Welcome to the Applied Materials Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, May 17, 2012. Please note that today's call will contain forward-looking statements which are all statements other than those of historical fact, including any statements regarding Applied's performance, industry outlooks, customer spending, Varian integration, restructuring activities, capital allocation and Q3 and fiscal year 2012 business outlooks. 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. The forward-looking statements are based on information as of May 17, 2012, and the company assumes no obligation to update such statements. Today's call also contains non-GAAP financial measures. Reconciliations of the non-GAAP measures to GAAP measures are contained in today's earnings release or in the financial highlight slides, which are on the Investor page of our website at appliedmaterials.com. I would now like to turn the conference over to conference over to Michael Sullivan, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Holly, and good afternoon. Joining me today are Mike Splinter, our Chairman and CEO; George Davis, our Chief Financial Officer; and Joe Sweeney, our General Counsel and Corporate Secretary. Today, we'll discuss the results for our second quarter, which ended on April 29. Our earnings release was issued just after 1:00 p.m. Pacific Time and you can find a copy on our website, appliedmaterials.com. Also on the website is our quarterly financial highlights presentation, which provides additional details. Mike Splinter will lead off today's call with comments about the industry environment, as well as our performance and strategies. Next, George will discuss our financial performance for the quarter, along with our business outlook. Before we begin, I have a calendar announcement. Applied will hold an Analyst and Media Briefing at the Semicon West Tradeshow in San Francisco on Tuesday morning, July 10 at 8:00 a.m. Pacific Time. We hope to see many of you at the event and we'll also provide a webcast and replay for anyone who won't be able to join us in person. So with that introduction, I'd now like to turn the call over to Mike Splinter.

Thanks, Mike, and good afternoon everyone on the call today. I'm pleased to report that Applied Materials delivered another quarter of solid financial results, posting $2.5 billion of revenue and earnings at the high-end of our target range. These results reflect strength in our semiconductor equipment business, driven by robust foundry spending. Investments in areas related to advanced transistors are particularly strong, enabling our front-end products and implant groups to achieve record quarterly sales. In contrast, the environment for our Display and Solar businesses remains weak, as television sales continue to be sluggish and solar market adjusts to excess manufacturing capacity. We recently announced the details of our EES restructuring plan. The actions we are taking are consistent with our previously stated goal to reduce the annual breakeven level for EES to approximately $500 million. Our success in driving operational improvements across the company has bolstered our confidence in our ability to deliver strong cash flow performance throughout our business cycles. As a result, in March we announced the 13% increase in our quarterly dividend and a new stock repurchase program authorizing up to $3 billion of buybacks in the next 3 years. Let me now turn to the economic outlook. While a number of indicators point towards stronger growth of our global economy in the second half of the year, we remain mindful of the consumer spending implications resulting from macroeconomic risks in Europe and the emerging markets. Mobility is the prominent macro theme impacting Applied's business as it drives significant changes in consumer behavior, including faster adoption rates for new products and shorter refresh cycles. Global appetite for mobile devices with new features, longer battery life and brighter, higher resolution displays continues to strengthen. We now see smartphone sales in the range of 660 million to 710 million…

Thank you, Mike, and let me add my welcome to everyone on the call today. During the second fiscal quarter, we exceeded our expectations for revenue and delivered non-GAAP earnings per share of $0.27 at the high-end of our target range of $0.20 to $0.28 per share. Strong performance in our semiconductor equipment business was the largest contributor to these results. Our Solar and Display businesses continue to focus on next-generation technology, while managing their overall spending in the face of weak markets. As Mike indicated, after the end of the quarter, we announced the restructuring of our EES business to lower the cost structure and the operating breakeven level. We expect to incur charges of $70 million to $100 million for costs relating to employee severance, inventory write-downs and other asset impairments over the next 12 to 18 months. These costs represent approximately $0.04 to $0.06 per share on a GAAP basis and up to $0.01 per share on a non-GAAP basis. We will keep you updated as these charges impact our financial statements. I'll now compare our second quarter results to the prior quarter. Orders increased 38% to $2.8 billion and net sales increased 16% to $2.5 billion, led by strong demand for semiconductor equipment. Backlog grew 10% to $2.4 billion, in line with orders. Backlog adjustments were a negative $24 million, as cancellations, financial debookings and foreign exchange impacts of just under $100 million were partially offset by $73 million of re-bookings, primarily in Display. Our backlog aging remains healthy, with over 80% of backlog expected to turn in the next 2 quarters. Non-GAAP gross margin was 42.1%, up 1.4 points sequentially, reflecting a higher mix of SSG revenue. Total non-GAAP operating expenses were $580 million, slightly above our target range of $565 million, plus or minus…

Thanks, George. [Operator Instructions] Holly, let's please begin.

