10-QPeriod: Q3 FY2002

APPLIED MATERIALS INC /DE Quarterly Report for Q3 Ended Jul 28, 2002

Filed September 9, 2002For Securities:AMAT

Summary

Applied Materials Inc. (AMAT) reported its third-quarter results for the period ending July 28, 2002. The company faced a significant industry downturn, evident in the substantial decrease in net sales for the nine months ended July 28, 2002, which were down 41% compared to the prior year. This decline was attributed to the ongoing weakness in the semiconductor industry and reduced capital spending by customers. Despite the challenging environment, the company noted a modest recovery beginning in the second fiscal quarter of 2002, driven by consumer and wireless device demand, and continued investment in advanced semiconductor technologies. The order outlook remains uncertain in the near to intermediate term due to macroeconomic factors and end-market weakness. AMAT's financial condition remained strong, with ample liquidity from cash, cash equivalents, and short-term investments sufficient to meet its needs for the next 12 months. The company continues to manage its cost structure and operational expenses effectively amidst the cyclical industry conditions.

Key Highlights

  • 1Net sales for the nine months ended July 28, 2002, decreased by 41% year-over-year, reflecting a significant industry downturn.
  • 2The company experienced a modest recovery in the semiconductor industry starting in Q2 2002, driven by consumer and wireless device demand.
  • 3New orders increased by 47% in Q3 2002 compared to Q3 2001, indicating improving demand in certain segments.
  • 4Operating expenses were reduced by 20% year-over-year for the nine months ended July 28, 2002, due to cost control measures.
  • 5Gross margin for the nine months ended July 28, 2002, was 40.2%, down from 45.8% in the prior year, primarily due to factory underabsorption from lower business volume.
  • 6The company maintained strong liquidity with $4.9 billion in cash, cash equivalents, and short-term investments at quarter-end, sufficient for the next 12 months.
  • 7Applied Materials is involved in several ongoing legal proceedings, with the litigation against Novellus Systems, Inc. concerning PVD technology being a notable ongoing case.

Frequently Asked Questions

The primary driver for the decline in net sales was the severe downturn in the semiconductor industry, characterized by reduced capital spending by semiconductor manufacturers due to continued weakness in the macro-economic climate and consumption of electronic goods. This led to customers reevaluating, rescheduling, or canceling orders.

Yes, the company noted a modest recovery in the semiconductor industry beginning in the second fiscal quarter of 2002, driven by consumer-related and wireless device demand. New orders also showed a significant increase in the third fiscal quarter of 2002 compared to the same quarter in the prior year.

Applied Materials has implemented cost reduction activities and limited discretionary expenditures. Operating expenses for the nine months ended July 28, 2002, declined by 20% year-over-year. However, research, development, and engineering spending saw a lower rate of reduction as the company focused on strategic product development programs.

The company's financial condition remained strong, with $4.9 billion in cash, cash equivalents, and short-term investments at July 28, 2002. Management believes this liquidity, along with cash generated from operations and financing capacity, is sufficient to meet liquidity requirements for the next 12 months.