Applied Materials Announces Results for Third Fiscal Quarter 2005

-- Net Sales: $1.63 billion (12% decrease quarter over quarter; 27% decrease year over year)

-- Net Income: $370 million (21% increase quarter over quarter; 16% decrease year over year)

-- EPS: $0.23 ($0.05 increase quarter over quarter; $0.03 decrease year over year)

-- New Orders: $1.47 billion (5% decrease quarter over quarter; 40% decrease year over year)

Applied Materials, Inc., the world's largest supplier of waferfabrication solutions to the global semiconductor industry, reportedresults for its third fiscal quarter ended July 31, 2005. Net saleswere $1.63 billion, down 12 percent from $1.86 billion for the secondfiscal quarter of 2005, and down 27 percent from $2.24 billion for thethird fiscal quarter of 2004. Gross margin for the third fiscalquarter of 2005 was 43.9 percent, compared to 44.0 percent for thesecond fiscal quarter of 2005, and down from 47.4 percent for thethird fiscal quarter of 2004. Net income for the third fiscal quarterof 2005 was $370 million, or $0.23 per share, up from net income of$305 million, or $0.18 per share, for the second fiscal quarter of2005, and down from net income of $441 million, or $0.26 per share,for the third fiscal quarter of 2004. The results of the third fiscalquarter of 2005 included a favorable tax adjustment of $132 million,or $0.08 per share, principally due to the resolution of a multi-yeartax examination.

New orders of $1.47 billion for the third fiscal quarter of 2005decreased 5 percent from $1.55 billion for the second fiscal quarterof 2005, and decreased 40 percent from $2.46 billion for the thirdfiscal quarter of 2004. Regional distribution of new orders for thethird fiscal quarter of 2005 was: Japan 23 percent, Korea 19 percent,North America 19 percent, Taiwan 15 percent, Europe 12 percent, andSoutheast Asia and China 12 percent. Backlog at the end of the thirdfiscal quarter of 2005 was $2.61 billion, compared to $2.85 billion atthe end of the second fiscal quarter of 2005.

During the third fiscal quarter of 2005, the company repurchasedapproximately 27 million shares of common stock at an average price of$16.62 per share for an aggregate purchase price of $450 million. Alsoduring the third fiscal quarter of 2005, the company declared aquarterly cash dividend of $0.03 per share, payable on September 7,2005 to stockholders of record on August 17, 2005.

"Applied Materials again demonstrated its leadership in technologyinnovation with the introduction of the Applied UVision(TM) inspectionsystem and the advanced etch and film deposition technologies that weshowcased this quarter," said Mike Splinter, president and chiefexecutive officer. "Our unique solutions are helping customers advancetechnology in order to deliver new levels of performance fortransistors, interconnects and other chip features required by newgenerations of electronics products.

"While industry conditions remained challenging, we met ourfinancial targets, continued to generate strong cash flow and returnedvalue to our stockholders through share repurchase and a dividend.With our financial strength and technology leadership, Applied is wellpositioned to benefit from customers' increased capital spending,"concluded Splinter.

This press release contains forward-looking statements, includingstatements regarding the company's technology leadership, strategicposition, cash generation and product capabilities; and customers'requirements and capital investments. Forward-looking statements maycontain words such as "expect," "anticipate," "believe," "may,""should," "will," "estimate," "forecast," "continue" or similarexpressions, and include the assumptions that underlie suchstatements. These statements are subject to known and unknown risksand uncertainties that could cause actual results to differ materiallyfrom those expressed or implied by such statements. Risks anduncertainties include, but are not limited to: the sustainability ofdemand in the semiconductor and semiconductor equipment industries,which is subject to many factors, including global economicconditions, business spending, consumer confidence, demand forelectronic products and integrated circuits, and geopoliticaluncertainties; customers' capacity requirements, including capacityutilizing the latest technology; the timing, rate, amount andsustainability of capital spending for new technology, such as 300mmand sub-100 nanometer applications; the company's ability tosuccessfully develop, deliver and support a broad range of productsand to expand its markets and develop new markets; the ability tomaintain effective cost controls and to timely align the company'scost structure with business conditions; the successful integrationand performance of acquired businesses; changes in management; andother risks described in Applied Materials' Securities and ExchangeCommission filings, including its reports on Form 10-K, Form 10-Q andForm 8-K. All forward-looking statements are based on management'sestimates, projections and assumptions as of the date hereof. Thecompany undertakes no obligation to update any forward-lookingstatements.

Applied Materials will discuss its third fiscal quarter results,along with its outlook for the fourth fiscal quarter of 2005, on aconference call today beginning at 1:30 p.m. Pacific Time. A webcastof the conference call will be available on Applied Materials' website under the "Investors" section.

Applied Materials, Inc. (Nasdaq:AMAT), headquartered in SantaClara, California, is the largest supplier of equipment and servicesto the global semiconductor industry. Applied Materials' web site iswww.appliedmaterials.com.

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended
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(In thousands, except August 1, July 31, August 1, July 31,
per share amounts) 2004 2005 2004 2005
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Net sales $2,236,152 $1,631,938 $5,809,705 $5,273,703
Cost of products sold 1,176,920 914,849 3,135,663 2,947,959
---------- ---------- ---------- ----------
Gross margin 1,059,232 717,089 2,674,042 2,325,744

Operating expenses:
Research,
development and
engineering 256,781 236,448 743,601 703,799
Marketing and
selling 101,513 98,366 285,886 268,644
General and
administrative 87,394 79,578 251,145 256,876
Restructuring,
asset impairments
and other charges - - 167,459 -
---------- ---------- ---------- ----------
Income from operations 613,544 302,697 1,225,951 1,096,425

Interest expense 13,489 9,338 36,971 28,425
Interest income 24,869 45,948 82,362 123,055
---------- ---------- ---------- ----------
Income before income
taxes 624,924 339,307 1,271,342 1,191,055

Provision for/(benefit
from) income taxes 184,353 (30,284) 375,047 227,869
---------- ---------- ---------- ----------
Net income $ 440,571 $ 369,591 $ 896,295 $ 963,186
---------- ---------- ---------- ----------

Earnings per share:
Basic $ 0.26 $ 0.23 $ 0.53 $ 0.58
Diluted $ 0.26 $ 0.23 $ 0.52 $ 0.58

Weighted average
number of shares:
Basic 1,696,544 1,630,895 1,689,573 1,654,740
Diluted 1,721,690 1,641,818 1,727,626 1,666,720
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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
---------------------------------------------------------------------
October 31, July 31,
(In thousands) 2004(1) 2005
---------------------------------------------------------------------

ASSETS

Current assets:
Cash and cash equivalents $ 1,493,292 $ 1,255,746
Short-term investments 5,084,704 4,972,697
Accounts receivable, net 1,670,153 1,525,133
Inventories 1,139,368 1,073,722
Deferred income taxes 610,095 627,366
Other current assets 283,907 289,805
----------- -----------
Total current assets 10,281,519 9,744,469

Property, plant and equipment 2,953,130 2,993,156
Less: accumulated depreciation and
amortization (1,607,602) (1,709,558)
----------- -----------
Net property, plant and equipment 1,345,528 1,283,598

Goodwill, net 257,321 337,825
Purchased technology and other intangible
assets, net 50,291 88,601
Deferred income taxes and other assets 158,786 164,156
----------- -----------
Total assets $12,093,445 $11,618,649
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt $ 45,864 $ 46,165
Accounts payable and accrued expenses 1,895,061 1,703,540
Income taxes payable 347,056 227,614
----------- -----------
Total current liabilities 2,287,981 1,977,319

Long-term debt 410,436 414,290
Other liabilities 133,001 155,395
----------- -----------
Total liabilities 2,831,418 2,547,004
----------- -----------

Stockholders' equity:
Common stock 16,803 16,225
Additional paid-in capital 2,070,733 987,064
Deferred stock compensation, net (96) -
Retained earnings 7,164,170 8,078,026
Accumulated other comprehensive
income/(loss) 10,417 (9,670)
----------- -----------
Total stockholders' equity 9,262,027 9,071,645
----------- -----------

Total liabilities and stockholders' equity $12,093,445 $11,618,649
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(1) Certain amounts in the October 31, 2004 consolidated condensed
balance sheet have been reclassified to conform to the 2005
presentation.