Applied Materials, Inc.: Results for Third Quarter of Fiscal 2008

• Net Sales: $1.85 billion (28% decrease year over year; 14% decrease quarter over quarter)
• Net Income: $165 million (65% decrease year over year; 46% decrease quarter over quarter)
• EPS: $0.12 ($0.22 decrease year over year; $0.10 decrease quarter over quarter)
• New Orders: $2.03 billion (11% decrease year over year; 16% decrease quarter over quarter)

SANTA CLARA, Calif.-- Applied Materials, Inc. reported results for its third fiscal quarter ended July 27, 2008. Net sales were $1.85 billion, down 28 percent from $2.56 billion for the third quarter of fiscal 2007, and down 14 percent from $2.15 billion for the second quarter of fiscal 2008. Gross margin for the third quarter of fiscal 2008 was 40.2 percent, down from 47.5 percent for the third quarter of fiscal 2007, and down from 45.0 percent for the second quarter of fiscal 2008. Net income for the third quarter of fiscal 2008 was $165 million, or $0.12 per share, down from net income of $474 million, or $0.34 per share, for the third quarter of fiscal 2007, and down from net income of $303 million, or $0.22 per share, for the second quarter of fiscal 2008.

New orders of $2.03 billion for the third quarter of fiscal 2008 decreased 11 percent from $2.28 billion for the third quarter of fiscal 2007, and decreased 16 percent from $2.41 billion for the second quarter of fiscal 2008. Regional distribution of new orders for the third quarter of fiscal 2008 was: Japan 21 percent, North America 19 percent, Korea 17 percent, Southeast Asia and China 17 percent, Europe 16 percent, and Taiwan 10 percent. Backlog at the end of the third quarter of fiscal 2008 was $4.74 billion, compared to $4.59 billion at the end of the second quarter of fiscal 2008.

“Applied Materials delivered financial and operational performance that was in line with our quarter forecast during a difficult semiconductor industry environment,” said Mike Splinter, president and CEO. “While our silicon business was down, revenues increased in our display, service and solar businesses. We made significant progress in our solar division during the quarter, substantially increasing the number of crystalline silicon systems shipped and enabling start-up production on the first four SunFab™ Thin Film lines at customer sites. We are focused on operational execution, and we are taking advantage of opportunities to expand our leadership with next-generation innovations in silicon, display and solar.”

Non-GAAP net income for the third quarter of fiscal 2008 was $228 million, or $0.17 per share, compared to non-GAAP net income of $518 million, or $0.37 per share, for the third quarter of fiscal 2007, and $362 million or $0.26 per share for the second quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.

Results by reportable segment for the third quarter of fiscal 2008, the second quarter of fiscal 2008, and the third quarter of fiscal 2007 were:

Effective in the first quarter of fiscal 2008, Applied changed its management reporting system for services, with all service results reported in the Applied Global Services segment. Fiscal 2007 segment information has been reclassified to conform to the fiscal 2008 presentation.

Non-GAAP net income and non-GAAP EPS, detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results, exclude charges related to (i) equity-based compensation, (ii) certain items associated with acquisitions, including amortization of intangibles and inventory fair value adjustments on products sold, (iii) restructuring and asset impairments, (iv) certain costs associated with ceasing development of beamline implant products, and/or (v) the resolution of income tax audits and changes in tax credits. Management uses non-GAAP net income and non-GAAP EPS to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Applied believes that these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management and facilitate comparisons of this period’s results with prior periods. The presentation of this additional information should not be considered a substitute for net income or EPS prepared in accordance with GAAP.

Applied Materials will discuss its fiscal 2008 third quarter results, along with its outlook for the fourth quarter of fiscal 2008, on the earnings call today beginning at 1:30 p.m. Pacific Daylight Time. A webcast of the earnings call will be available at www.appliedmaterials.com.

Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in Nanomanufacturing Technology™ solutions with a broad portfolio of innovative equipment, services and software products for the fabrication of semiconductor chips, flat panel displays, solar photovoltaic cells, flexible electronics and energy-efficient glass. At Applied Materials, we apply Nanomanufacturing Technology to improve the way people live. Learn more at www.appliedmaterials.com.

Contacts

Applied Materials, Inc.
Robert Friess, 408-986-7977 (investment community)
David Miller, 408-563-9582 (editorial/media)