STOCKREPORTS		 Applied Materials, Inc. Nasdaq Symbol AMAT
In S&P 500
19-JUL-97 Industry:
Equipment (Semiconductor)		 Summary: This company, the world's largest manufacturer of wafer fabrication equipment for the semiconductor industry, produces deposition, etching and ion implantation systems.

Recent Price 81.31
52 Wk Range 81.31 - 23.50		 Yield Nil
12-Mo. P/E 39.9

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
3-
Fair Value
78.50
Risk
HIGH
Earn/Div Rank
B
Technical Evaluation:
BULLISH since 11/96
Rel. Strength Rank (1 Lowest - 99 Highest)
92
Insider Activity
Neutral

Overview 16-MAY-97

We have once again raised our sales and earnings outlook for FY 97 (Oct.), as AMAT is distinguishing itself by recovering very quickly from the current slump in the semiconductor equipment industry. Revenues are likely to decline a little more than 5% in FY 97. The company is faring much better than its industry peers largely due to the strength of its products, which enable the production of semiconductors with linewidths (transistor size) of 0.25 micron or below. Longer-term, AMAT is also well positioned in equipment that will produce semiconductors from silicon wafers with 12 inch (300 millimeter) diameters. Margins will be hurt by the lower volume, although a recent restructuring and other cost-saving measures have had a positive effect thus far in FY 97. We look for the company to earn $2.45 a share in FY 97, excluding a $0.32 charge related to acquisitions recorded in the first quarter. Given the strong momentum AMAT is currently experiencing through all of its businesses, we look for EPS to jump to $3.70 in FY 98.

Valuation 16-MAY-97

Although the earnings outlook for AMAT continues to improve, we have lowered our ranking on the shares to "hold". The shares have nearly tripled in price since their 1996 bottom, and we think the stock may need some time to digest the gains. This is especially true in light of the overcapacity that remains for DRAM (dynamic random access memory) chips. Trading at approximately 17 times our estimate for FY 98 EPS, the shares are fairly valued. AMAT remains a solid holding for long-term investors willing to assume an above-average degree of risk. The company is the market leader in a growing industry, which should allow it to post solid long term earnings gains, although results will remain cyclical.

Key Stock Statistics

S&P EPS Est. 1997 2.13
P/E on S&P Est. 1997 38.2
S&P EPS Est. 1998 3.70
Dividend Rate/Share Nil
Shs. outstg. (M) 181.5
Avg. daily vol. (M) 4.375
Tang. Bk. Value/Share 13.80
Beta 2.70
Shareholders 3,800
Market cap. (B) $ 14.8
Inst. holdings 66%
Value of $10,000 invested 5 years ago:$ 179,858

Fiscal Year Ending Oct. 31

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 835.8 1,041 506.1 340.5 216.0 167.0
Q2 900.9 1,128 675.4 411.3 256.0 180.0
Q3 NA 1,115 897.7 440.2 281.4 194.0
Q4 NA 861.0 982.7 467.8 327.4 210.0
Year NA 4,145 3,062 1,660 1,080 751.0

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.16 0.93 0.38 0.22 0.09 0.05
Q2 0.54 1.01 0.54 0.32 0.13 0.07
Q3 E0.67 0.92 0.79 0.34 0.17 0.08
Q4 E0.76 0.40 0.84 0.36 0.21 0.08
Year E2.13 3.27 2.56 1.25 0.60 0.27

Dividend Data: No cash has been paid. Two-for-one stock splits were effected in 1995, 1993, 1992 and 1986. A "poison pill" stock purchase rights plan was adopted in 1989.

Business Summary 16-MAY-97

Applied Materials is the leading producer of wafer fabrication systems for the worldwide semiconductor industry. The company also sells related spare parts and services.

Contributions by geographic area in FY 96 (Oct.) were:

Sales Profits
North America 31% 32%
Japan 24% 27%
Korea 14% 12%
Europe 17% 11%
Asia/Pacific 15% 18%

A fundamental step in fabricating a semiconductor is deposition, a process of layering either electrically insulating (dielectric) or electrically conductive material on the wafer. The company currently participates in chemical vapor deposition (CVD), physical vapor deposition (PVD) and epitaxial and polysilicon deposition.

AMAT is also a leader in etch systems. Before etch processing begins, a wafer is patterned with photoresist during photolithography. Etching then selectively removes material from areas which are not covered by the photoresist.

In February 1996, AMAT launched the Metal Etch DPS (Decoupled Plasma Source) Centura and Centura HDP-CVD, a new generation of Etch and CVD products aimed at producing critical interconnect device structures for advanced logic and memory chips.

