were singled out as shining examples of this growth vector, alongside Microsoft (Nasdaq: MSFT  ) Windows infrastructure that hasn't been refreshed "since the mid-90s" and is now embracing Windows 7.

"We watch companies like Intel (Nasdaq: INTC  ) that leads the way," Hill said. "Cisco we look at, the [third-party foundries] of the world. They have an eye on their customers. We're watching our customers. And we think overall the trend is positive."

Indeed, Intel will confirm or undermine that world view when it reports earnings tonight, and I think it'll be the former, more optimistic option. Aside from buoyant consumer sentiment and rah-rah quotes like what we're getting out of Novellus, I'd like to point out that Intel's spokespeople took proactive steps to make sure I'm covering this earnings announcement. "Intel has posted earnings results above Street expectations for the last year," they told me. That's not the kind of heads-up you're handing out to the press if you expect to miss the next mark.

Like its larger semiconductor equipment peers Applied Materials (Nasdaq: AMAT  ) and Lam Research (Nasdaq: LRCX  ) , Novellus is an excellent leading indicator of where technology trends are going. And the only way is up, baby. Watch this industry in the coming quarters to see whether the semiconductor super recovery still has legs.

Do you read a different message in Novellus' tea leaves? Please share your insights in the comments box below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel and Microsoft are Motley Fool Inside Value picks. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1232311, ~/Articles/ArticleHandler.aspx, 10/23/2014 9:49:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement