Welcome to the Applied Materials’ Fiscal 2008 Third Quarter Earnings Conference Call. During the presentation all participants will be in listen-only mode. Afterwards you will be invited to participate in the question and answer session. [Operator instructions]. As a reminder, this conference call is being recorded today, August 12, 2008. Please note that today’s earnings call contains forward-looking statements including those relating to Applied Material’s performance, products, growth opportunities, strategic positions, solar strategy and RAM, operational initiatives, cost controls acquisitions, share repurchases and financial targets, customer spending and industry outlook. All 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. Information concerning these risk factors is contained in today’s earnings press release and in the company’s filings with the SEC. Forward-looking statements are based on information as of August 12, 2008, and the company assumes no obligation to update such statements. Today’s call also contain non-GAAP financial measures, reconciliations of the non-GAAP measures to GAAP measures are contained in state’s earning’s release and in our financial highlight slide, which are on the investor page of our website at www.appliedmaterials.com. I would now like to turn the conference over to Robert Friess, Vice President and Treasurer, Applied Materials. Please go ahead sir.

Thank you Sarah. Good afternoon and welcome to Applied Material’s fiscal 2008 third quarter earnings call. I’m happy to be participating in this quarter’s webcast as Interim Head of Investor Relations. For those of you who have not yet met, I’m looking forward to speaking with you soon. Before we began let me remind you that we’ll be hosting an analyst briefing at the European Photovoltaic Solar Energy Conference in Valencia, Spain on Monday, September the 1st. More details on this event will be provided soon. Joining me on the call today are Mike Splinter, President and CEO, George Davis, Senior Vice President, Chief Financial Officer and Jo Sweeney, Senior Vice President and General Counsel and Corporate Secretary. Today we’ll discuss results for the period ending July 27, 2008. The financial results were released this afternoon at 1:05 pm Pacific Time. A copy of the news release is available on Business Wire and on our website at www.appliedmaterials.com. Michael Splinter will lead up the call with highlights on the market environment and commentary on the company in each segment. George will follow with a discussion on our financial performance for the third quarter and our targets for the fourth fiscal quarter of 2008. After, George and Mike’s remarks we will open the call for questions. With that I would like to turn the call over to Mike.

Thank you, Robert. As many of you know Robert has assumed the responsibility for Investor Relations, while we recruit a new executive to lead our Investor Relations functions, Robert, thank you for stepping in. Applied Materials third quarter financial results can be characterized as optimizing our company’s performance in a challenging economic environment with a semiconductor equipment market being particularly tough. During, the quarter we saw, continued softening of world economies as oil prices spiked, credit tightened and then the US housing values fell further and unemployment increased. It’s no surprise that US consumer confidence is at its lowest level in more than a decade. Over the past few months forecast for 2008 wafer fab equipment spending moved in line with our view of down 25% to 35% year-over-year as memory prices weaken and investments were delayed. While, there were some signs of strength in the PC market that showed double-digit unit growth is not translated to investment broadly by our customer base. In this light our team executed every opportunity for orders and revenue in each of our businesses to achieve our results. The Silicon Systems Group remains focused on financial and operating results and the group performed well in the most challenging quarter since Q4 2003. Let, me highlight a few examples of the team achievements in the quarter. In mask inspection with the Aera2’s unique aerial imaging capability, we are now running production at six customers with significant wins at chip makers mask and wafer fab operations. Interest in this new product continues to be strong and in bright field inspection our U-vision product is in line to increase shipments by 60% in fiscal ‘08. In edge we’re focused on becoming the tool of record in key applications for critical dimension control in high aspect ratio features.…

Thanks, George. As a reminder please limit your question to say one per firm and one follow-up. Kara, let’s begin with the first question.

[Operator Instructions]. Your first question comes from the line of Jay Dana with JP Morgan.

Okay. Can you hear me?

We can, hi, Jay.

