應用材料 (AMAT) 2003 Q3 法說會逐字稿

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  • Operator

  • Welcome to the Applied Materials third quarter fiscal 2003 earnings release conference call.

  • During the presentation, all participants will be in a listen-only mode.

  • Afterwards you will be invited in participate in a question and answer session.

  • At that time if you have a question, press star one on your telephone keypad.

  • As a reminder this conference is being recorded today, Tuesday, August 12, 2003.

  • I would now like to turn the conference over to Paul Bowman.

  • Managing Director of Investor Relations, Applied Materials.

  • Please go ahead, sir.

  • - Managing Director of Investor Relations

  • Good afternoon, welcome to Applied Materials third quarter 2003 earnings conference call.

  • With me today are Mike Splinter, President and CEO;

  • Joe Bronson, Executive Vice President and Chief Financial Officer; and Joe Sweeney, Group Vice President, Legal Affairs and Intellectual Property and Corporate Secretary Financial results for the fiscal third quarter were released on business wire shortly after 1:05 p.m.

  • Pacific daylight time.

  • You can obtain a copy of the news release on the investor sector of our website at www.appliedmaterials.com.

  • Today's earnings call contains forward-looking statements that 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, those set forth in today's earnings news release, and in the company's filings with the Securities and Exchange Commission including Form 10-Q reports for the quarters ending January 26th, 2003 and April 27th, 2003 and the company's form 10-K report for the fiscal year ending October 27, 2002.

  • The company assumes no obligation to update the information provided in these presentations.

  • Today's presentation also contains non-GAAP financial measures.

  • Reconciliation of GAAP financial measures to nonGAAP financial measures are contained in the earnings press release issued today and on May 13, 2003 for the prior quarter which are on the website again at www.appliedmaterials.com.

  • And are also furnished to the SEC.

  • Today's call will begin with an update on the business Mike Splinter followed Joe Bronson with an analysis of the third quarter financial results followed by fiscal fourth quieter 2003 financial targets.

  • After these remarks we will open up the conference call for questions.

  • Since we would like to finish by 2:45 p.m.

  • Pacific time we would like each caller to limit their questions to one per firm.

  • With that I would like to introduce Mike Splinter.

  • - President and CEO

  • Thanks, Paul.

  • Good afternoon, and welcome to our Q3 earnings conference call.

  • I have been at Applied Materials for a little more than three months now and I'm even more excited about the company and the opportunities that we have.

  • We have a great team and great possibilities.

  • First I want to thank the entire Applied Materials team for their hard work and commitment during this management transition.

  • And for the excellent support I have received as I have immersed myself in the company and met with our customers, employees, shareholders to better understand their ideas, suggestions, issues and concerns about the direction we are taking.

  • During these last three months our employees really pulled together as evidenced by the third quarter financials.

  • And the ongoing successful implementation of the realignment plan.

  • The trend we are seeing is positive.

  • The orders for the quarter were up, driven by another strong quarter in Japan and further growth from Dram [ph] manufacturers.

  • We are projecting that our orders for the fourth quarter will also increase.

  • We are clearly ready to support a ramp in the business as our customers begin investing in capacity again.

  • When I came to Applied Materials, I said I wanted to get the company focused on growth.

  • I am pleased with the progress we have made so far.

  • We have improved our cost structure, streamlined ourselves to be more efficient and responsive and reorganized how we work with our customers.

  • We made some management changes, and introduced a series of hot new products.

  • We are well positioned for industry leading growth as the market begins to return.

  • During this time, I met with customers around the world.

  • From those meetings, I see incremental improvements in our operating environment.

  • In particular, fab utilization for advanced factories continues to improve.

  • And if you look at history, when utilization rates rise our orders start increasing as well.

  • In part, that is what we are seeing with the order trend.

  • Worldwide economic conditions are also improving.

  • Internet traffic is increasing.

  • Advances in wireless devices are being made, creating an opportunity for new applications.

  • What'sdriving our customers to the next generation of technology are the demands for performance, new features, lower power and lower costs.

  • All of these improve with the move to 300-millimeter and 90-nanometer technology.

  • Our products and technology are what is required to move the industry forward.

  • At recent Semicon west show I had a whole new perspective at this year.

  • After having attended for 30 years or so as a customer, we showcased the broadest set of solutions available for 300-millimeter wafers at 90-nanometers and below.

  • A truly complete suite of systems for copper interconnect, process diagnostics as well as new service capabilities.

  • During this last six weeks Applied Materials introduced 8 new products which reinforced our technology leadership and growth opportunities in 90 nanometers as well as 65 nanometers.

  • It is clear that the investment in new products over the last several years is now ready to pay dividends.

  • Specifically we introduced new products for electrochemical plating, epitaxy, dialectric etch, chemical and mechanical polishing, as well as our latest defect inspection systems.

  • As most of you know, copper interconnect technology enables faster logic chips.

  • This is a key element for high performance computing and portable electronics.

  • One of the greatest challenge in the industry transition to copper is creating a manufacturable low key dialectric film.

  • To solve the integration, manufacturability and extendibility challenges Applied Materials technologists, in collaboration with the customers, have produced solutions that enable the films to be reliably and repeatedly produced.

  • In fact, today our black diamond films are the only [indiscernible] films in volume production at leading manufacturers.

  • Our work with customers throughout the industry positions us for leadership as low K becomes more widely adopted at the 90 and 65 nanometer loads.

  • We have extended our leadership in PVD, CVD and CMD for both aluminum and copper interconnect as well as in our most advanced transistor applications.

  • The broad based leadership is particularly important to our customers as they transition to 300-millimeters. 300-millimeter equipments crossed over this quarter and combined with our newest product offerings demonstrate we are strengthening the leadership position in the industry.

  • Look to the future, the drive to lower costs, increasing device complexity, the greater number of process steps and larger dye size will drive greater demand for advanced 300-millimeter systems.

  • Being a leader requires having the right focus.

  • Particularly focus only customers.

  • Knowing what they are thinking, sharing where we are going.

  • Elaborating on what improvements we need to make.

  • From R&D to delivery, to service and support is extremely critical.

  • Coming from a customer perspective, I know how important this is for us.

  • Our customers and the entire electronics supply chain.

  • I put a lot of emphasis internally on building -- on the Applied Materials value of being close to the customer.

  • Everything we are doing is focused on our customers and ensuring that their voice is heard throughout Applied Materials.

  • Our main objective is to satisfy their needs and expand the solutions we offer today and in the future.

  • During the last three months we have established a new set of corporate objectives.

  • They simply are, first, to enhance and extend our leadership system in our core silicon systems business.

