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Novellus to cut Richard S. Hill pay by 50 and workforce by 10 percent!

By Amarendra Bhushan for CEOWORLD Magazine Updated:December 10, 2008

I guess Unemployment hasnt bottomed yet!

Novellus Systems Inc. announced it will cut CEO Richard S. Hill’s pay by 50 percent as the company begins a 10 percent reduction in its workforce due to slumping revenue.

The job cut was made in response to deteriorating business conditions as Novellus continues to expand on its cost reduction and restructuring initiatives.

The chipmaker said it’s seeing customers push back equipment orders and shipments into 2009 which will negatively impact fourth quarter revenues. The company now expects a net loss of 15 cents a share in the quarter on a 10 percent drop in bookings.

“Unfortunately, the current environment warrants deeper cost reductions, in order to reach a lower cash breakeven level, which we are focused on achieving and we will be taking steps toward that goal by the end of January 2009,” said Richard S. Hill, Chairman and CEO, according to PRNewswire.

“In addition to headcount reductions, my salary will be reduced by 50 percent and I will not participate in the bonus program nor will I receive stock or option grants for 2009,” he added.

Novellus expects to take a $12 million charge in the fourth quarter for cost related to the job cuts and restructuring. In a prepared statement, CEO Richard Hill said the company had moved quickly to cut operating expenses to $105 million by the end of the third quarter, exceeding a goal of $110 million.

But he said, “Unfortunately, the current environment warrants deeper cost reductions, in order to reach a lower cash breakeven level, which we are focused on achieving and we will be taking steps toward that goal by the end of January 2009.”

In addition to the job cuts, Hill said his own salary will be reduced by 50%. He also will not take part in the company’s bonus program and will not receive stock or option grants for 2009.

In October, Hill offered a stunningly grim view of the chip-equipment industry saying, “While the semiconductor equipment business is notoriously cyclical, this is quite different. On a bookings front, all our regions are down. On a customer basis, there remain only three with the economic power to buy, and less than three with the will to buy. The outlook right now is totally unpredictable to us.”

Novellus Systems, Inc. (NASDAQ: NVLS), today announced that its financial results for the fourth fiscal quarter ending December 31, 2008 are expected to be below the low end of the guidance ranges for bookings, shipments, revenues, and earnings per share, which were communicated in its mid-quarter update conference call on November 20, 2008.

Increasing weakness seen in the last week at Korean memory customers has caused the push out of equipment bookings and shipments which will negatively impact Novellus’ revenues and earnings in the fourth quarter 2008 and into 2009. Visibility is extremely limited at this time, however, Novellus expects an incremental reduction of at least ten percent in bookings, shipments and revenue for the fourth quarter, which is expected to result in a net loss per share of at least $0.15 before charges related to restructuring and/or goodwill impairment.

As a result of continued deterioration in business conditions, Novellus will expand its cost cutting and restructuring plans. This includes approximately a ten percent reduction in its global workforce through a combination of attrition and layoffs which will generally be concluded by January 31, 2009. Novellus expects to incur approximately $12 million in related restructuring and asset impairment charges in the fourth quarter. As previously announced the company is also currently evaluating the $238 million of goodwill on the balance sheet for potential impairment which may result in additional non-cash charges.

“We were quick to respond to weakening business conditions early in 2008 and reduced operating expenses to $105 million by the end of the third quarter, exceeding our goal of $110 million,” said Richard S. Hill, Chairman and CEO. “Unfortunately, the current environment warrants deeper cost reductions, in order to reach a lower cash breakeven level, which we are focused on achieving and we will be taking steps toward that goal by the end of January 2009. In addition to headcount reductions, my salary will be reduced by 50 percent and I will not participate in the bonus program nor will I receive stock or option grants for 2009.”

Richard S. Hill
Chairman of the Board and Chief Executive Officer

Richard S. Hill has been Novellus’ chief executive officer and a member of the board of directors since 1993. He was appointed chairman of the board in May 1996.

Before joining Novellus, Mr. Hill spent 12 years at Tektronix, Inc., where he held a variety of positions, including president of Tektronix Development Company, vice president of the Test and Measurement Group and president of Tektronix Components Corporation. Prior to joining Tektronix, he held engineering management positions at General Electric, Motorola and Hughes Aircraft Company.

Mr. Hill holds a bachelor’s degree in engineering from the University of Illinois and a master’s degree in business administration from Syracuse University. He is a board member of the University of Illinois Foundation and serves on the boards of LSI and Arrow Electronics.

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