Yeah. Hi, good afternoon. Two questions. The first one is in the May conference call I believe if I remember correctly you stated that your customers would demonstrate working single junction panels by the end of the July quarter and tandem junction panels by the end of the October quarter. We got the first part of that done. Just wondering if the second part of that is on track and sort of in line with that, you made a statement about a release from the European patent office in your prepared remarks. Wondering if you can expand on that a little bit and indicate what that means in relative to the lawsuit against Sun film? Thank you.

Sure, thanks Jay. I am going to have to say this in a way, but you’ll have to ask our tandem junction customers specifically about the progress, but we feel our technologies online and we’re quite excited about the progress we made there this quarter, I would say definitely on track to your definition. On the patent we’re really as I said quite happy with the progress we made on tandem junction. I think this provisional, and it is a provisional opinion from the European patent office confirms our view that the patented is not valid and in addition of course as we stated publicly, we believe our unique and proprietary structure does not infringe that patent in the first place.

Thank you.

Your next question comes from the line of Krishna Shankar with Banc of America Securities. Mr. Shankar your line is open.

Krishna, can you hear us?

Hello?

Yes, hi. Now we can hear you.

Okay, how are you George. A couple of questions, one, I wanted to follow-up. Did I miss something when you said what are the ease operating margin excluding the one time charges for acquisition and are you still besides that are you still focused that the overall photo business will be break even in ’09 or any upside to that?

On your first question, Krishna, the M&A charges are running about 30 million a quarter in EES, so you can adjust that for the ongoing, and then in terms of break even we’re still saying that we believe it will be break even in 2009, and I don’t really want to update our guidance on that any further at this point, but we feel very good about what we can do to improve profitability there over time. We really expect the bulk of the learning curve that we’re going to experience is going to be over during really through the first half of ’09, we’ll have seen virtually everything you can see and in starting up one of these factories. All right. Next question.

Your next question comes from the line of Stephen Chin with UBS.

Thank you. Mike, I was wondering if you could elaborate more. I think you said on the silicon order guidance you expected silicon orders to grow about 30% sequentially. What’s giving you that confidence level? Is that mostly a few customer projects, product market share gains or what else can you share there and how sustainable do you think that looks like it will be about a billion dollars a quarter? How sustainable do you think silicon bookings could be past this October quarter? Thanks.

Yeah. Thanks, Steven. What I said was that silicon orders would be up in the quarter greater than 30%. It pretty much is really focused on just a few customers increasing at this point, particularly in flash and DRAM still in this area, a little bit of foundry we expect to see some foundry order increase. I think the big question is how sustainable is that into Q1, and I think you know how cautious I am about this at this point, and I think it is just too early to forecast what Q1 is going to be like, but because I primarily think that depends on what the consumers are going to do in the second half of the year, and I really can’t predicted that at this point. If I thought the current trends would continue and inventories would continue down, I would be a lot more bullish than I currently am.

Great, thanks, Mike.

Next question.

Your next question comes from the line of Gary Hsueh with Oppenheimer.

Just continuing the theme on your SSG order guidance for up above 30% quarter-on-quarter, my comment, from a bottom’s up perspective, exactly how much is that driven by your market share gains and how much of that just sort of an industry phenomena happening here in calendar Q4?

I think most of it is industry, Gary. I think that these are projects, but again it depends on spending pattern of certain customers. So, these are customers that we have very strong share with, so it gives us a little bit of accelerated benefit than maybe we normally have if it was other customers.

Okay. Just somewhat hesitant about that the trajectory, but you’re sort of walking a fine line in terms of coloring an inflection point off of a very low in the July quarter and moving up in the October quarter, doesn’t sound like you’re willing to put a stamp on your view for the January quarter, but what specifically or quantity take actively is your view for capital spending in ’09? You talked about capital intensity shifting back up over the next one or two years. Is it fair to say you expect capital pending in absolute terms up year-over-year in ’09?

