Applied Materials Announces Results for First Fiscal Quarter 2006

-- Net Sales: $1.86 billion (8% increase quarter over quarter; 4% increase year over year)

-- Net Income: $143 million (42% decrease quarter over quarter; 51% decrease year over year) includes charges for real estate and facilities disinvestment and equity-based compensation

-- EPS: $0.09 ($0.06 decrease quarter over quarter; $0.08 decrease year over year) includes charges for real estate and facilities disinvestment and equity-based compensation

-- New Orders: $2.04 billion (21% increase quarter over quarter; 22% increase year over year)

Applied Materials, Inc., reported results for its first fiscalquarter ended January 29, 2006. Net sales were $1.86 billion, up 8percent from $1.72 billion for the fourth fiscal quarter of 2005, andup 4 percent from $1.78 billion for the first fiscal quarter of 2005.Gross margin for the first fiscal quarter of 2006 was 45.1 percent, upfrom 44.2 percent for the fourth fiscal quarter of 2005, and up from44.4 percent for the first fiscal quarter of 2005. Net income for thefirst fiscal quarter of 2006 was $143 million, or $0.09 per share,down from net income of $247 million, or $0.15 per share, for thefourth fiscal quarter of 2005, and down from net income of $289million, or $0.17 per share, for the first fiscal quarter of 2005.

Excluding the charges discussed below, non-GAAP net income was$312 million, or $0.19 per share, for the first fiscal quarter of2006. The company reported pre-tax asset impairment and restructuringcharges of $215 million, or $0.08 per diluted share after tax,consisting of approximately $124 million for asset write-offs andimpairments and approximately $91 million for restructuring of leaseobligations. In addition, the company recognized approximately $52million of charges, or $0.02 per diluted share after tax, inconnection with its equity-based compensation programs. The companybegan expensing stock options in the first quarter of fiscal 2006.

New orders of $2.04 billion for the first fiscal quarter of 2006increased 21 percent from $1.69 billion for the fourth fiscal quarterof 2005, and increased 22 percent from $1.68 billion for the firstfiscal quarter of 2005. Regional distribution of new orders for thefirst fiscal quarter of 2006 was: Taiwan 24 percent, North America 22percent, Korea 18 percent, Europe 15 percent, Japan 13 percent, andSoutheast Asia and China 8 percent. Backlog at the end of the firstfiscal quarter of 2006 was $2.73 billion, compared to $2.57 billion atthe end of the fourth fiscal quarter of 2005.

"Our performance in the first quarter is an exciting start for2006. A significant increase in customer demand translated intohigher-than-expected order growth and strong financial performance forApplied Materials," said Mike Splinter, president and chief executiveofficer. "We are seeing momentum across our broad product portfoliofor both high-volume production and leading-edge 65nm and 45nm chipdevelopment applications.

"Our differentiated nanomanufacturing technologies are providingsolutions to customers' most challenging requirements, from strainengineering processes to enable faster transistor performance, toadvanced deposition and etch systems for today's Flash and DRAM memorychips. Our innovative thin film and mask metrology processes areextending current lithography technology into future devicegenerations.

"We are confident that our broad technology solutions positionApplied to outgrow and outperform the industry and deliver strongfinancial results," concluded Splinter.

The company continued to return value to stockholders throughstock repurchases and cash dividends. During the first fiscal quarterof 2006, the company repurchased approximately 27 million shares ofcommon stock at an average price of $18.84 per share for an aggregatepurchase price of $500 million and paid $48 million in dividends.

This press release includes financial measures that are not inaccordance with GAAP, consisting of non-GAAP net income and non-GAAPearnings per share (EPS). Management uses non-GAAP net income andnon-GAAP EPS to evaluate the company's operating and financialperformance in light of business objectives and for planning purposes.Applied believes that these measures are useful to investors becausethey enhance investors' ability to review the company's business fromthe same perspective as the company's management and facilitatecomparisons of this period's results with prior periods. Thesenon-GAAP measures exclude charges related to (i) asset impairments andrestructuring associated with Applied's disinvestment of a portion ofits real estate and facilities portfolio, and (ii) equity-basedcompensation. These financial measures are not in accordance with GAAPand may be different from non-GAAP methods of accounting and reportingused by other companies. The presentation of this additionalinformation should not be considered a substitute for net income orEPS prepared in accordance with GAAP. Reconciliations of reported netincome and reported EPS to non-GAAP net income and non-GAAP EPS,respectively, are included at the end of this press release.

