Applied Materials Announces Results for the Fourth Quarter and Fiscal Year 2002; Fourth Quarter New Orders of $1.56 Billion and Net Sales of $1.45 Billion.

Business Editors and High Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 13, 2002

Applied Materials, Inc., the world's largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its fourth fiscal quarter ended October 27, 2002. Net sales were $1.45 billion, down 1 percent from $1.46 billion for the third fiscal quarter of 2002, and up 14 percent from $1.26 billion for the fourth fiscal quarter of 2001. Net income for the fourth fiscal quarter of 2002 was $147 million, or $0.09 per diluted share, up 28 percent from $115 million, or $0.07 per diluted share, for the third fiscal quarter of 2002, and up from a net loss of $82 million, or $0.05 per diluted share, reported for the fourth fiscal quarter of 2001.

New orders of $1.56 billion for the fourth fiscal quarter of 2002 decreased 12 percent from $1.78 billion for the third fiscal quarter of 2002, and increased 41 percent from $1.10 billion for the fourth fiscal quarter of 2001. Regional distribution of new orders for the fourth fiscal quarter of 2002 was: Taiwan 21 percent, North America 20 percent, Japan 19 percent, Europe 14 percent, Southeast Asia and China 14 percent, and Korea 12 percent. Backlog at the end of the fourth fiscal quarter of 2002 decreased to $3.19 billion, from $3.30 billion at the end of the third fiscal quarter of 2002.

Gross margin for the fourth fiscal quarter of 2002 was 41.7 percent, compared to 41.5 percent for the third fiscal quarter of 2002 and 37.1 percent for the fourth fiscal quarter of 2001. Net income as a percentage of net sales was 10.2 percent for the fourth fiscal quarter of 2002, up from 7.9 percent for the third fiscal quarter of 2002 and up from a loss of 6.5 percent for the fourth fiscal quarter of 2001.

"We are pleased with the Company's results for our fourth quarter despite a difficult business environment," said James C. Morgan, chairman and chief executive officer. "The semiconductor industry continues to face uncertain economic conditions worldwide and reduced demand for electronic products. In recent weeks, a number of semiconductor manufacturers have announced reductions in their capital spending budgets, affecting the market outlook for equipment suppliers. We have implemented additional cost reduction measures to realign our operations with current business conditions, including a reduction in force announced November 4, 2002."

The Company also announced results for its fiscal year ended October 27, 2002. Fiscal 2002 new orders were $6.14 billion, a one percent increase from fiscal 2001 new orders of $6.10 billion. Net sales for fiscal 2002 were $5.06 billion, a 31 percent decrease from fiscal 2001 net sales of $7.34 billion. Net income for fiscal 2002 was $269 million, or $0.16 per diluted share, down 47 percent from $508 million, or $0.30 per diluted share, for fiscal 2001. During the fourth fiscal quarter of 2002, the Company reduced its fiscal 2002 effective tax rate to 21%, from 29.5% for fiscal 2001. This one-time rate reduction was due primarily to additional Foreign Sales Corporation income tax benefits, and resulted in an increase of $0.02 per diluted share for the fourth fiscal quarter of 2002 and for fiscal year 2002.

"This past year, while controlling costs, we continued to invest strategically in new technology development and in strengthening our global infrastructure. As a result, we achieved significant market share gains for our products, especially copper/low k interconnect, advanced transistor and 300mm applications. We have also increased our customer support capabilities especially in Asia, a region of expected high-growth potential, to maximize the utilization and efficiency of our systems in customer manufacturing facilities.

"Because we have engaged with our customers early in their technology development process, we believe that Applied Materials is well-positioned to capitalize on changes now taking place in the semiconductor industry and opportunities that lie ahead," concluded Morgan.

This press release contains certain forward-looking statements, including, but not limited to, those relating to the Company's business in Asia, the Company's strategic position and the semiconductor industry's outlook. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: the length and severity of the economic and industry downturn; global uncertainties; the Company's ability to maintain effective cost controls and to timely align its cost structure with market conditions; the demand for electronic products; changes in demand for semiconductors and customer capacity requirements, including capacity utilizing the latest technology; changes in the timing and amount of customers' investments in new technology; the Company's ability to develop, deliver and support a broad range of products and services on a timely basis; the Company's successful and timely development of new markets, products, processes and services and other risks described in Applied Materials' Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information in this press release.

Applied Materials will be discussing its fourth fiscal quarter results, along with its outlook for the first fiscal quarter of 2003, on a conference call today beginning at 1:30 p.m. Pacific Time. A webcast of the conference call will be available on Applied Materials' Web site under the "Investors" section.

Applied Materials (Nasdaq: AMAT), the largest supplier of products and services to the global semiconductor industry, is one of the world's leading information infrastructure providers. Applied Materials enables Information for Everyone(TM) by helping semiconductor manufacturers produce more powerful, portable and affordable chips.