Yes, I think it is fair to say I expect capital spending to be up year-over-year in ’09. As you know last time I said that I really felt our Q3 was the bottom of the trough, and that we would see a modest recovery. I am sticking to that at this time. I think all of those things are coming to be fact, but my big question, if we’re talking about calendar 2009 right now, my big question about 2009 is the first four months, what happens after the end of the year selling season, how well inventories are brought down and controlled, and I think if you look at overall utilization in the industry, it is very high, it is still increasing so there is not a lot of capacity out there, and if overall economies gets better, I think the second half of 2009 will be good. All that far is very qualitative. I just think too early for us to give any kind of quantitative estimate at this point.

Okay. Last, question here for George. George, if you look at the EES numbers, the revenue numbers somewhere around $200 million in the October quarter and roughly $500 million in terms of orders, there is a pretty big gap between orders and revenue. How should we model basically revenue kind of trailing behind orders for EES and you mentioned in the second half better profitability. Is that surely by an increase or big increase in revenue or do you expect to start a tail off the amount of OpEx increase in EES in the second half of ’09? What’s really driving that profitability? Revenue? OpEx growth slowing or combo of both?

Let me deal with the orders question really from a backlog perspective because the backlog performance differently in the solar business than it does in the traditional semiconductor equipment business, so where as the orders are coming on, we’ll see them much more spread out over the year than the front loaded order conversion to revenue that used to seeing in the semiconductor space. So, I think that is probably the biggest difference there. In terms of improving profitability, I think we’ll come at it from two angles. I think there is a lot of spending that’s really bundled up in impacting gross margin that on these early projects where we’re working to integrate all of these tools coming together for the first time in the factory and making the adjustment that are necessary to get the production worthiness of these factories to where we both would like them to be, so that’s one track and we’re make ago lot of progress on that front, going through a lot of learning, but we’re very pleased with the progress there, and the other piece of course is the OpEx not only to support the start up of these factories but the initial installations on these things, so there is a lot going on that will -- that I think will become far more efficient over time and subsequent factories and so depending on the growth OpEx may actually increase over time, but the effectiveness and efficiency and the flow through to operating margin will be substantially better.

Thank you

Your next question comes from the line of Jim Covello with Goldman Sachs. Jim Covello – Goldman Sachs: Good afternoon, guys thanks so much for taking the question. Question on the flat panel display segment. If I heard you right, I think you said real significant decline in orders, 75% and increase in shipments. I just wonder isn’t that a little in-consistent if customers are cutting orders because of excess capacity why do they need to take more shipments and therefore is there any risk to the shipment guidance or shipment push outs for flat panel display over the next couple of quarters? Thank you.

Thanks, Jim. Our view is orders are going to be down substantially, and we didn’t say that revenue was going to be up quarter-over-quarter, but sort of flat plus or minus. It is not the big contributed, we said on the upside for the quarter for revenue would be EES, and that AGS and display and silicon all are kind of flat plus or minus around the mean. So, what you tend to see with the big order pullbacks and display is that the backlog holds up very well. You can see some stretching in the pattern of the revenue over time, but we don’t see any reason to think that we won’t have a similar pattern in this go round. We’re expecting strong revenue, but we’re not forecasting growth.

Jim, I just add into that, this is Mike, that these factories do take a long time to start up, and also those customers do make down payments on their machines, so they’re quite motivates, take those machines, work the bugs out of the factory, make sure it is running so that they can ramp up the factories as demand shows.

Thank you.

Your next question comes from the line of Weston Twigg with Pacific Crest.

Just, going back to SunFab for a minute, one of your customers CIG net solar commented the majority of its customers want have their quarter size to remodels rather than the full size GEN8 modules. Seems, likes that takes away the value proposition which is to lower the total balance of systems costs by reducing the number of panels installed. I just wonder if you can give us your view on how long it might take to change the customer mindset to the idea of using the larger GEN8 panel and how much success you’re having there?

