Semiconductor production equipment maker Novellus Systems (NASDAQ:NVLS) reported second-quarter earnings bright and early this morning of $0.29, beating the consensus estimate of $0.26. The report even exceeded the upper end of the range of estimates. It earned a nickel per share in the same quarter last year. Revenues, expected to be $331 million, were actually $338 million. Novellus also gave forward-looking guidance that should raise consensus earnings estimates for the September quarter.

You may recall that last week software stocks got hit hard on earnings pre-announcements, setting a negative tone for the group. It appears that this week, Novellus is setting a positive tone for chips and chip-equipment earnings, but not stock trading. Novellus is down 5% in early trading despite what is by all accounts a good report.

So what's the problem? Well, Intel (NASDAQ:INTC) was downgraded by Merrill Lynch (NYSE:MER), which also had negative comments on the entire chip sector because of supply concerns.

I wonder whether the Merrill analyst read the New York Times interview with tech newsletter writer and perma bear Fred Hickey. Hickey thinks spot prices for chips will decline because there is too much supply. Another reason he is bearish is the semiconductor group is down 11% while technology in general is down about 6% year-to-date. This is a problem because semis "often lead the action in tech."

Hickey has been bearish ever since I first heard of him in 2001. To my recollection, he missed last year's surge in tech. It is not clear to me that he will know when to get back into tech.

In the meantime, Novellus has a good track record for beating earnings estimates and is growing faster than its competitors. The company is poised to continue both trends. It trades at 19 times next year's earnings, has almost $7 per share in cash, and has practically no debt.

While all that sounds good to me, the most important thing this week for Novellus' share price may be Intel's earnings report tomorrow. Stay tuned.

Fool contributor Roger Nusbaum is an investment manager and wildland firefighter in Prescott, Ariz. At press time, neither he nor his clients owned any of the stocks mentioned.