  • Then to create and develop new business and opportunities for revenue and margin growth.

  • Third, be the supplier our customers want to do business with.

  • Finally, continuously improve the effectiveness of our company in everything we do.

  • Pretty much everything we will focus on is incorporated in the objectives and we will drive hard to achieve the objectives and implement new programs and strategies, share best practices and have open communication to ensure their success.

  • Looking ahead, what can you expect from Applied Materials?

  • Well, you should expect technological differentiation and great products that provide the customers value with improved performance, reliability, and effectiveness.

  • An ongoing commitment to investment in R&D and innovation and effective business process and solid predictable financial performance.

  • Applied Materials is a growth company in a continuously evolving industry.

  • We have been successful because we have a solid foundation, a seasoned management team and we are willing to take the lead to help change the industry with new technology and new products.

  • We're pleased with our Q3 order growth in this tough environment, and we expect orders in the fourth quarter to grow sequentially.

  • With new products in the pipeline, emerging markets and billions of people not yet benefitting from technology, there are significant opportunities ahead for Applied Materials.

  • We have the capacity in place, we have the products, and we have the people.

  • We are ready and we are well positioned.

  • Thank you.

  • I'll now turn the call over to our CFO, Joe Bronson.

  • Joe.

  • - CFO and EVP of Corporate Services

  • Thanks, Mike.

  • Good afternoon,.

  • We will now cover the financial performance for the third quarter ended July 27th, and our outlook for the fourth quarter.

  • Presentation of the third quarter's financial performance discusses GAAP results as well as ongoing results.

  • Ongoing performance excludes charges incurred as a result of the company's realignment activities and is presented in the supplemental consolidated statements of operations included in the press release.

  • The realignment activities consisted of inventory write-offs as the result of the implementation of the global affairs distribution, refocused product efforts primarily in E-Tech mass pattern products, a reduction in work force and the consolidation of facilities.

  • The GAAP results will also be discussed as presented in the company's earnings release published today.

  • Third quarter net sales were $1.1 billion, approximately the same level as the second quarter of 2003 and 25% lower than the prior year third quarter.

  • Reported gross margin was 31.7% in the third quarter compared to 33.7 in the second quarter of '03.

  • Primarily due to $93 million of charges to Cost of Goods Sold for inventory write-offs as a result of the implementation of the global spares distribution system as well as costs for refocused product efforts primarily in E-Tek's mass pattern generation business.

  • Excluding these charges, ongoing gross margin was 40.2% compared to 38.1% in the second quarter.

  • Reported operating expenses of $434 million, were $53 million or 11% lower than the prior quarter.

  • Excluding the charges related to employee reductions facilities consolidations and asset write-offs associated with re-alignment activities ongoing operating expenses of $364 million in Q3 were $21 million or 5% lower than the prior quarter.

  • The reduction in operating expenses in the third quarter was achieved through expected savings from the realignment activities.

  • Operating expenses excluding accruals for employee variable compensation programs as ongoing income did not achieve required thresholds.

  • And as anticipated, the variable compensation accruals will be required if income further improves, resulting in an increase in the level of operating expenses going forward.

  • The reported net loss for the third quarter was $37 million or 2 cents per share.

  • Compared to the second quarter of 2003, net loss of $62 million or 4 cents per share.

  • And third quarter 2002 net income of $115 million or 7 cents per share.

  • Excluding the $164 million charge, related to the realignment activities, ongoing net income for the third quarter was $78 million or 5 cents per share or 7% of total revenue, an increase from the second quarter of $45 million or 3 cents per share or 4% of total revenue.

  • New orders in the quarter were $1.05 billion with a book-to-bill ratio of .96 to one.

  • Orders exceeded expectation in most of the company's product area.

  • Orders improved from the previous quarter by 9%. which exceeded the order target.

  • Economic conditions seem to be slowly improving throughout the world and customer fab utilization for advanced capacity integrated circuit production which is below 180 nanometers is tightening.

  • Some additional points follow.

  • Corporate earnings reports have improved in the second quarter.

  • Raising over all optimism and favorable stock market performance has begun to bolster confidence throughout the business community.

  • High technology capacity is tightening, particularly at 180 nanometer and below technology where there is little available capacity.

  • There appears to be significant 300-millimeter demand potential both in the memory and logic sectors if current business conditions hold and improve.

  • However, for advanced manufacturing at 180 nanometer and below, 300-millimeter tools have not been order in sufficient quantity to support a production ramp.

  • Japan investment for both capacity and technology continued to be strong in the quarter.

  • Order percentages by geographic region for the third fiscal quarter were as follows.

  • Taiwan 36%.

  • North America 20%.

  • Japan, 18%.

  • Korea 10%.

  • Europe 10%.

  • Southeast Asia and China 6%.

  • Orders were generally stronger across the board for all aspects of the company's business except mass pattern generation equipment where business continues to be extremely soft throughout the industry.

  • Orders in Japan and Taiwan were significant as customers began to invest based on previously announced capital plans.

  • Business in China reflected continued demand from global IBM customers that are leveraging costs and capital spending by outsourcing some of their production to China.

  • DRAM orders represented 47% of total system orders for the third quarter compared to 25% for the second quarter.

  • And the third fiscal quarter of 2003, 13 customers placed system orders in excess of $10 million versus 16 in the second quarter.

  • Of the 13 customers.

  • Two system orders were in excess of $50 million versus 3 in the second quarter and one system order was in excess of $100 million, versus 1 in the second quarter.

  • Backlog for the quarter was 2.53 billion, down from 2.76 billion for the second quarter.

  • Back log adjustments totaled $196 million consisting of cancellations which were $112 million and other adjustments, $84 million.

  • Cash equivalents and short term investments increased by $13 million from the prior quarter to $5.23 billion at the end of the quarter.

  • Increase in cash for the quarter primarily reflects continued excellent working capital management especially in view of cash requirements for re-alignment activities.

  • Cash requirements for realignment activities amounted to approximately $65 million in this quarter.

  • Accounts receivable remain consistent with the prior quarter with net collections of $1.09 billion and DSO performance of 62 days compared to 61 days in the second quarter.

  • Inventory decreased by $117 million from last quarter and was due primarily to product refocus effort and ongoing inventory reduction management programs for both manufacturing and spares.

  • During the first nine months of the fiscal year, spares net inventory decreased by $143 million or 22% and manufacturing net inventory has decreased by $86 million or 30%.

  • Capital expenditures in the third quarter totaled $36 million and depreciation and amortization was $93 million.