If you had the opportunity. Hi, Wes. If you had the opportunity to attend inter solar, you may have seen our installation video. So, people have to get used to installing the bigger panels. This will take a little bit of time. We’re working with those installers now so they understand the handling and how to do this, but there is no real technology here. So, as time has passed we’re seeing pretty dramatic increased interest in handling the full size panels. I think that will be a trend that we’ll see over the next year or so, but we also have thought about this from the very start to offer the flexibility to cut panels in one quarter one half size, but I think what we’ll see is mostly one quarter and they then full size panels as the handling techniques get more familiar to all the installers.

Okay, great. Just, wondering if you can ask one more on the HCP side. I believe last quarter you mentioned that orders were tracking about 200 million. Is that consistent with this quarter and then also just wondering how the manufacturing capacity expansion is progressing in terms of total capacity for those two projects?

Sure, the capacity expansion is progressing very well and the rates in Q3 were some where to the – to that level that we did at the $200 million that we talked about in terms of shipments we expected actually to be up fairly substantially in Q4 on a shipment basis because of the primarily driven by increased --- actually pretty much driven by increases in both locations, so the naturally reflects in at the capacity additions and also just timings some shipments.

Okay, thanks.

Sure.

Your next question comes from the line if Tim Arcuri with Citigroup.

Hi, guys couple of things. First of all, George, now that you’re pretty and fair into your solar business, can you give us some sort of update in terms of what the break even will be in the business? I think you talked about crossing over to profitability previously sometime in the first half of ‘09 sounds like that might be more like maybe mid-year to back half of ‘09 now and I’m wondering can you give us some kind of you know idea as to what the breakeven revenue level is, number one, and number two, I wanted to know when you think you are going to recognize the revenue on tandem junction?

Well, number one, on the solar profitability as we said Cheney and PWS want to take out the M&A charges pretty much breakeven now and an ongoing in for better and we see they are improving overtime immediately. It is really the timing of when thin film makes the turn, and that will be a function of a couple things, one timing of revenue recognition and again how rapidly we’re able to basically proliferate the learning curves. Since we’re right in the middle of that, I am not ready to forecast that right now. I think the overall picture is as we said, and we still think the 2010 profitability outlook that we’ve discussed of 25% to 35% operating margins in this business overall is still very viable. So, we’ll continue to update and inform as we go along and we’re going to get every quarter we’re just going to be that much further along on the learning curve. Also, within EES we have the glass and web businesses, which are already profitable, albeit at lower margins than some of our established equipment businesses and then we have some R&D activities on kind of new generation opportunities that we’re looking at that also impact the overall operating performs.

George can you answer the question about tandem junction?

Sure, we are not going to forecast that. I have changed that. Thanks Tom.

Your next question comes from the line of Patrick Ho with Stifel Nicolaus.

Two questions, first George on the acquisition related charges of $41 million were they on the line item? And secondly, for I guess either you are Mike in terms of the silicon orders for the fourth quarter what type of linearity are you see -- are you seeing some of these orders coming in the month of October is that what’s giving you confidence versus some of your equipment peers? Thanks.

So, on M&A you’ve got the 41 about 35 of it is in cost of sales and the balance is in OpEx. And in terms of within the segments the majority of it as I said is in the EES.

Hi, Patrick I think that the orders are pretty lumpy because there are few bigger orders and but I would not say that they are all in the last month of our quarter, not at all.

Great, thank you.

Your next question comes from the line of Satya Kumar with Credit Suisse.

Hi, Question on margins. I guess if I look into the October quarter your guiding revenue is that despite the 30% growth in silicon which is high margin, sounds like flat panel is flat. What’s the mix factor driving EPS slightly lower at the mid-point?