[Operator Instructions] Your first question comes from the line of Satya Kumar, Credit Suisse. Satya Kumar - Crédit Suisse AG, Research Division: Mike, it sounds like you said that the year is likely to be flattish for WFE and you've taken up, at least, the low end of your WFE outlook. But you also said that Q2 may be a peak for foundries and you think memory is likely to remain weak. Could you just give a sense of the moving parts between first half and second half? What's sort of coming up to make it flat in the second half?

Sure. So I think first of all, to kind of understand our view on this, you have to think about -- what the foundries need to supply model changes and the buying season at the end of the year. So what it does is peaks out foundry spending in this kind of second calendar quarter, end of the first quarter, beginning of the second calendar quarter. Now, since if you look at both our fiscal year in the very beginning of the calendar year, spending in wafer fab equipment was a little bit weak. So as you go through the -- when we add it up, we get pretty much flat first half, second half, even though we see a peak in this time period of March, April, May. Then if you we at the other kind of segments of wafer fab equipment spending, in the DRAM area, we expect low levels of spending throughout the year, modestly down in the second half of the year. NAND spending, we previously had thought it would be better, but we now think it's not going to be better. It's going to be a little bit lower in the second half of the year as well. And then we do expect logic spending to perk up at the very end of the year as new tech -- the next node of logic technology starts to be purchased. So the summation of that is foundry will end up being pretty flat first half, second half; logic will pickup; and memory will be modestly down in the second half. Satya Kumar - Crédit Suisse AG, Research Division: Okay. One quick follow-up. If I take a step back from the seasonal trends in foundries and all that, if I look at how big this 40-nanometer node is at all the foundries, and if I look at how much capacity is being added at 28 nanometer, and if I sort of try to think about the capacity at the end of the year, relative to how big the opportunity is, do you think that we are labeling the 28-nanometer additions or later links or early links? How do you sort of think about the overall opportunity for 28 additions?

Our view on 28 is that this is going to be the largest node. We think demand on 28-nanometers is very high and there's still constrained supply. The speed of the ramp is about something in the neighborhood of 50% faster than the 40-nanometer, 45-nanometer ramp. And we think in the end, when this -- when 28-nanometer peaks out over the next few years, it will end up being something on a range of 40% higher than the previous generation peak. So right now, we think 28-nanometer is going to be strong through the year. It's going to be strong into 2013. Assuming that our customers can find a place to put equipment, they'll continue to add equipment as quickly as they can.

The next question comes from the line of Jim Covello, Goldman Sachs.

Two questions. First in the EES segment, what does normalized profitability have to get to over the next couple of years, post the restructuring in order for you guys to want to stay in the business? That would be the first question. Second question is on the NAND side, obviously it's been a little lower than we all would have thought this year. Is it just pricing that we need to look at in order to determine when that segment could pick back up, or is there some technology transitions coming along that could create a need for increased spending, even in the absence of a pickup in pricing?

Jim, it's George. I'll the question on the EES segment. I think if you look at the new EES model that we talked about at the Analyst Meeting, we showed that operating margins went to somewhere between 16% and 19% when we to get to a $1 billion of revenue, which is about half of the run rate that we saw last year. So we think as EES moves up into that range, it starts to show the underlying benefit of the core operating businesses. It continues to be an investment vehicle for us. We think this is an attractive long-term business and so we'll continue to invest in next-generation cell technologies. But we think in that range, it will be a positive contributor to the company.

