Applied Magnetics Corp. Announces Unaudited Second-Quarter Fiscal-Year 1998 Results.

GOLETA, Calif.--(BUSINESS WIRE)--April 20, 1998--Applied Magnetics Corp. (NYSE:APM) Monday reported a net loss of $31.9 million, or $1.33 basic net loss per share, for the second quarter of fiscal 1998 on sales of $58.8 million, compared with net income of $31.1 million, or $1.06 fully diluted earnings per share, on sales of $126.3 million for the same period last year.

Net sales for the second quarter of fiscal 1998 decreased 53.4 percent, compared with the same quarter in the prior-year period and decreased 21.0 percent, from net sales of $74.4 million in the first quarter of fiscal 1998.

Due to significantly lower sales volumes, pricing declines and lower yields, the gross margin in the second quarter of fiscal 1998 was 6.3 percent, compared with a gross margin of 38.4 percent for the same period last year and a negative 9.5 percent in the first quarter of fiscal 1998.

Operating losses and the decline in revenue for the first half of fiscal 1998 are a reflection of the current softness in market demand being experienced by component suppliers to the disk drive industry, as well as declining prices and a change in the mix of head-gimbal assembly and headstack assembly products.

During the first quarter of fiscal 1998 the company implemented a cost-reduction program in response to declining revenues. As a result, expenses were reduced by more than 20 percent from FQ198 to FQ298 and are planned to decrease further in FQ398.

The company had previously expected that revenue would be flat from FQ198 to FQ298. However, continued reduction in demand for the company's inductive thin-film products from its largest customer resulted in lower revenues.

It is currently anticipated that revenue may decline more than 25 percent in FQ398 from FQ298, then increase during FQ498 as MR head shipments become a significant source of revenue, pending qualification on 2.8 gigabyte per 3.5-inch disk MR programs.

Inductive thin-film revenue will continue to decline during the second half of fiscal 1998. However, production volumes are expected to continue through the first quarter of fiscal 1999, upon successful qualification of the company's 2.1 gigabyte per 3.5-inch disk inductive thin-film product currently under evaluation by one of the company's customers.

MR product qualifications are also underway for capacities of 3.4 gigabyte and above 3.5-inch disk and the company plans to deliver samples of its first giant magnetoresistive ("GMR") products during FQ398.

Research and development ("R&D") expenses of $28.4 million in the second quarter of fiscal 1998 increased from $10.8 million in the same period last year and $23.3 million in the first quarter of fiscal 1998.

The company has been focusing the majority of its technical resources on its new production program qualifications utilizing MR technology and on development of GMR head technology. As a result, there continues to be a significant increase in R&D expenses during fiscal 1998.

Cash and equivalents at April 4, 1998, decreased to $86.9 million, from $162.3 million at Sept. 27, 1997. Additional credit available under the company's existing credit facilities was $46.2 million. Capital expenditures for the quarter ended April 4, 1998, were $16.6 million.

The company believes it will have sufficient cash flows from existing cash reserves, operations and available credit facilities to support the company's transition to MR production during fiscal 1998.

Applied Magnetics is a leading independent manufacturer of magnetic recording heads, head-gimbal assemblies ("HGAs") and headstack assemblies ("HSAs") for computer hard disk drives.

Founded in 1957, Applied Magnetics is the oldest independent U.S.-based supplier of disk heads to the merchant market. With headquarters in Goleta (near Santa Barbara), the company employs more than 7,000 around the world, with facilities in Malaysia, Korea, Singapore and China. The company's World Wide Web site can be found at www.appmag.com. -0-

Certain statements included in this release are forward-looking and involve risks and uncertainties, and actual results may differ materially. Factors that could cause results to differ include, but are not limited to, the company's successful transition to volume production of MR disk head products with profitable yields; short qualification and product life cycles and process yields related to its new MR products; the limited number of customers and changes in customers' short- and long-range plans; dependence on continued customer demand for the company's pico form factor inductive thin-film products; competitive pricing pressures due to current industry oversupply conditions; the company's ability to manage inventory levels; domestic and international competition in the company's product areas; risks related to international transactions, general economic risks and uncertainties and other risks disclosed in the company's periodic reports filed with the Securities and Exchange Commission. -0-

               Applied Magnetics Corp. and Subsidiaries
             Condensed Consolidated Summary of Operations
                             (Unaudited)
            (In thousands, except share and per-share data)

                             Three Months Ended      Six Months Ended
                            April 4,    March 29,  April 4,    March 29,
                              1998        1997       1998        1997