Yeah, I think the biggest impact is that most of the revenue increases we said is coming out of EES, and so you have less flow through to profitability at this time. So, the way I would describe Q4 is we’re still in the investment phase for solar. We expect silicon to stay at low levels similar to where we were in Q3. So, we’re keeping strong cost controls in place and quite frankly our established businesses are all performing very well given their respective cycles. So, that’s I think really to see the upside which we expect to be quite considerable in EPS we are going to have see SSG recover and then flow through profitability in solar.

Okay. And a follow up question on orders you are guiding up 5 to 10% you sort of talked about silicon and display and if I think fab solutions and somewhere in between the last couple of quarters for orders, I get about $100 million increase for the adjacent groups is that about right? And could you give a little more granularity in terms of what the contribution might be from the SunFab portion and the non-SunFab portion for bookings in October?

Yeah, I am not going to give you that detail of breakout, but let me characterize overall what we see the moving pieces are for the coming quarter. So, we’ve said we think it will be a 5% to 10% AGS is flattish generally around this quarter display we said it’s going to be down 75% or so. So really all of the orders uptick is coming from silicon and EES. Mike said silicon is going to be greater than 30% up on orders, so then the rest really is coming out of EES. We have talked about Cheeny and PWS contributing the majority of the orders, and we see that continuing.

Thanks.

You are welcome.

Your next question comes from the line of Jesse Pichel with Piper Jaffray.

Yes Good afternoon. Thank you for taking my call. Mr. Sprinter, you mentioned 120-micron wafers in your prepared remarks. Does that represent a new wire saw or is that simply qualifying a new process on existing equipment and to that end, is AMAT developing new device structures for crystalline solar cells?

Okay. So, first of all let’s sit on the 120-micron we are developing new products for 120-micron capability and are working with customers on those today. Our machines are now capable across the board to all of our products from saws to deposition to metallization to testing etcetera. So, I think that’s kind of explains where we are there. Part of our strength is to be able to keep the technology rolling and keep it moving fast, and that’s the idea we want to bring to not these acquisitions so that we really stay ahead in this field. And then on developing device structures, we’re certainly interested in supporting customers in that area. But at this point that’s what we’re doing we’re working with various customers on improving different sales structures but are doing independent work in that area at this point.

Do you anticipate new AMAT offerings for the crystalline silicon solar cell equipment near term?

Yes.

Thank you, very much.

Thank you.

Your next question comes from the line of Mehdi Hosseini with FBR.

Thanks for taking my question. Going back to the SunFab, I want to get an update on the certification process. Back in the silicon west I think Mark was talking about certification starting towards October timeframe, and could you give us an update and would it be fair to assume that as this lines are certified at the customers site we would see an acceleration in those efforts and would that help with a faster than expected revenue recognition?

Well, okay. First of all, certification is on track, no change from what Mark talked about a few weeks ago both tandem junction and single junction are in the certification loop, and I think before the end of the year on single junction shortly after the end of the year on tandem junction after once we have those certifications done, then customers just have to demonstrate that their panels are equivalent to that certification. So, that takes substantially less time, but right now I think customers are having no problem getting contracts for buying their panels. Demand is significantly higher than supply at the current time. That might change next year or the year after, but right now customers are able to find people to take their, to sign off, take the agreements that are completely selling out their factory.

My follow-up question is there any relationship between certification and revenue recognition and then of all your customers how many have come back with a significant second set of orders?

I will let Mike -- let me first address the revenue recognition question, and then Mike will come back on the customer profile. So, in terms of revenue recognition, each of our contracts is slightly different for what constitutes customer acceptance. Some of the contracts have some form of certification anticipated as part of the sign off, and some do not, so it varies by customer. So, it’s one factor, I wouldn’t say it is necessarily a gating or deciding factor for our contracts.

Mehdi, we’ve had two customers come back for follow-on orders at the current time.

Thank you.

Next question?

Alright, I do apologize. Your next question comes from CJ Muse with Lehman Brothers.

Good afternoon. Thank you for taking my question. When you look out over the next four quarters for EES, what do you think the mix will look like between crystal and silicon and thin film?