So Jim, I think you got both a question and a follow-up. But the NAND follow-up question, what we're seeing right now is about a 75% bit growth. But within that, there's a number of things, maybe I can address first supply and then demand. On the supply side, we're seeing a number of things happening here. A lot of the legacy demand is kind of falling off for things like cameras, iPods or MP3 players, and USB drives. So that allows them room to upgrade their legacy capacity, so factor one. Then additionally, the 3-bit per cell technology is getting qualified in many more applications and much faster, probably, than we thought it would. On the demand side, I think the biggest factor is that the footprint in tablets and smartphones of NAND flash is not moving up as fast as we thought. So while they're affected by that big growth rate of 60% in tablets and 30-plus percent in smartphones, they're not getting a big additional kicker on the bit growth because the number of bits per box are staying relatively flat. I think that part of that is pricing, but I think part of it is just what consumers demand for storage in these devices. So until solid-state drives get into PCs or the footprint dramatically changes, I think we'll see this kind of growth rate, bit growth, in NAND.

And your next question comes from the line of Stephen Chin, UBS.

Just a question on the 2012 sales guidance being at the higher-end at $9.5 billion. Do you have an updated view on the Silicon group sales guidance for the fiscal year? Can we assume that the Silicon sales will be at the higher end of the range given at Analyst Day?

Yes, I think the pick up that we're seeing in our outlook is driven by SSG, so that's where we're getting the additional benefit.

Okay. And my follow-up question is do you think you could achieve the 24% target market share gain goal at foundry customers faster than you originally thought, given the strength you're seeing there now?

I don't know about faster than we're thinking. I think we have to see some more transistors move the gate last to be able to see that, and some more gains in our etch and PD -- in our Inspection business to be able to reach that goal. But we're encouraged by the gains in the front end at this point.

Your next question comes from the line of Mahesh Sanganeria, RBC Capital Markets.

Mike, in perspective of 28-nanometer capacity constraint, can you tell us, are you getting a longer lead time because it seems like that your revenue is going down but your orders are pretty high. Is that the customers are slotting for a longer period of time with you because of the capacity constraints?

I think that customers have recently realized how constrained the capacity is, so we have a way of doing business and for them to signal as soon as they know where they're going to need capacity. I wouldn't say that they're giving us a lot more lead time. I think they're telling us as soon as they know that they need more capacity. In part, you can see that here in our Q2, where demand was a bit higher in our semiconductor group than we thought it would be. And I think that actually is extending into Q3. So I don't know that we get anymore lead time on this. But we would like to get more lead time but the way this business is working right now, I think customers let us know as soon as they know.

And with some of our customers, the time between order and shipment is pretty tight. And so we had another quarter of pretty high turns, which also makes it hard to make the math work when you look at the high orders in this quarter and the lower orders, but still very strong demand.

It is good to see the backlog inch up a bit, though, I will say that.

And one more thing if you can elaborate on the foundry side, I think you said the first half was very concentrated. And did you say that you're seeing some broadening from the foundry -- in terms of foundry customers in the second half?

Yes, I think that's fair to say. But when you really look at this, there are 4 major foundry spenders, and it's really a matter of the mix between those 4 major foundry spenders; who's spending more, who's spending less. I think the second half will be a little bit more even than the first half.

And your next question comes from the line of Edwin Mok, Needham & Company. Edwin Mok - Needham & Company, LLC, Research Division: Actually a question on the Display side. You mentioned on the prepared remarks that you expect fourth quarter to pick up. Just to clarify, is that calendar or fiscal? And in terms of pickup, what is driving that? Is that new model changes or just channel demand?

Yes. So we said by our fourth fiscal quarter, we said as early as our fourth fiscal quarter, but the biggest thing that we continue to see some increase investment in mobility, for tablets and for touch-enabled ultrabooks. But also to really have the orders pick up, we have to see TV investments increase. And that, particularly, will be in some factories in China. The factories are built, and it's a matter of customers deciding when to facilitize those. But we think that could be as early as fourth quarter. There's been pretty significant underinvestment this year, CapEx as low as $3 billion. Our equipment CapEx as low as $3 billion. So very significant underinvestment here. Meanwhile the market is growing, so the shortages are improving, prices are improving. Supply and demand is getting more in balance. So we think that there is needed investment and as we projected in Analyst Day, we think 2013 can kind of get back to 2011 revenue levels for us. Edwin Mok - Needham & Company, LLC, Research Division: That was very helpful there. And then going back to silicon, just I guess a question on foundry. I think one of the foundry, or at least one of the foundry or some of the foundries, are starting to talk about 20-nanometer as the new node and I think some people are speculating that will be a bigger node and if you listen to what Intel is talking about in terms of 20-nanometer, it's seeing basically bigger [indiscernible] because you need more equipment. So are you guys anticipating that to start to come in calendar fourth quarter of this year? And do you expect that to be, I guess, a longer-term driver for the foundry business?

