Press Releases

NOVELLUS SYSTEMS REPORTS SECOND QUARTER RESULTS

San Jose, Calif. -- Jul. 16, 1998 -- Novellus Systems, Inc. (Nasdaq NM: NVLS) today reported net sales and results of operations for its second quarter ended June 27, 1998. Net sales for the quarter were $142.8 million, an increase of 25 percent over second quarter 1997 net sales of $114.5 million. Net income of $16.1 million and $0.46 per share was recorded for the quarter as compared to the net loss posted in the second quarter of 1997 of $153.7 million and $4.66 per share. Without the one-time pre-tax charges of $235.2 million recorded during the second quarter of 1997, net income would have been $17.2 million and $0.50 per share. The per share amounts are stated on a diluted basis and are adjusted for the 2-for-1 split that was announced on September 22, 1997 and was effective on October 13, 1997.

Cash and short term investments at June 27, 1998 were $107.4 million, up 7 percent over first quarter 1998 balances of $100.7 million. Bookings fell short of achieving a 1:1 book to bill ratio for the second quarter of 1998.

"Novellus' net sales for the quarter reflect the reduction of capital spending by semiconductor manufacturers, particularly for capacity expansion," said Richard Hill, Chairman and Chief Executive Officer. "During the quarter, Novellus announced a cost reduction program, including an acceleration of the consolidation of its thin film system operations together with approximately a ten percent reduction of our overall workforce, in response to the current industry slowdown. During this time of limited visibility as to strength in capital spending, Novellus is committed to continue its research and development investment for the future, while looking at all alternatives for keeping expenditures at a minimum in the near term."

Hill continued, "During the quarter, Novellus introduced Damascus^TM Complete Copper^TM, a full spectrum of production-worthy products designed to deliver advanced copper interconnect structures for integrated circuit fabrication. Damascus includes industry-leading chemical vapor deposition (CVD), advanced physical vapor deposition (PVD) for depositing the barrier and seed layers, and a revolutionary copper electrofill system called SABRE^TM. In addition, Novellus announced agreements with Lam Research and IPEC for the development of an integrated copper dual damascene solution. With the announcements of our cross-industry alliances, Damascus encompasses not only metal and dielectric deposition technologies, but also equipment and processes from other leading suppliers in etch and Chemical Mechanical Planarization (CMP)."

"While capacity purchases by semiconductor manufacturers have slowed considerably, strong interest in emerging, advanced technology products continues," Hill added. "The ability of Novellus to provide innovative, cost-effective solutions such as a complete dual damascene solution to our customers is a result of our strong commitment to invest in new product development. Continued execution by Novellus on its product strategy will enable the Company to ensure that it is well positioned to take advantage of the long-term growth potential for the thin film deposition market."

Hill concluded, "There has been a significant slowdown in capital spending by the semiconductor manufacturers over the last several weeks. If this trend persists, we will continue to tightly control our expenditures in order to manage a return to our shareholders."

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements regarding (i) the Company's commitment to continuing its research and development investment for the future, (ii) the Company's intention to tightly control and keep expenditures at a minimum, (iii) the semiconductor manufacturers' interest in emerging, advanced technology products, (iv) the Company's ability to continue to invest in new product development, (v) the Company's ability to take advantage of the long-term growth prospects for the thin film deposition market, as well as other matters discussed in the news release that are not purely historical data, are forward-looking statements. The forward-looking statements involve risks and uncertainties including, but not limited to, a possible continuing slowdown in new orders, the difficulty of curtailing expenses to necessary levels and the inability of the Company's product development efforts to continue its position as an industry leader in deposition technologies, and other risks indicated in filings with the Securities and Exchange Commission (SEC). Actual results could differ materially. Novellus assumes no obligation to update this information. For more details, please refer to Novellus' SEC filings, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q.

Novellus Systems, Inc. manufactures, markets, and services advanced automated wafer fabrication systems for the deposition of thin films. Novellus deposition systems are designed for high-volume production of advanced, leading-edge semiconductors at the lowest overall cost. The Company's stock trades on the Nasdaq Stock Market's National Market under the symbol "NVLS". Additional information about the company is available on the Novellus Systems home page on the World Wide Web, located at http://www.novellus.com.

Note: the earnings per share amounts have been adjusted for the 2-for-1 split effective October 1997

(1) The Company's reported loss of $153.7 million or $4.66 per share for the quarter ended June 28, 1997 includes pre-tax one-time charges totaling $235.2 million. This supplemental financial information does not purport to be financial statements prepared in accordance with generally accepted accounting principles. The information in the tables shows operating income, net income and net income per share excluding the one-time charges.