  • Under the company's stock repurchase program we repurchased approximately 5 million shares of common stock during the quarter for $75 million at an average price of $15.15.

  • The company's performance in the third quarter exceeded our expectations and we made significant progress in a number of areas.

  • One, the company's business solidified this quarter with good performance in all systems and related service businesses.

  • The realignment activities are beginning to show meaningful cost reduction throughout the global infrastructure enabling improved levels of profitability at current revenue levels and significant profit growth opportunity when business conditions improve.

  • The company is in the final stages of completing the implementation of its new global spares distribution system.

  • While the ERP and logistics and planning systems being implemented since September 2002, the final distribution of inventories to the global distribution centers is now just being completed.

  • Inventory write-offs were required as a result of the completion of the operational portion of the implementation and closure of the warehouses.

  • The E-Tech business unit has been restructured.

  • The spares and service business has been relocated to Hillsborough, Oregon, where the existing laser writer business is located.

  • The Hayward operation of E-Tech has now become a research and development activity focused on 65 nanometer and below technology and focused on electron beam mass pattern generation power activities working with a major customer.

  • Charges for this quarter reflect work force reduction and facility consolidation charges as well as inventory provisions for the current E beam mass writer business.

  • Demand for mass power generation equipment continues to be weak across the board.

  • Product businesses continue to win selections at major accounts in copper, related applications as well as front end transistor applications.

  • The slim cell electroplating product introduced in June 2003 has been well received and is poised to win significant market share in 2004.

  • Two new dialectric products for advanced applications were first displayed at Semicon west and are drawing significant interest from customers.

  • As system build unit demand increases we will be able to leverage Austin manufacturing capacity more effectively which will improve the ongoing gross margin.

  • The Austin manufacturing operations are prepared to meet the requirements for a significantly higher level of business.

  • Our focus will be to ensure supply chain readiness for a higher level of business activities.

  • The semiconductor industry seems to have bottomed out from the three year drought of capital spending and reduced industry profitability representing the beginning of a more favorable global economic picture.

  • Aggregate demand seems to be increasing and corporate profits in general were better in the quarter.

  • The low interest rate environment may continue to stimulate economic activities although there may be some bumps along the way.

  • In addition, IT spending seems to be moving in a positive direction with significant pent up demand.

  • With the completion and availability of 300-millimeter tools for advanced production the industry is poised to retool and we believe that 2004 will be a major investment period for 300-millimeter equipment spending.

  • Estimates for 2003 calendar year semiconductor capital equipment spending are flat with modest positive growth over 2002 reflecting an increase in the second half 2003 calendar year spending.

  • Although it may be too early to tell, we are currently projecting that the industry will increase semiconductor equipment investment next year.

  • We are cautiously optimistic about prospects for the business.

  • We expect orders in the fourth quarter to grow sequentially by approximately 10% from third quarter levels.

  • Timing of receipt of the orders may create volatility because the size of potential order is significant and delays in receipt of the orders could impact the quarters is performance.

  • Revenue and ongoing profitability are expected to be similar to this quarter's performance with revenue flat slightly up and ongoing profitability between 4 cents and 5 cents per share depending on revenue achievement.

  • The charges for the fourth quarter realignment activities are expected to be between 75 and $100 million as the company begins its third full fiscal quarter of executing these realignment activities.

  • So I'll close and turn it back over to Paul.

  • - Managing Director of Investor Relations

  • Thank you, Joe.

  • We will begin the question and answer session.

  • I would like to remind you to limit your questions to one per firm.

  • Operator, please begin with the first question.

  • Operator

  • Thank you.

  • If you wish to register a question for the question and answer session and you are on a speech phone, pick up the hand set before entering your request.

  • To place a request you need to press tar star on the number one on your telephone keypad.

  • If your question has been answered and you wish to withdraw the request press star two.

  • As a reminder please limit yourself to one gentlemen.

  • Once you have asked your question you have the opportunity to requeue to register for another question.

  • One moment for the first question.

  • Your first question is from Steve O'Rourke of U.S.

  • Bancorp Piper Jaffrey.

  • Please proceed with your question.

  • - Analyst

  • Good afternoon, a quick question here on orders.

  • Overall DRAM was 47% and it looks like Taiwan was very strong.

  • What do the trends look like for both of these segments going forward into the fourth quarter?

  • - President and CEO

  • The third quarter had a large -- a very large order in the DRAM space and we have always told you that DRAM tends to be anywhere from 15-25% of the business and so this is a spike we believe this quarter.

  • I think that the order pattern will be kind of reverting to a more normal patterns.

  • However, there are some large DRAM orders potentially out there so it is very difficult to predict a mix because there are a number of large orders that are pending.

  • So we will just have to see.

  • - Analyst

  • Fair enough.

  • And one quick question on the mask business.

  • Can you comment at all based upon what you are seeing on the customer base with respect to tapeouts.

  • Are you just sort of seeing this flat or increases in tapeouts out there?

  • - President and CEO

  • We are seeing it pretty flat right now and very little investment across the board.

  • There is very little -- most of the stuff that is for 100 nanometer and a little by the below in the 90 nanometer and that instal base is in place at the current time and there is little capital investment going on.

  • - Analyst

  • Fair enough, thank you.

  • Operator

  • Your next question is from Suresh Balaraman of Think Equity.

  • - Analyst

  • Historically in Japan and in recent years the industry is moving away from the DRAM focus and I was wondering if it changes your market landscape and any specific reasons why Japan was down sequentially this quarter?

  • - CFO and EVP of Corporate Services

  • Well, I think the situation in Japan for us has been very good and I don't think there is any real change in focus in terms of product acceptance.

  • In fact, the 300-millimeter I would say we are doing better.

  • Most of the shift in volume or numbers has to do with large orders.

  • You know, an order for us is anywhere 50 to over $100 million, so any significant shift in one order placement, you know, affects the numbers quite a bit.

  • I don't think there is any change in trend or competitive landscape for us except that I think we are actually gaining momentum in 300 millimeter in Japan.

  • - President and CEO

  • And in fact, I think, Joe, we say that when you look at the semiconductor industry in Japan is really been renewed with the new players and the new joint ventures and they are investing in capital and we expect them to continue to invest in capital and for the foreseeable future.

  • - Analyst

  • Thanks.

  • Operator

  • Your next question is from Shekhar Pramanick of Prudential.

  • - Analyst

  • Joe, we were kind of not expecting cancellations at this stage.

  • Maybe give us a little more color on this 120 or 110 million cancellation.

  • I mean what geography it is coming from or any other color you could provide maybe.