Certainly, we do expect 20-nanometer to again be a very big node for the foundries. We'll see some R&D equipment, but we don't expect a major ramp in 20 nanometers in the fourth quarter. Really, what we expect is logic spending to increase at the end of the year as 14-nanometer capacity starts to get built. Both of those technologies are quite good for Applied as the advanced transistors take a lot more steps. They'll take more epi steps. They will take more metal steps to be able to develop those high-performance low-power transistors.

The next question comes from the line of Chris Blansett, JPMorgan. Christopher Blansett - JP Morgan Chase & Co, Research Division: Quick question on the second half as you diversify out your customer base in SSG. Should we expect a modest improvement in the margin profile when this occurs?

It will be -- I think, more impact on the margin will be just the activities we're taking on cost. So it'll be modestly positive, but not material. Christopher Blansett - JP Morgan Chase & Co, Research Division: Okay. Then the follow-up was tied to the disclosure that you're going to significantly reduce your spending on the LED front. Does this mean you're out of the area or are you just trying to kind of minimize the development expenses at this time for maybe a longer burn before you get some product?

So what we're going to do there is certainly we have a number of customers that we've been working with. We'll continue to support those customers in their efforts to get our products into production. But we're going to pull back on how much we've been spending on the new capabilities and the new products in the MOCVD area. So we will pretty significantly pullback on the spending there. And really, the rationale is we have a lot of areas that we are looking at that have good return for the company and for shareholders and we have to prioritize our spending. And this is one of those areas where the return looked quite far out, so we made our choices to spend in other areas and also cut back and get our profitability in our Solar business up.

Your next question comes from the line of Terence Whalen Citigroup.

This is Wenge Yang for Terence. In terms of DRAM spending, as the DRAM price stabilize, is there any discussion from the customers to resume some of the technical -- technology shrinks for the DRAM sector?

Yes. Technology shrinks are ongoing. The DRAM guys have had -- primarily, where they're spending their small capital budget is on technology shrinks. But we've been encouraged to see prices stabilize here. I think it's certainly a sign that capacity and demand are getting more in balance there, as we all know there is some capacity coming off line here at the current time, which also should help that balance. But people are not talking about new factories yet at this point, or new big capacity adds.

Okay. Just a quick follow-up on that. Last time, when [indiscernible] merging to Micron camp [ph], there was a technology spending to convert the processes from [indiscernible] process to Micron processes. So in this round, if Elpida and Micron deal went through, do you see another round of technology spendings to consolidate the process into a single process backlog?

I really think it's too early to tell exactly how Elpida and Micron are going to get together. I'd just say we're encouraged that the factories are still running and Elpida is getting orders from major customers. I think those things are positive signs right now. How far down the road, certainly, eventually, they have to synergize the technologies, but that may not be needed for a while because the spec DRAM cells are relatively similar.

Your next question comes from the line of Krish Shankar, Bank of America Merrill Lynch.

Mike or George, one is a long-term question, with all the well-publicized supply-side issues stated by the fabless companies. Do you think down the road, these fabless guys that are well capitalized might start buying front-end tools from consignment and place it at the foundries, kind of like what they do at the back and the tester of the OSAT?

I think it's a great long-term question. I don't think we would have any visibility to that trend starting now. And again, I think what you're seeing with foundry customers is a desire to add capacity to meet future demand and across a broad group of customers. So I think the model as it stands right now is still on the horizon.

But certainly people are concerned about not having enough supply at this node. So I think it will be interesting to see what strategic actions they take for the next node of capacity.

Well, one of the challenges is how do you -- you'd have to be a customer that had tremendous scale. Because factories today are only going to get more scale intensive. So there's probably only 1 or 2 customers, and maybe 3 actually, that have that kind of scale and 2 are already fairly engaged in production.

Got it. And then just my follow up, along the same path. It seems like the foundry players are spending for yield and demand. So in a scenario of the macro economy deteriorates in the second half, in your view, do you think the foundry players continue to invest for whatever reasons they want to do it in the second half or do you think they'll scale back in the second half of the year?

