Applied Materials (NASDAQ:AMAT) and Novellus Systems (NASDAQ:NVLS) were among the semiconductor equipment makers that had a great 2004, when business rebounded after a brutal downturn. Things have been tougher in 2005 so far, with both companies seeing their revenues fall. But now, Novellus' recent earnings report for the second quarter shows that the situation may be improving once again. The company beat expectations on both revenue and net income.

Novellus' net income clocked in at $33.2 million, or $0.24 per share, beating the previous quarter's $0.22. Sales, meanwhile, were $330 million, down 3% from first-quarter results and a 2.5% drop from last year's second quarter. The company was able to earn more on lower revenue partly because gross margins improved 2.5 points to 47.8% from quarter one to quarter two.

So, when will revenues start to grow again? Well, we don't know. But neither does Novellus' CEO, Richard Hill, who said on the conference call that sales for the third quarter are expected to be flat to down 10%. Potential investors will continue to be cautious on that news, but the problem with waiting to buy until the CEO is optimistic about growth is that the stock will most likely push substantially higher.

Despite the uncertainty over near-term growth, however, there are reasons for optimism. Chip equipment expenditures are continually driven by Moore's Law, which states that chip speeds double every 18 months or so. For that to happen, semiconductor manufacturers need to upgrade their facilities periodically, and Novellus will be no exception. It also helps that Novellus builds the equipment necessary to accommodate emerging methods in the industry, including the transition from aluminum circuitry to copper (since copper offers lower resistance, which results in less heat and lower power consumption) and the trend toward "low-k" insulators (which can operate at higher speeds than semiconductors with silicon oxide insulators).

So even though we don't know for certain when growth will return, we can be quite sure that it will, eventually.

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Fool contributor Dan Bloom doesn't own shares in any company mentioned in this article. Send him a message if you would like to comment on this column.