  • - CFO and EVP of Corporate Services

  • The cancellation has to do with a what was one customer changing to another customer as a result of an alliance and a new venture.

  • To the order that was on the books for that one customer had to be cancelled.

  • That is -- that is most of the cancellations.

  • There are some ones's and twos's but that was most of it.

  • - Analyst

  • Should I understand it will get booked as a different customer.

  • - CFO and EVP of Corporate Services

  • It has already been booked.

  • - Analyst

  • Okay.

  • My second question for Mike, could you maybe talk about a little bit of new process module strategy, how it has changed relative to as you have taken the leadership role?

  • - President and CEO

  • Well, what I -- what I would say is what we are focusing the [indiscernible] technology center on is characterizing our equipment, it is a significant advantage for us over the competition being able to characterize our equipment better and characterize how our equipment works together better and demonstrate the compatibility between our various pieces of equipment.

  • So, that is where our primary to focus is going to be on utilizing the made-in [ph] technology center to increase the equipment sales.

  • - Analyst

  • So are we saying that process selling process integration flow is not a part of goal any more?

  • - President and CEO

  • Well, certainly lower priority and we will meet our commitments from what we are -- we have committed.

  • But again the primary focus is selling equipment.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Steven Pelayo with Morgan Stanley.

  • Please proceed with your question.

  • - Analyst

  • A couple of quick ones here.

  • Did you give the percentage from service.

  • I think last quarter you were talking about 18%.

  • - CFO and EVP of Corporate Services

  • It was higher last quarter.

  • Are you talking about bookings or revenue?

  • - Analyst

  • This is bookings.

  • - CFO and EVP of Corporate Services

  • Bookings was about that level.

  • It is still about the same level, a little higher.

  • - Analyst

  • A little higher, okay.

  • - CFO and EVP of Corporate Services

  • But not much.

  • - Analyst

  • And did you give a foundry number as well?

  • I don't know if I missed it.

  • I think last quarter it was 10%, I think.

  • - CFO and EVP of Corporate Services

  • It is a little by the -- well, we actually -- that is kind of a mixed bag that I would say it is in the 10% range.

  • - Analyst

  • That's fair enough.

  • Now, my real questions were specifically I guess you got this large order and looks like it came out of Taiwan and you're talking about DRAM falling back up to more of historical trend so I'm a little nervous about how you can fill that hole.

  • I guess large nonDRAM orders pending.

  • - CFO and EVP of Corporate Services

  • The way I answered the question.

  • A large of large DRAM orders out there.

  • We don't know when exactly they're going to come.

  • So it is -- it is hard to predict a mix.

  • I mean you could have another quarter if those DRAM orders came and the other orders didn't come or came later you would have of a similar situation as this quarter or could be much less if the logic orders came and the DRAM orders got delayed.

  • It's really hard to predict when the numbers of large.

  • We are talking about big orders.

  • - Analyst

  • If I could -- a quick final one you got guided revenues flat to up and flat to down.

  • It looks like EPS kind of flat to maybe down.

  • Was that the variable starting again order what is the impact there?

  • - CFO and EVP of Corporate Services

  • I think you it is depends on the amount of revenue.

  • I think that the savings that we're getting are continuing and if we achieve these profit thresholds we will have to provide some of these variables compensation accruals.

  • So it kind of nets out.

  • - Analyst

  • Fair enough.

  • Operator

  • Your next question comes from Glen Yeung of Smith Barney.

  • Please proceed with your question.

  • - Analyst

  • A clarification first.

  • I think, Joe, you mentioned there was a cancellation in the quarter that was rebooked to another customer.

  • Do I understand it the net bookings saw a reduction and my question is did the gross booking see an increase because of the incremental hundred million rebooked?

  • - CFO and EVP of Corporate Services

  • The order that was changed to a new customer was a new order and the cancellation number reflected the order that was on the books for that customer.

  • - Analyst

  • Okay.

  • And then I guess the other question is you mentioned a few times now there are large orders out There I wonder if you could give us some thoughts on what the breadth of orders look like from the market today from a customer perspective?

  • - CFO and EVP of Corporate Services

  • That is -- that is extremely hard to do.

  • We know as we said in the comments that there is a lot of 300 hundred millimeter potential retooling demand.

  • There is a lot of tight and some advanced capacity.

  • If business continues to improve or at least to hold we think that some of these orders will hatch.

  • How many?

  • It is really hard to say.

  • It is going to depend on the individual company circumstances, where they are in the implementation and things of that type but we do know that there are orders out there for this 300-millimeter retooling.

  • - President and CEO

  • Glen, this is Mike Splinter, when you look across the utilization of advanced factories, there -- it is really quite high in both logic and memory factories so we are hopeful that it going to be broadbased -- as broad -- across a broad base of our customers.

  • - Analyst

  • Great, thank you.

  • Operator

  • Your next question comes from John Pittser of CSFB.

  • Proceed with your questions.

  • - Analyst

  • A couple of questions.

  • You talked about foundries being 10% of the order book this quarter.

  • What is your outlook for the October time frame?

  • And talk about the gross margin in the October quarter.

  • You talked about profitability flat to slightly down.

  • Should we expect the same gross margin, and then a question for Mike.

  • I think you said in the prepared comments that this quarter 300-millimeter crossed over from 200-millimeter.

  • Are you talking about cost of ownership from your customer standpoint, revenue or bookings from your standpoint.

  • If you could clarify I that would be great.

  • - CFO and EVP of Corporate Services

  • I think trying to predict foundry orders is the same as trying to predict DRAM orders.

  • There are sizeable orders out there for retooling and publicly announced spending plans by those -- by all those customers.

  • We'll just have to see, you know, what happens in terms of the mix.

  • In terms of margins, margins are as I have said before, going steadily up because of the realignment activities beginning to take hold and we are in our third full quarter of implementation and we are getting to the point where these things are starting to kick in and we are almost getting done.

  • So, we have got another at least a quarter to go.

  • But as I have said before, the leverage in the business is very substantial and if -- if revenue improves we will see some very nice margin upticks going forward.

  • - President and CEO

  • John, my comment on the 300-millimeter crossing over 200-millimeter was orders.

  • In fact, closer to 60% of the orders on 300-millimeter.

  • - Analyst

  • Was this the first --

  • - President and CEO

  • Substantial.

  • - Analyst

  • Was this the first time in recent history that has been the case, Mike?

  • - President and CEO

  • First time ever.

  • I think last quarter it was in the 30ish% or 30-35% were on 300-millimeter.

  • It clearly shows the trend that people are filling out -- investing in 300-millimeter because it gives them the right cost advantage and volume advantage.