The company also manufactures ion implantation equipment. During ion implantation, silicon wafers are bombarded by a high-velocity beam of electrically charged ions. These ions penetrate the wafer at selected sites and change the electrical properties of the implanted area.

In December 1995, AMAT unveiled a new family of products to address the rapidly growing CMP (Chemical Mechanical Polishing) market, a process increasingly being used in the manufacture of semiconductors.

The company is also a 50% stockholder in Applied Komatsu Technology, Inc., which produces thin film transistor (TFT) manufacturing systems for active-matrix liquid crystal displays.

Important Developments

May '97 The company said that orders in the second quarter of FY 97 improved 10.5% from the first quarter of FY 97. The higher orders reflect customers accelerating their investment plans, especially for equipment which offers cutting-edge semiconductor production technology. AMAT also indicated that orders were particularly strong for the North American logic and microprocessor markets.

Capitalization

Long Term Debt: $227,808,000 (4/27/97).

Per Share Data ($)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Tangible Bk. Val. 13.15 9.95 5.74 3.72 3.03 2.41 2.26 1.96 1.58 1.24
Cash Flow 4.07 3.09 1.60 0.84 0.46 0.37 0.37 0.47 0.39 0.08
Earnings 3.27 2.56 1.26 0.60 0.27 0.19 0.25 0.39 0.30 0.00
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 44 3/4 59 7/8 27 1/4 20 9 3/4 4 3/4 5 1/8 4 1/8 4 1/2 4 1/4
- Low 21 3/4 18 1/2 18 1/8 8 4 2 7/16 2 1/16 2 3/4 2 1/8 1 3/16
P/E Ratio - High 14 23 22 33 36 25 20 11 15 NM
- Low 7 7 14 13 15 13 8 7 7 NM

Income Statement Analysis (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Revs. 4,145 3,062 1,660 1,080 751 639 567 502 363 174
Oper. Inc. 1,078 777 396 199 96.1 76.5 74.7 93.6 79.4 10.5
Depr. 149 83.2 58.5 37.8 27.7 24.5 16.4 11.7 11.4 9.3
Int. Exp. 20.7 21.4 16.0 14.2 15.2 14.0 6.7 2.8 3.2 3.3
Pretax Inc. 922 699 331 150 58.9 40.4 54.1 84.4 66.7 0.6
Eff. Tax Rate 35% 35% 35% 34% 33% 35% 37% 39% 40% 42%
Net Inc. 600 454 214 100 39.5 26.2 34.1 51.5 40.0 0.3

Balance Sheet & Other Fin. Data (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Cash 404 769 422 266 223 140 72.0 107 101 71.0
Curr. Assets 2,693 2,312 1,231 776 582 434 367 343 276 179
Total Assets 3,638 2,965 1,703 1,120 854 661 558 434 339 233
Curr. Liab. 935 862 496 381 248 200 195 143 117 48.0
LT Debt 275 280 209 121 118 124 54.0 29.0 11.0 21.0
Common Eqty. 2,370 1,784 966 599 474 325 300 254 201 154
Total Cap. 2,658 2,075 1,187 727 599 456 362 290 219 183
Cap. Exp. 453 266 186 99 67.0 67.0 111 43.0 20.0 12.0
Cash Flow 748 547 272 137 67.2 50.7 50.5 63.6 52.0 9.1

Curr. Ratio 2.9 2.7 2.5 2.0 2.3 2.2 1.9 2.4 2.4 3.7
% LT Debt of Cap. 10.3 13.5 17.6 16.7 19.8 27.2 14.8 10.2 5.2 11.5
% Net Inc.of Revs. 14.4 14.8 12.9 9.2 5.3 4.1 6.0 10.3 11.0 0.2
% Ret. on Assets 18.1 19.5 14.9 10.0 4.9 4.3 6.8 13.2 13.9 0.2
% Ret. on Equity 28.9 33.0 26.8 18.4 9.3 8.3 12.1 22.4 22.3 0.3

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--3050 Bowers Ave., Santa Clara, CA 95054-3299. Tel--(408) 727-5555. Fax--(408) 986-8352. Website--http://www.AppliedMaterials.com Chrmn & CEO--J. C. Morgan. Pres--D. Maydan. SVP & CFO--Gerald F. Taylor. Secy--D. A. Slichter. Treas--Nancy H. Handel. Investor Contact--Susan Overstreet. Dirs--M. Armacost, H. M. Dwight Jr., G. B. Farnsworth, P. V. Gerdine, T. Kawanishi, P. R. Low, D. Maydan, J. C. Morgan, A. J. Stein. Transfer Agent--Harris Trust Co. of California, LA. Incorporated--in California in 1967; reincorporated in Delaware in 1987. Empl-- 9,700. S&P Analyst: Stephen T. Madonna, CFA


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