Novellus Systems Key Characteristics PR Term Paper

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At the same time that Novellus was articulating this strategy, it was keeping mum on its quarterly earnings report; in many recent markets, Novellus had produced disappointing results for shareholders, as little as three cents per share in 2003.

Novellus also made several product announcements, all in line with its proposed moves. Notably, it introduced INOVA NexT, a new version of an existing PVD technology; the market for PVD systems has been forecast by Gartner Dataquest at around $1.2 billion in 2005 (Auchard, 2005).

Clearly, the key strategic issue for Novellus is maintaining its excellent 'buy' ratings over time against a giant like Allied Materials. Attacking the problem by introducing new products is expensive: Novellus R&D costs have remained fairly constant, however, through periods of good income for the company, and less good.

Table 6:

Comparison of three parameters for Novellus Systems, Inc.

Gross Profit (in mil.)

R&D expenditures

Total operating expenses

Source: CNN/Money Web site, 2005

Recommendations

Currently, the company has virtually no debts (CNNMoney Web site, 2005).

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In addition, it has weathered the cyclical nature of the semiconductor industry in good enough shape for Hooves to issue "buy" analyses consistently.

In addition, it was able to reduce its operating expenses substantially in the period from 2003 to 2004 relative to its gross profits. This is some indication that the company is taking seriously its own advice and optimizing manufacturing factors. If the company is also correct that doing so will continue to be the best way to assure profits, then the only thing Novellus needs to do is stay the course it has already set. The trick, of course, will be in not trying to change something that isn't broken, when the temptation might be to become not a reliable second to Allied Materials, but the first source instead.

Because this company is solid and favored by analysts, it would be a mistake to radically depart from the procedures that have made Novellus one of the top companies in its field, according to Hoovers.....

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