  • - Analyst

  • Great, thanks, guys.

  • Operator

  • Your next question comes from Mark Fitzgerald of Bank of America Securities.

  • Please proceed with your question.

  • - Analyst

  • Thank you.

  • The outlook for 2004, you kind of upped Cap Ex.

  • Can you give us an idea of what you're basing that on -- is that just macro.

  • It's kind of bottoms up for the industry.

  • - CFO and EVP of Corporate Services

  • The macro part really depends on what the economy is going to do and that is anybody's guess.

  • But certainly from the bottom's up point of view, we see the significant amount of 300-millimeter activities for production next year from most of the major customers.

  • How they -- how they time and spend that money is certainly going to have something to do with the business and so as we complete our business plan we will see how that looks.

  • But that is really the forms the basis for our prediction.

  • - Analyst

  • And is there any number that you're currently putting around that that the point?

  • - CFO and EVP of Corporate Services

  • Well, I think we're still very early in our planning process so that is currently being analyzed by all our regional and account activities and it comes together in a few months.

  • - Analyst

  • But is substantial I mean are we looking at a traditional type of kind of a 30% type of year-over-year growth rate?

  • Is that what you mean by substantial?

  • - CFO and EVP of Corporate Services

  • Well, I don't think I used the word substantial.

  • I don't know at this particular point.

  • I would rather wait and see what the regions and the account heads tell us.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Theodore O'Neill with A. G. Edwards.

  • Please proceed with the question.

  • - Analyst

  • Mike.

  • In the previous two upturns that we had the industry began with very high leading edge utilization rates and that followed through with high utilization rates across the previous three technology nodes.

  • So if you look at the foundry, utilization rates they were across the board over 100% for the majority of those two previous upturns.

  • Can you give us any insight into whether or not outside of the leading edge you're also seeing the utilization rates tighten?

  • - President and CEO

  • Well, we are, but I don't have a specific number for you, Theodore, because primarily where we're selling our equipment into and where the big decisions for us are being made are in those advanced factories and that is where we're really focused -- focused our energies and discussions with customers on.

  • And as the leading edge factories fill up, I think it does pull up the -- all the water in the river so we'll see how it goes in the upcoming months here.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Jim Covello with Goldman Sachs.

  • Please proceed with your question.

  • - Analyst

  • In response to Steve 's question I didn't hear you mention SAV101 at all .

  • Is that playing a factor in the revenue guidance for the calendar third quarter?

  • - CFO and EVP of Corporate Services

  • No, not at all.

  • - Analyst

  • Why is that?

  • - CFO and EVP of Corporate Services

  • Because of the way we are been conducting our business.

  • We have been on this system for over two years and learned how to manage with it so it doesn't present any difficulties for us.

  • - Analyst

  • Not I -- guess not difficulties so much as you know are there shipments that you're making next quarter that you're not going recognize it is as revenue I guess is the question?

  • - CFO and EVP of Corporate Services

  • That happens -- that's a different quarter, Jim.

  • - Analyst

  • And no more sure next quarter than in previous quarters, I guess?

  • - CFO and EVP of Corporate Services

  • Well, if we had a significant amount of Japan mix, that might have an impact, but, you know, it is -- I don't think it is a big deal.

  • - Analyst

  • Okay.

  • Great.

  • And then just one clarification.

  • Did I hear you say the cash charges out of the total $164 million in charges, $65 million were cash charges.

  • - CFO and EVP of Corporate Services

  • $65 million of cash was spent, yes.

  • Okay.

  • Thank you very much.

  • Operator

  • Your next question comes from Robert Mayor with semiconductor equipment.com.

  • - Analyst

  • Can you give us a little more detail as to what you see the future of your E-Tech division being and maybe differentiate laser versus e-beam and obviously there's still a need for mask writing tools.

  • It may wax and wane depending on where we are in technology nodes.

  • Is this a less desirable business for you given the lumpiness or maybe you could fill us in as to what your feeling is going forward.

  • - CFO and EVP of Corporate Services

  • Robert , I think the thing is to think about technology.

  • It's not a less desirable business for us.

  • We still think mask making is critical.

  • We are going to focus our energies right now is on 65 and 45 nanometers and try to intercept those with new advances in technology .

  • That is where the technologists are going to be focused so that is where we are going to be aiming with both our laser and our E-beam machines.

  • - Analyst

  • Any other change in competitive positioning or other things that you are looking at doing in order to get those interception points further out?

  • - President and CEO

  • We are certainly looking at some new ideas.

  • And when we are ready with the idea 's, we will talk to you about them but we don't have something that we're ready to talk about today.

  • - Analyst

  • Okay.

  • Thank you.

  • Operator

  • Your next question comes from Ali Arani [ph] with CIBC World Markets.

  • Proceed with your question.

  • - Analyst

  • Some housekeeping question on flat panel display equipment mix and your head count at the end of the quarter.

  • And then my question on your net bookings up 17% and your guidance with that cancellation implies another 25% growth sequentially in net bookings in a positive book-to-bill or a parity book-to-bill.

  • You talked several times on the call about the ramp that you're ready for.

  • I am hoping that you could talk about, one, the visibility into the year end ramp that seems to be growing and, second, to the market share since your books on a net basis are outperforming the industry now.

  • - President and CEO

  • Well, you're right, our orders are outperforming the industry.

  • Let's go back and see if we can answer some of your questions.

  • I think you had about three or four questions.

  • In your list you asked what our ending head count was.

  • A little over 12,000 people is the head count.

  • Joe, you want to answer the flat panel mix question?

  • - CFO and EVP of Corporate Services

  • Yeah, the flat panel business is pretty healthy at the current time.

  • But don't forget we are in the CVD segment but we have also have an inspection tool that has actually gained some pretty good acceptance in Korea.

  • So that is being shipped.

  • Now, this is one area where, you know, all of the revenue in this unit is on a deferred basis.

  • And so timing of revenue is delayed a little bit.

  • All of the systems are shipped and not revenued until the unit is signed off.

  • - Analyst

  • So, Joe, sounds on the Gen 6 level in competitor capacity .

  • - CFO and EVP of Corporate Services

  • We are doing extremely well there in the penetration and we really been able to maintain market share.

  • Now, picking up a little share in the test part is also been a -- been a good phenomenon.

  • So the business is pretty good shape.

  • And technologywise also in pretty good shape.

  • - Analyst

  • Great.

  • - CFO and EVP of Corporate Services

  • And we infrastructure now in Taiwan as well to service those manufacturers and soon will have some operations in China as well.