Applied Materials' Web site is http://www.appliedmaterials.com.

                        APPLIED MATERIALS, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                          (Unaudited)
                      Three Months Ended        Fiscal Year Ended
----------------------------------------------------------------------
(In thousands,
 except per share    Oct. 28,     Oct. 27,     Oct. 28,     Oct. 27,
 amounts)              2001         2002         2001         2002
----------------------------------------------------------------------

Net sales           $1,264,673   $1,445,698   $7,343,248   $5,062,312
Cost of products
 sold                  795,967      843,372    4,091,215    3,005,651
                    ----------   ----------   ----------   ----------
Gross margin           468,706      602,326    3,252,033    2,056,661

Operating expenses:
 Research,
  development
  and engineering      272,548      272,639    1,198,799    1,052,269
 Marketing and
  selling              119,026      107,580      508,214      385,693
 General and
  administrative        87,229       87,251      393,710      323,262
 Non-recurring items   148,600            -      221,164       85,479
                    ----------   ----------   ----------   ----------
Income/(loss)
 from operations      (158,697)     134,856      930,146      209,958

Interest expense        12,659       13,189       47,640       49,357
Interest income         54,597       46,131      221,296      179,910
                    ----------   ----------   ----------   ----------
Income/(loss) before
 income taxes and
 cumulative effect
 of change in
 accounting
 principle            (116,759)     167,798    1,103,802      340,511

Provision/(benefit)
 for income taxes      (34,441)      20,556      328,574       71,507
                    ----------   ----------   ----------   ----------
Income/(loss) before
 cumulative effect
 of change in
 accounting
 principle             (82,318)     147,242      775,228      269,004

Cumulative effect of
 change in
 accounting
 principle, net of
 tax                         -            -     (267,399)           -
                    ----------   ----------   ----------   ----------
Net income/(loss)   $  (82,318)  $  147,242   $  507,829   $  269,004
                    ----------   ----------   ----------   ----------

Earnings/(loss) per
 share:
 Basic-continuing
  operations        $    (0.05)  $     0.09   $     0.48   $     0.16
 Basic-cumulative
  effect of change
  in accounting
  principle                  -            -        (0.17)           -
                    ----------   ----------   ----------   ----------
   Total basic      $    (0.05)  $     0.09   $     0.31   $     0.16
                    ----------   ----------   ----------   ----------

 Diluted-continuing
  operations        $    (0.05)  $     0.09   $     0.46   $     0.16
 Diluted-cumulative
  effect of change
  in accounting
  principle                  -            -        (0.16)           -
                    ----------   ----------   ----------   ----------
   Total diluted    $    (0.05)  $     0.09   $     0.30   $     0.16
                    ----------   ----------   ----------   ----------

Weighted average
 number of shares:
  Basic              1,632,208    1,647,380    1,626,404    1,643,612
  Diluted            1,632,208    1,684,314    1,694,658    1,701,557
----------------------------------------------------------------------


                        APPLIED MATERIALS, INC.
                 CONSOLIDATED CONDENSED BALANCE SHEETS
----------------------------------------------------------------------
                                       October 28,      October 27,
(In thousands)                            2001              2002
----------------------------------------------------------------------

ASSETS

Current assets:
  Cash and cash equivalents           $ 1,356,304      $ 1,284,791
  Short-term investments                3,485,088        3,644,735
  Accounts receivable, net                776,451        1,046,016
  Inventories                           1,412,997        1,273,816
  Deferred income taxes                   551,785          565,936
  Other current assets                    199,549          257,499
                                      -----------      -----------
Total current assets                    7,782,174        8,072,793

Property, plant and equipment, net      1,706,488        1,764,937
Other assets                              339,848          387,035
                                      -----------      -----------
Total assets                          $ 9,828,510      $10,224,765
                                      -----------      -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                       $         -      $    40,323
  Current portion of long-term debt         4,807            9,453
  Accounts payable and
   accrued expenses                     1,477,531        1,348,156
  Income taxes payable                     50,478          103,524
                                      -----------      -----------
Total current liabilities               1,532,816        1,501,456

Long-term debt                            564,805          573,853
Deferred income taxes and
  other liabilities                       124,152          129,807
                                      -----------      -----------
Total liabilities                       2,221,773        2,205,116
                                      -----------      -----------
Stockholders' equity:
  Common stock                             16,315           16,480
  Additional paid-in capital            1,872,967        2,022,546
  Retained earnings                     5,693,010        5,962,014
  Accumulated other comprehensive
   income                                  24,445           18,609
                                      -----------      -----------
Total stockholders' equity              7,606,737        8,019,649
                                      -----------      -----------
Total liabilities and
  stockholders' equity                $ 9,828,510      $10,224,765
----------------------------------------------------------------------