This press release contains forward-looking statements, includingstatements regarding the company's performance, growth, momentum,product capabilities, technology leadership, strategic position,financial results and delivery of stockholder value; customer demandand industry growth. Forward-looking statements may contain words suchas "expect," "anticipate," "believe," "may," "should," "will,""estimate," "forecast," "continue" or similar expressions, and includethe assumptions that underlie such statements. These statements aresubject to known and unknown risks and uncertainties that could causeactual results to differ materially from those expressed or implied bysuch statements. Risks and uncertainties include, but are not limitedto: the sustainability of demand in the semiconductor andsemiconductor equipment industries, which is subject to many factors,including global economic conditions, business spending, consumerconfidence, demand for electronic products and integrated circuits,and geopolitical uncertainties; customers' capacity requirements,including capacity utilizing the latest technology; the timing, rate,amount and sustainability of capital spending for new technology, suchas 300mm and 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 company's ability toeffectively manage its resources and production capability, includingits supply chain; and other risks described in Applied Materials'Securities and Exchange Commission filings, including its reports onForms 10-K, 10-Q and 8-K. All forward-looking statements are based onmanagement's estimates, projections and assumptions as of the datehereof. The company undertakes no obligation to update anyforward-looking statements.

Applied Materials will discuss its first fiscal quarter 2006results, along with its outlook for the second fiscal quarter of 2006,on a conference call today beginning at 1:30 p.m. Pacific Time. Awebcast of the conference call will be available on Applied Materials'web site under the "Investors" section.

Applied Materials, Inc. (Nasdaq:AMAT), is the global leader innanomanufacturing technology solutions for the electronics industrywith a broad portfolio of innovative equipment, service and softwareproducts. At Applied Materials, we apply nanomanufacturing technologyto improve the way people live. Learn more atwww.appliedmaterials.com.

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

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Three Months Ended
January 30, January 29,
(In thousands, except per share amounts) 2005 2006
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Net sales $ 1,780,576 $ 1,857,592
Cost of products sold 990,351 1,019,893
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Gross margin 790,225 837,699

Operating expenses:
Research, development and engineering 241,762 272,877
Marketing and selling 77,830 100,773
General and administrative 88,423 105,263
Restructuring and asset impairments - 214,847
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Income from operations 382,210 143,939

Interest expense 9,272 8,705
Interest income 36,658 48,691
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Income before income taxes 409,596 183,925

Provision for income taxes 120,831 41,145
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Net income $ 288,765 $ 142,780
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Earnings per share:
Basic $ 0.17 $ 0.09
Diluted $ 0.17 $ 0.09

Weighted average number of shares:
Basic 1,672,671 1,598,260
Diluted 1,687,140 1,608,165
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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

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October 30, January 29,
(In thousands) 2005 2006
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ASSETS

Current assets:
Cash and cash equivalents $ 990,342 $ 1,107,299
Short-term investments 4,944,999 4,700,837
Accounts receivable, net 1,615,504 1,754,545
Inventories 1,034,093 1,023,175
Deferred income taxes 592,742 667,633
Assets held for sale - 55,763
Other current assets 271,003 232,143
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Total current assets 9,448,683 9,541,395

Property, plant and equipment 3,011,110 2,750,498
Less: accumulated depreciation and
amortization (1,736,086) (1,667,248)
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Net property, plant and equipment 1,275,024 1,083,250

Goodwill, net 338,982 347,049
Purchased technology and other intangible
assets, net 81,093 80,841
Deferred income taxes and other assets 125,375 157,373
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Total assets $ 11,269,157 $ 11,209,908
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LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt $ 7,574 $ 2,567
Accounts payable and accrued expenses 1,618,042 1,603,963
Income taxes payable 139,798 271,973
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Total current liabilities 1,765,414 1,878,503

Long-term debt 407,380 407,380
Other liabilities 167,814 256,446
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Total liabilities 2,340,608 2,542,329
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Stockholders' equity:
Common stock 16,067 15,866
Additional paid-in capital 721,937 371,819
Retained earnings 8,227,793 8,322,978
Accumulated other comprehensive loss (37,248) (43,084)
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Total stockholders' equity 8,928,549 8,667,579
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Total liabilities and stockholders'
equity $ 11,269,157 $ 11,209,908
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APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

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Three Months Ended
January 30, January 29,
(In thousands, except per share amounts) 2005 2006
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Non-GAAP Net Income

Reported net income (GAAP basis) $ 288,765 $ 142,780
Restructuring and asset impairments - 214,847
Equity-based compensation expense - 51,952
Income tax effect of non-GAAP adjustments - (97,480)
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Non-GAAP net income $ 288,765 $ 312,099
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Non-GAAP Net Income Per Diluted Share

Reported net income per diluted share (GAAP
basis) $ 0.17 $ 0.09
Restructuring and asset impairments - 0.08
Equity-based compensation expense - 0.02
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Non-GAAP net income - per diluted share $ 0.17 $ 0.19
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Shares used in diluted shares calculation 1,687,140 1,608,165
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