  • - President and CEO

  • And the end user growth continues on unabated here so we're pretty excited about our possibilities in this business going forward.

  • - Analyst

  • Great.

  • And in terms of the relative market share and visibility into this ramp quote down yet into year end.

  • - President and CEO

  • I think Joe commented about the lumpiness of orders and size of orders makes a sizeable difference.

  • I think you can just look inside the numbers on our orders versus competitors and I think you pretty get a good assessment of market share shift.

  • - Analyst

  • Great, thank you.

  • Operator

  • Your next question comes from Jerry Fleming with Bond Stock Oppenheimer.

  • Please proceed with your question.

  • - Analyst

  • A question about the slim cell, the ECP product.

  • And how many places is it being evaluated and at what technology node and then my other question would be if you had to expense options how much of a hit would you have take then quarter?

  • - President and CEO

  • On slim cell, pretty much everybody is looking at it with some urgency because of the sizeable differential in defects and it productivity as well as operating costs so there is a lot of excitement around this machine.

  • Joe, I'm going to let you answer the question on stock options.

  • - CFO and EVP of Corporate Services

  • Well, the -- we don't have the number yet for the -- since we are in a proforma disclosure it appears in the 10-Q so the 10-Q will be getting prepared here shortly and we will be in the process of reviewing that data but it will be in the 10-Q in the notes.

  • - Analyst

  • Going back to the slim cell, are people looking at it for 130 nanometer ramps or is that all decided?

  • - President and CEO

  • Depends on the customer.

  • Some are looking at that time for 130.

  • The preponderance of looking at it for 90 and 65.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Timothy Acurie with Deutsche Bank.

  • Please proceed with your question.

  • - Analyst

  • Can you hear me?

  • - CFO and EVP of Corporate Services

  • Yep.

  • - Analyst

  • Okay.

  • Great.

  • Joe, you're kind of talking about some larger orders clouding visibility for Q3 and Q4.

  • Is this a trend going forward that orders are getting lumpier?

  • - CFO and EVP of Corporate Services

  • No, I don't think so.

  • I just think there is just a lot of -- it is all 300-millimeter related.

  • You have a situation that, you know, this is know -- there is no installed base.

  • So this is a new -- you know, it is implementation of new technology in a production environment.

  • - Analyst

  • But, would you also say that some fabs have decided to order all the equipment at once versus maybe before where they would buy it in different phases?

  • Is that --

  • - CFO and EVP of Corporate Services

  • I think they're doing it exactly the same way.

  • If you look at, you know, Samsung for example has built their facility in module form and equipped the first module running production and then they will move to the second module and so on.

  • And I think, you know, semiconductor manufacturers aren't going to change the way they have approached their business, you know in this transition.

  • I think they will do it exactly the same way.

  • - Analyst

  • If I can sneak in one more.

  • Joe, it is difficult to predict what cancellations will be next quarter, but if you had to take a stab at that, what do you think will be.

  • - CFO and EVP of Corporate Services

  • I couldn't give you a number.

  • I would just say they will be reduced from the current level.

  • - Analyst

  • Okay.

  • Great, thanks.

  • Operator

  • Your next question comes from Kevin Winnick [ph] with Polly North Capital Management. [ph] Please proceed with your question.

  • - Managing Director of Investor Relations

  • Go ahead, Kevin.

  • Operator.

  • Why don't we go to the next question.

  • Operator

  • Your next question comes from Jay Deahna with J.P. Morgan.

  • Please proceed with your question.

  • - Analyst

  • It is Jay Deahna.

  • A question for Mike a two-part question.

  • Mike, being, you know a manufacturing chipmaker kind of guy coming into Applied Materials, how do you view the company as opposed to people that have grown up in the equipment industry.

  • And I guess the primary outcome here is the focus on selling tools as opposed to integrated solutions so any thoughts you can give me on that as it relates to changing the organizational focus.

  • And the second part is with Sass [ph] stepping out and more of a bottoms up focus on selling tools does that imply more of a product line CTO type of strategy as opposed to a corporate perspective on that?

  • - President and CEO

  • The first one on the how do I -- I view the company, I tried to relate quite a bit of that already in my prepared comments but I would just say that when you look at the technology capability inside this company it really is outstanding.

  • And really technology capability inside this company it really is outstanding.

  • And developing that capability and utilizing it to create great products is really what we are going to focus on here and make those products manufacturable and make them at the right price and really offer that value to our customer base.

  • And add to that the real focus on being close to our customers and making that really a corporatewide value that everybody in this company lives is really the kind of focus that you're going to see.

  • In relationship to Sass, Sass [ph] has been here for 20 some years and Applied Materials owes him a great deal of gratitude for all the contributions that he has made.

  • There are really hard to enumerate there have been so many.

  • But as I said when I look at the technology pace here, it is strong and it is broad and we will expect a number of those great technologists to step up and take Sass's place so I think that they will be able to provide the leadership in the company that we need.

  • - Analyst

  • I guess what I'm getting at is if you kind of look at some of the key new products introduced over the last several years and some of the acquisitions they may not have been completely optimized so what do you do internally to make sure that that type of performance improves going forward.

  • - President and CEO

  • Look at our corporal objectives and we will really be focused -- one of those is to improve our effectiveness and all that is about our business processes, assessing how we are doing, assessing our ideas and assessing our technology on an ongoing basis.

  • I think we will be pretty effective at that.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Nikolay Tishchenko with Fulcrum Capital Management.

  • Please proceed with the question.

  • - Analyst

  • This is Fulcrum Global Partners.

  • Two questions.

  • The first one I will try to get the answer about the shipments.

  • If you don't want to talk about the numbers what was sequential change in shipments?

  • And the second question to you Joe again is about step up in interest income this quarter, what was the reason?

  • - CFO and EVP of Corporate Services

  • Well, interest income had to do with realizing some gains in portfolio shifts.

  • We have a lot to play with and you know that was optimized in this particular quarter by moving the portfolio around.

  • I'm not sure of your question about sequential --

  • - Analyst

  • Shipment, change in shipments.

  • Shipments.

  • Equipment shipments.

  • You were talking about revenues guidance in the next quarter.

  • - CFO and EVP of Corporate Services

  • Right.

  • - Analyst

  • I'm trying to look into the shipments of tools -- forget about SEB, forget about recognition of revenues.

  • - CFO and EVP of Corporate Services

  • I don't really even have very good data and you have a situation where you have all types of different mixes with process tools being one and then you have the, you know, the spares and also the AKT equipment so it is unit shipments are not something we track very closely.

  • The thing we do track is our manufacturing production, our unit production and I would tell you that your unit production often will be higher in this coming quarter than it was in the third quarter.

