Covello also raised his rating on Varian Semiconductor (VSEA) to Buy from Neutral.

FORBES: Chips: Some Analysts Turn Cautious

For Q1, Applied sees sales down 5%-15% sequentially, including the impact of the just-completed acquisition of Varian Semiconductor.

FORBES: Applied Materials Q4 Edges Ests; Outlook Weak; Shrs Slip

Among the largest underlying components of VBK, in trading today Polycom Incorporated ( NASD: PLCM) is up about 4.5%, Varian Semiconductor Equipment ( NASD: VSEA) is up about 0.2%, and Gardner Denver Incorporated ( NYSE: GDI) is up by about 0.4%.

FORBES: Volatility Persists In Small Caps