Well, certainly thin film is going to start to close the gap, and again for the next few quarters for sure the crystalline silicon will be well ahead of the thin film.

Okay. When do you think that will surpass that level?

In sometime in 2007, but it’s not, I don’t have a point in time estimate for you.

Okay. And then I guess on the operating margin side for the service business, looks like it is tracking a little bit lower. lower. Can you help I guess help me understand what’s going on there? Is that display in solar entering the mix at lower margins or is it something else that worked there?

No, as I said in my prepared remarks, there was some settlement activities and other items. If you look at the ongoing operating margin for them, it is right in line with history. So, that was more of a one-time item. So, it will be if they came in at 26% on an ongoing basis.

Great, thank you.

Your next question comes from the line of [Mattis Malic] with Morgan Stanley.

My questions, George, nice job on the gross margins for SSG business. The gross margins appear better than your peers like [Lambry] and Novell less. Where do you think you can take the gross margins once the revenues come back?

It is interesting. What we tried to do is increase the variability and improve the cycle time over time and it is really I just applaud you’re seeing over time a lot of the great work our team in Austin has done reducing their cycle times and we’re much more in-variable in that sense, so we do expect it to -- we do expect to have some leverage obviously as revenue comes up, but what you’re really seeing is we have tremendous ability to ride down a difficult environment and still preserve very attractive profitability overall. It is one of the reasons why we’re able to continue to fund R&D at a high level and still basically preserve our overall business model as a company.

Got it. And, then one follow-up for Mike. Mike, you spoke about credit tightening in the markets and I can see memory makers getting impacted from it, but can you talk about credit tightening in your solar customers? Are you seeing any signs there or baking any worst case scenarios in your models?

We haven’t seen anybody that can’t get money at this point, but I would say the hurdles to get it have gone up dramatically. The, amount of information, the detail at which the lending or financing institutions are looking at the various projects are much more severe than they were six months ago, but I think fundamentally they still believe it is a great place to invest and there is money to be made.

Thank you.

We’ll take one more question and then move to final remarks.

Your final question will come from Edwin Locke of Needham & Company.

I didn’t mean to squeeze in. A question on the solar side. You mentioned you have eight lines in start upright now but some of what you reported in loss you only booked six line. How do you reconcile the difference there and does it mean you can book these lines or what happened there?

No. What we said is when we believe when we’re within one year of sign off that we’ll go ahead and book the order and so we’ve gone ahead and that’s been the basis and we’ll continue to be the basis at this time.

I see. Great. And, then my follow-up is on display side. You mentioned that it appears that the current GEN8 cycle is investment is largely over. How do we visualize this cycle? Do we expect a down cycle or very low booking level for the next few quarters and look at loss cycle looks like lost like four or five quarters. Should I look at it that way or how do you visualize that?

Yes. I think you should largely visualize it in that way. I don’t know about five quarters, but we think that in the second half of next year we’re going to start to see increased orders for the GEN 10 build out and along the way here of course some of the smaller suppliers will invest in increased capacity in GEN 8.5, but I think this is kind of the trend in the display business, very big cycles of ordering, pretty smooth acceptance of equipment, and started up of those factories. Meanwhile a big drop off until the next generation is ready. I would say that one of the things that in talking with customers is that, they are all very clear about moving to Gen10. So, I don’t think any question in our mind now about the viability of a Gen10 or a Gen12 for that matter in the display business. So, the cycle continues here, everybody believes this will continue to drive costs out, and the market, the TV market continues to move to bigger and bigger LCD panels and I just think it is a matter of time until LCD is basically 100% of the TV market.

Great, thanks.

We would like to thank you for joining us in our discussion of Applied Materials financial results. We would like to remind you that a replay of this call and supporting slide package will be available on our website starting at 5 pm today and will remain posted until August 26. Thank you, again for your interest in Applied Materials.

That concludes this evening’s teleconference. You may now disconnect.