  • - Analyst

  • What would be expected growth?

  • - CFO and EVP of Corporate Services

  • Oh, in unit shipments?

  • - Analyst

  • In shipments of productions whatever you name it.

  • - CFO and EVP of Corporate Services

  • Well, the growth in products, it is you know, anywhere from 5-10%.

  • - Analyst

  • Thank you very much.

  • Operator

  • Your next question comes from Kristina Azmina [ph] with Needham and Company.

  • Please proceed with your question.

  • - Analyst

  • Hi, Michael.

  • Could you give us further clarity on the execution on the service strategy?

  • How far along are you in penetrating that 30-40 billion service market opportunity that you have identified?

  • And going forward, what kind of milestones should we be watching in order to gauge your progress?

  • - President and CEO

  • So on your service business, we have an ongoing service business which has been successful for us as we really look at -- at that as an area for our opportunity and growth.

  • We'll come back at the end of the quarter and talk in a lot more detail about that.

  • I would like to hold off until late October or early November and talk to you in some detail about our goals and plans in the service business for the future.

  • - Analyst

  • Okay.

  • Thank you.

  • Operator

  • Your next question comes from Brett Hoddice [ph] with Merrill Lynch & Co. Please proceed with your question.

  • - Analyst

  • Good afternoon, I just wanted to follow up you mentioned a moment ago that Boston's unit production will be up between 5-10% which is how your orders were up this quarter so the fact that revenues are going to be flat to slightly up just to clarify on things said earlier, Joe.

  • It sounds like that is mostly a function of timing, of revenue recognition.

  • - CFO and EVP of Corporate Services

  • I gave out a sliver of information and don't want it to be misinterpreted.

  • Units in a factory get built for a number of different reasons.

  • They get build first for revenue.

  • Some of them are built for evaluation purposes.

  • Some of them are built for capital assets.

  • Et cetera.

  • It is why I say we don't use units as a revenue predictor.

  • And then the revenue recognition rules are different based on where that product is and its maturity.

  • So all we're basically trying to convey here is that business activity is up in our factories.

  • And I really don't want you to use the unit productions as a harbinger of revenue prediction.

  • Just, suffice it to say, though, that unit production being up is a good thing.

  • - Analyst

  • Thank you.

  • Operator

  • Your next question comes from Bill Hong [ph] about American Technology Research.

  • Please proceed with your question.

  • - Analyst

  • Do you have a revenue per employee goal during this cycle.

  • My question is about the productivity plans and how it compares to past cycles?

  • Thanks.

  • - President and CEO

  • Most definitely .

  • I'm not going to give a number out.

  • The purpose of the entire realignment activities was to dramatically improve the capability of the company to make money and produce higher levels of revenue per employee and we are really pretty focused on that activity by getting cycle time down in all aspects of the business and we have made some great progress on the 300-millimeter systems already and we certainly have more to do.

  • But we have said before that we expect to make the same -- you know in peak cycles we expect to make the same types of margins we have made before and perhaps even do a little better.

  • - Analyst

  • Okay.

  • Thanks.

  • Operator

  • Your next question comes from Edward White with Lehman Brothers.

  • Please proceed with your question.

  • - Analyst

  • Yes, thanks.

  • With larger orders starting to loom on the horizon, can you talk a little more about your ability to respond to the upturn given the fact that employment is down quite a lot from where it was in recent years and some of the companies in the supply chain are smaller.

  • Can you talk specifically about what you are planning -- what you are able to do in order to be prepared to take advantage of the opportunity if it turns out to be bigger than generally expected.

  • - President and CEO

  • We are well prepared in Austin to accept of a very -- a much higher level of business.

  • The concern that we always have is ensuring that the supply chain is ready.

  • Now, in order to assume the supply chain is ready we have to do a good job of communicating with the suppliers and also we have better suppliers in terms of their stability and their capability.

  • A lot of them are now public companies.

  • A lot of them are larger and a lot of them have decent balance sheets.

  • And are not even though they have suffered tremendously in this downturn, there is significant viability there.

  • So basically a lot of our focus as I said in my prepared comments really have to ensure that the supply chain can deliver the parts to us when we need them so that we can get the throughput advantage that we believe we have in our Austin manufacturing to be able to deliver a significant high level of revenue in a reasonably short period of time.

  • - Managing Director of Investor Relations

  • I would also add to that that we have been focus on reducing our cycle time throughout the supply chain which should help us be more responsive as well.

  • - Analyst

  • Okay.

  • Great, thank you.

  • Operator

  • Your next question comes from Byron Walker with UBS.

  • Please proceed about your question.

  • - Analyst

  • Good afternoon, you folks at least in the past had tracked internally a pullins to pushouts and could you comment on that in the reported quarter and how that compared to the previous quarter?

  • And the other question is what is your head count at the end of the reported quarter.

  • - CFO and EVP of Corporate Services

  • Head count is 12,200.

  • Slightly lower.

  • I think it was 12,5 at the end of the previous quarter.

  • In terms of pullins and pushout, certainly pushouts for the last three years plus have been the greater than pullins.

  • So I would say that the equation is getting closer to parity.

  • - Analyst

  • Still a decent leading indicator for you folks?

  • - CFO and EVP of Corporate Services

  • I don't know it is not something we manage carefully with.

  • I would rather not have pushouts at all.

  • We would like to get a -- you know, a much better situation so that we don't have to rattle the chain up and down with this type of cycle, cyclical behavior.

  • But certainly pullins are certainly going to be more at parity with pushouts.

  • Operator

  • You have a followup question at this time from Steven Pelayo with Morgan Stanley.

  • Please proceed with your question.

  • - Analyst

  • I'm curious if, Mike, if you have gotten any more concern about some of the issues that we have heard with in Invidia [ph] and their primary foundry as well as IBM also has had some struggles lately.

  • I'm wondering if you're concerned at all about the 300-millimeter yield issues that will maybe slow the transition to 300-millimeter.

  • - President and CEO

  • I'm real really not.

  • Still the overwhelming area advantage is significant and there is no fundamental yield issue that we have seen that somehow can't be relatively quickly solved so I think when you look across the industry the performance varies by company and -- but nothing fundamental so as you can see from our orders and the percent of orders on 300-millimeters, people are relatively bullish in investing on 300 millimeters.

  • - Analyst

  • Then the last question was just relative to I think for 2003 you were talking about the wafer fab equipment market being relatively flattish but given your guidance for this quarter and then only one quarter left in the December quarter it would have to be a good sized hockey stick for applied calendar year revenues to be flattish.