I think it really depends on what the demand on smartphones and tablets are. These things seem to transcend some of the economic environment, but it depends on how bad a situation we can imagine. Certainly, if there's a situation like 2008, I think everybody pulls back like they did in 2008. But I think with any kind of modest pullback, there's a good chance that these electronic devices continue to be sold in nearly these kind of quantities that we're talking about.

And we're starting to PCs pickup, which is a positive sign and certainly we didn't get much help from PCs last year.

Your next question comes from the line of Patrick Ho, Stifel, Nicolaus. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Can you go back for a second in terms of just trying to reconcile the revenue outlook that you're presenting for July versus I guess the strong order flow you've seen over the last 2 quarters. You mentioned turns business continues to be high. I guess is that any indicator for us to look at how orders are or what's the discrepancy? How can I reconcile the strong order flow that we've seen versus the revenue guidance for July?

Well, I mean, I think we discussed the SSG element, which is a high degree of turns business that we saw in the second quarter. Also, remember we had a large, close to $100 million booking in AGS related to a SunFab project and that won't actually revenue until after the third quarter. So that may be part of what, if you're trying to reconcile, that may be part of the math. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And also, a second question in terms of the margin profile on a going forward basis. You mentioned a lot of the gains you hope to get on the margin profile from the cost savings efforts. As revenues begin to grow again to what I would characterize as more normalized levels, how much does just the impact of increasing revenues contribute it to say the gross margin, more particularly?

Well, I think you're already going to see it. In the third quarter, we said we'd be down on revenue. I think we're going to be fairly flat on gross margin as some of the improvements help offset the effect of volumes. So one of the things in margin that is the big factor is going to be mix. And as we get -- continue to see a strong semi mix, while we're -- particularly while we're seeing the non-semi business is still at absolute levels, we still have some room for upside. But really it's when the non-semi businesses start to recover, which we expect to happen in '13, that I think you're going to see some real lift on the margin side.

Your next question comes from the line of Vishal Shah, Deutsche Bank.

George, I'm just trying to understand the bookings profile that you reported in the second quarter. Some of your competitors reported a much lower bookings number in March quarter. I'm just trying to understand is it just timing, or is it exposure to certain set of customers or lack of exposure in Japan or is it the share gains?

Yes, I think it's -- I'd love to say it's a little bit of all of it, but the fact is we also had an additional month, which was an important month in terms of demand. It's a month that'll be in our competitors' next quarter and it won't be in ours. But we had very, very strong, particularly foundry orders in the second quarter, and that really was the foundation. In addition, as I said in AGS, we're above trend in orders because we had the one large project order that skews the data a little bit.

Okay, great. And then one of your foundry customers recently pulled in 20-nanometer CapEx, are you seeing similar activity at some of your foundry customers? Are they asking you more for 20-nanometer? And do you expect maybe some of those customers to similarly follow the big move?

I think they have to be -- everybody will move to the next generation of technology as fast as they can because demand is high, next-generation gives smaller die size. But I think there's time yet to get those technologies to really be production-worthy. And so as soon as they can get them into production, they will. Everybody is working on that next-generation of technology at a breakneck pace. So it's just a matter of how soon those breakthroughs come and how good the transistors are and how reliable they are.

Your next question comes from the line of C.J. Muse, Barclays Capital.

I guess with silicon guided down here in July, but you all look for second half to track in line with the first half, curious if your expectations are for a snapback in Q3 or how should we think about the linearity of silicon revenues in the second half?

Yes, I think that we're thinking that, that will happen in later in the calendar year, not probably in the Q3 time frame, as customers are really trying to get that equipment into production status and starting to build chips. So the way we're looking at it is that the pickup will come in the latter part of the calendar year.

Okay, that's helpful. And as follow-up, can you, I guess, outline your expectations for OpEx as we move into the second half? I know clearly, if the market moves around things can change. But assuming that this scenario you've laid out towards the various business segments, how should we think about the trends for OpEx?

Yes, again for Q3, we would expect to be in the range of $565 million, plus or minus $10 million, certainly down from Q2. And then as we see the effects of synergies increasing and also the impact of the EES restructure, we should be able to move down lower in the range.