Net sales                   $ 58,843    $126,311   $133,255    $247,939
Gross profit (loss)            3,721      48,549     (3,357)     95,146

Research and development
 expenses                     28,441      10,815     51,750      21,963
Selling, general &
 administrative expenses       1,790       2,288      3,575       4,332
Restructuring charges/a         --          --        8,400        --
Terminated merger costs/b       --         2,906       --         2,906

Total operating expenses      30,231      16,009     63,725      29,201

Income (loss) from
 operations                  (26,510)     32,540    (67,082)     65,945

Interest expense, net         (2,094)     (1,091)    (2,866)     (2,380)
Other income (expense)        (3,080)        158     (1,455)        437

Income (loss) before taxes   (31,684)     31,607    (71,403)     64,002
Provision for income taxes       247         516        277       1,039

Net income (loss)           $(31,931)   $ 31,091   $(71,680)   $ 62,963

Net income (loss) per share:/c

 Earnings per common share  $  (1.33)   $   1.32   $  (3.00)   $   2.69
 Earnings per common share
  -- assuming dilution      $  (1.33)   $   1.06   $  (3.00)   $   2.16

Weighted average number of
 common and common equivalent
 shares outstanding:

  Common shares               23,925      23,519     23,891      23,393
  Common shares -- assuming
   dilution                   23,925      31,178     23,891      31,020


(a) For the quarter ended Dec. 27, 1997, the company recorded a
pre-tax restructuring charge of approximately $8.4 million primarily
in connection with the planned shut down of its production facility
in Ireland and writedown of certain tooling and equipment.

(b) Terminated merger costs for the three and six months ended March
29, 1997, include legal and accounting fees, financial advisory
fees and miscellaneous other expenses related to the February 1997
proposed business combination between the company and Read-Rite
Corp. that was subsequently withdrawn on March 14, 1997.

(c) Earnings per common share is computed by dividing net income by
the weighted average number of shares of common stock outstanding
during the period.  Earnings per common share -- assuming dilution
is computed based on the weighted average number of shares of common
stock and common stock equivalents outstanding during the period and
as if the company's Convertible Subordinated Debentures ("Convertible
Debentures") were converted into common stock at the beginning of
the period after giving retroactive effect to the elimination of
interest expense, net of income tax effect, applicable to the
Convertible Debentures.  During a loss period, the assumed exercise
of in-the-money stock, options and conversion of Convertible Debentures
have an antidilutive effect.  As a result, these shares are not included
in the weighted average shares outstanding of 23,925,354 used in the
calculation of basic and fully diluted loss per common share as of
April 4, 1998.


               Applied Magnetics Corp. and Subsidiaries
                 Condensed Consolidated Balance Sheets
                             (Unaudited)
                 (In thousands, except per-share data)

                                              April 4,       Sept. 27,
                                                1998           1997

Current assets:
  Cash and equivalents                       $ 86,943       $162,302
  Accounts receivable, net                     28,047         52,924
  Inventories                                  31,815         51,438
  Prepaid expenses and other                   14,487         11,420

Total current assets                          161,292        278,084

Property, plant and equipment,
  at cost                                     396,310        371,224
Less:  accumulated depreciation              (185,623)      (181,732)

Property, plant and equipment, net            210,687        189,492

Other assets                                   11,962         10,412

Total assets                                 $383,941       $477,988

Liabilities and Shareholders' Investment

Current liabilities:
  Current portion of
    long-term debt                           $    552       $    513
  Bank notes payable                           49,751         50,188
  Accounts payable                             23,178         49,103
  Accrued payroll and benefits                  9,178         11,287
  Other current liabilities                    10,029          5,829

Total current liabilities                      92,688        116,920

Long-term debt, net                           118,944        116,030
Other liabilities                               2,680          4,257

Shareholders' investment:
Common stock, 10 cents par
 value, authorized 40 million
 shares, issued 24,091,844 shares at
 April 4, 1998, and 23,976,711 shares
 at Sept. 27, 1997                              2,409          2,398
Paid-in capital                               191,725        191,185
Retained earnings (deficit)                   (22,377)        49,303
Treasury stock, at cost (130,233
 shares as of April 4, 1998, and
 128,384 shares at Sept. 27, 1997)             (1,577)        (1,554)
Unearned restricted stock
  compensation                                   (551)          (551)

Total shareholders' investment                169,629        240,781

Total liabilities and
  shareholders' investment                   $383,941       $477,988

CONTACT: Applied Magnetics Corp., Goleta

Craig D. Crisman, 805/683-5353