  • Is that a service impact or I don't understand it why applied perform so much the industry being flat?

  • - CFO and EVP of Corporate Services

  • Steve, I don't know.

  • You have to take me through that.

  • I'm not following your logic.

  • - Analyst

  • I'm looking at your calendarised revenues using the January quarter as the ending year.

  • And doing my revenue forecast, it comes out to your annual 2003 revenues calendarised down about 5-10% or so versus, the wafer fab equipment market you were talking about which was flattish.

  • I was just wondering if there was something behind there that maybe you could shed some light on.

  • - CFO and EVP of Corporate Services

  • These estimates are based on a lot of the publicly announced plans of the customers.

  • So, you know, we have to see how those come out.

  • It is -- it has to do with what conditions are going to be like so it is -- we just have so see.

  • A lot of of business out there and we have to see when it hatches.

  • - Analyst

  • In the event that there was somewhat of a larger hockey stick in bookings in the October quarter, could you turn them into revenues quick enough would really drop through in the January quarter?

  • - CFO and EVP of Corporate Services

  • You know, it depends when the customers want them.

  • - Analyst

  • Okay.

  • Good enough, thanks, Joe.

  • Operator

  • Your next question comes from Glen Yeung with Smith Barney.

  • Please proceed with your question.

  • - Analyst

  • Two followups.

  • One is if you could quantify the amount of the order cancellation, the single order cancellation that you saw in the quarter.

  • - CFO and EVP of Corporate Services

  • We really don't do that by a customer.

  • You know the total as I said was $112 million and it was primarily one customer so --

  • - Analyst

  • And then I wonder if you could remind us what cancellations were last quarter and what the net bookings were in the April quarter?

  • - CFO and EVP of Corporate Services

  • I don't have that.

  • We can call you.

  • I don't have that at my finger tips.

  • - Analyst

  • Okay.

  • Thanks.

  • Operator

  • Your next question is from Kevin Winnick [ph] with Polyness Capital Management.

  • Please please proceed with your question.

  • - Analyst

  • Can you hear me?

  • - Managing Director of Investor Relations

  • You're back.

  • - Analyst

  • Since yields of advanced geometries are still lower than optimal, can you give us a little bit of color as to how much your customers are delaying orders because they still hope to free up capacity with higher yields or how much are they willing to order given that they are out of capacity currently?

  • And then, maybe your own opinions as to how far away we are from optimal yield at point 13 and how long it's going to take to get there?

  • - President and CEO

  • Well, you know, as I said earlier, it really depends on the customer, some customers are already at optimal yields and others are not at optimal yields so it is very hard to make a general industry statement other than to say that there is no -- there are no barriers -- fundamental barriers process or technological barriers that are stopping customers from getting to optimal yields.

  • It's just learning curve and learning curve goes pretty much as volume of wafers go.

  • So as these companies run more 300-millimeter wafers in volume they will learn, they will fix the problems and we will work very closely with them to ensure our equipment is performing optimally from both a defect and productivity standpoint and we will do our job in helping them get there as fast as possible.

  • But a specific time frame, it is very, very general time frame, very hard to get.

  • - Analyst

  • Well, the ones that aren't there now, are they ordering more equipment, you know, are they waiting to try to increase their yields on the current equipment?

  • - President and CEO

  • Well, I think they also know what they have to do to get volume up.

  • They can't hold back making.

  • When they need more capacity they need more capacity.

  • They can't invest in 200-millimeter.

  • That is generally a bad investment since the future really is 300-millimeters.

  • And again, you can see that in our order pattern.

  • So when they need more capacity they need more equipment.

  • If their customers are ordering they can't say well, we'll wait until we get our yield up to deliver.

  • Just that is not a possibility, so, they're ordering when they need capacity and working on working aggressively on the yield and productivity and parallel.

  • - Analyst

  • Thanks for the thought.

  • - Managing Director of Investor Relations

  • Operator at this time we will take one last question and then we will make the closing remarks.

  • Operator

  • Your last question is from Michael Brian with SoundView.

  • Please proceed with your question.

  • - Analyst

  • Hi, good afternoon.

  • Maybe two questions.

  • One on the new etch products.

  • Joe, maybe give us an eye idea of what he you think they can ramp into production.

  • Are you really targeting 65 or do you think you'll be able to get some design wins that haven't been decided at 90 nanometer.

  • And then secondarily with the 10% new order growth rate you said there is lots of business out there.

  • Give me an idea of what that -- where you have judgmented down?

  • What the possible orders are or what kind of hit rates versus the commit that has come in from the marketing guys to get to the 10% number?

  • - President and CEO

  • The -- let's talk about the etch thing first.

  • Obviously we are going after all the etch business.

  • It's a good product for 130 and 90 and is extendible.

  • We are certainly going to try to compete for it.

  • One of those products is on the producer platform which is a high productivity tool and really good for a lot of the -- a lot of applications in dialectric edge such as the spacer and things of that type where as the enabler tool is more of a dual [indiscernible] application with probably a lot longer cycle times and things that will be penetrating at 90 and 65.

  • So the products are ready and we'll be after that market.

  • The last question is really tough to answer.

  • We -- we have -- we continue to run our system which identifies all global opportunities and we take the numbers from the bottom.

  • It is really difficult to say, you know, this one is going to happen, the other one is not going to happen and things of that type.

  • It is really difficult.

  • Particularly in an environment where we are just starting to see some reasonably good activities in the last 3-4 months so we will just have to see what happens.

  • - Analyst

  • I guess maybe just from the, you know, you're targeting a low double digit growth.

  • You know, you came to that conclusion that some were safer than others.

  • Give us an idea of how you judgment some set.

  • - President and CEO

  • I would like you to go back to Ali's comment which shows that we had outperformed people, people had quarter-to-quarter declines where we recorded an uptick and then we are continuing to report that uptick in the fourth quarter and some of the competitors are maybe coming with larger slightly larger percentage gains but in the last six months we will have jut feer outperformed the business and gained share.

  • I think there is more opportunity to do that with the slim cell products so hard to say.

  • But I think we're on a good course.

  • - Analyst

  • Good enough, thanks.

  • Yes.

  • - Managing Director of Investor Relations

  • At this time, we would like to thank everybody for listening to the third quarter earnings announcement.

  • As a reminder, the webcast of this conference call is available on our website and will remain there until August 26th.

  • Again, thank you all very much for your interest in Applied Materials and this will conclude our call.

  • Operator

  • Ladies and gentlemen, that does conclude the conference call for today.

  • We thank you for your participation and ask that you please disconnect your lines at this time.