10-KPeriod: FY2006

APPLIED MATERIALS INC /DE Annual Report, Year Ended Oct 29, 2006

Filed December 14, 2006For Securities:AMAT

Summary

Applied Materials Inc. (AMAT) demonstrated a strong recovery in fiscal year 2006, with net sales increasing by 31% to $9.17 billion. This growth was driven by a significant rebound in the semiconductor and related industries, leading to a 55% increase in new orders compared to the previous year. The company's Silicon segment saw robust performance, with sales up 34% year-over-year, reflecting increased customer investment in advanced manufacturing technologies and higher wafer starts. The company also made strategic acquisitions during the year, including Applied Films, to expand its reach into adjacent markets like solar PV and flexible electronics. Despite increased research and development spending, which rose to $1.2 billion (13% of net sales), AMAT maintained a healthy gross margin of 46.8%, indicating effective cost management and strong product demand. The company also continued its commitment to shareholder returns through stock repurchases and increased dividend payments. While the semiconductor industry remains cyclical, the fiscal year 2006 results indicate a positive trend and a strong operational performance for Applied Materials, positioning it well for future growth in its core and expanding markets.

Key Highlights

  • 1Net sales increased by 31% to $9.17 billion in fiscal year 2006.
  • 2New orders grew by 55% to $9.89 billion, signaling a strong recovery in demand.
  • 3The Silicon segment experienced significant growth, with net sales up 34% to $5.97 billion.
  • 4Gross margin improved to 46.8% from 44.1% in the prior year, driven by higher volumes and cost efficiencies.
  • 5Research, Development, and Engineering (RD&E) expenses increased to $1.2 billion (13% of net sales) to support new product development.
  • 6The company completed strategic acquisitions, including Applied Films, to expand into new markets.
  • 7Backlog increased to $3.4 billion at the end of fiscal year 2006, indicating strong future demand.

Frequently Asked Questions

Applied Materials' net sales for fiscal year 2006 were $9.17 billion, a significant increase from $6.99 billion in fiscal year 2005.

The revenue growth was primarily driven by a strong recovery in the semiconductor and related industries, leading to increased customer capital investments and a 55% year-over-year increase in new orders. Key segments like Silicon also saw substantial growth.

Applied Materials increased its investment in RD&E to $1.2 billion, but maintained a healthy gross margin of 46.8% due to higher sales volumes and cost management initiatives. Marketing, selling, general, and administrative expenses increased, partly due to business transformation initiatives and equity-based compensation.

Yes, Applied Materials completed several strategic acquisitions, most notably the acquisition of Applied Films, to expand its capabilities into adjacent markets such as solar photovoltaic cells, flexible electronics, and energy-efficient glass.

The company's backlog increased to $3.4 billion at the end of fiscal year 2006, up from $2.57 billion in the prior year. This increase indicates strong future demand for Applied Materials' products and services.