Your next question comes from the line of Jagadish Iyer, Piper Jaffray.

Two questions, Mike and George. First on the Display side, when do think you could probably see north of the $200 million run rate level if -- Display has been kind of quiet for few quarters. So when do you think it's going to pop up given that touch panel has been one of the hot areas on the ultrabook side. So any color on that?

I mean, we think you could see orders certainly bounce up to that level as early as our fourth fiscal quarter. But we would expect that run rate to be certainly more prevalent in 2013 than we're seeing here in 2012.

Okay. Fair enough. Second question just a follow-up, the $500 million break even for the EES, a 2-part question: First is what is your conviction that solar equipment spending should come back sometime in '13? And second thing is that do you believe you could be profitable in fiscal '13?

Yes. We think both of those are possible. It's in part why we aimed the target at $500 million, so that we could be profitable in 2013 with our current level of expected revenue. It's, of course, pretty hard to tell right now, but we're encouraged by what's happening on the end market. We think the first quarter was pretty close to 8 gigawatts of deployment. So we'll see what happens the rest of the year and how close client demand get.

Your next question comes from the line of Ben Pang, Caris & Company. Benedict Pang - Caris & Company, Inc., Research Division: Two questions. One, have your bit growth expectations changed for NAND or DRAM since the year? And the second question is, in terms of the 20-nanometer front [indiscernible] how would you characterize the growth relative to 28-nanometer?

I'm sorry, Ben, I didn't quite catch the second question on 28-nanometer versus 20-nanometer. We're you talking about capacity or complexity? Benedict Pang - Caris & Company, Inc., Research Division: Basically, your market, your, or I guess, the 10,000 [indiscernible] whatever, how much of a bigger opportunity do you guys have with the [indiscernible] as part of the whole. So I just want to see if it's -- is that your biggest opportunity in SSG going forward?

Yes. Okay, so first on bit growth. Our view on bit growth really hasn't changed much in the last few months. DRAM in the 30% to 40% range, not a lot of momentum there although we see increased footprint on DRAMs and smartphones, which again is another one of those positive signs for DRAMs. And then flash in the 75% bit growth regime. And that's resulting -- and about 1/3 of that results in capacity additions and 2/3 in upgrades -- that they're achieving through upgrades. We think the 20-nanometer technology is going to be between 30% and 40% more complex. Layers that are deposition layers, etch layers, inspections that all could accrue to Applied Materials. So our overall SAM, if you will, should increase by roughly that amount on a per wafer start or per 10,000 wafer start basis.

Your next question comes from the line of Mark Heller, CLS.

Mike, I just want to -- I'm not sure you covered it, but there was a decision today on solar import tariffs on the Chinese. I'm just wondering how that -- you might think that might affect your EES business?

Yes, the import tariffs for -- the anti-dumping import tariffs were certainly larger than we thought, 30%, more than 30% for many -- as many, many Chinese solar manufacturers. These tariffs are on top of some tariff -- some countervailing duty tariffs already levied, so this seems to be pretty steep. It will certainly cause changes in the supply chain. For those global companies, I think they will be able to adjust their supply chain, move around, get access to cells from other regions. It'll also give opportunity, I think, to Taiwanese manufacturers and of course, it will give some benefit to U.S. manufacturers as these tariffs get levied. For Applied Materials, we're selling to pretty much every solar -- every crystalline silicon solar manufacturer. And our focus with them is on reducing cost and improving efficiency. We certainly -- our goal, and I think the goal of most of our customers is to drive the cost down so that governments don't have to intervene into the business either from incentive or tariff kind of situations. So we're going to keep our focus up in this area. In the end, if it doesn't affect demand, my biggest worry that these tariffs would affect in demand, slowdown in demand, that would be a negative for every part of the solar industry, so hopefully they don't do that. But I think there's a pretty big risk of that.

And then a quick follow-up for George. How should we think about the gross margins and the tax rate in the second half of the fiscal year?

Sure. So as we said for the second half of the year, we don't really see a big shift in mix impacting. So I think at the levels that we're seeing today or possibly slightly improved on margin. And the tax rate for the full year, our outlook is still 26% to 27%.

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

I just wanted to comment on the Varian numbers, thanks for breaking those out. That's helpful to see how that business is developing and I'm just wondering if you expect the implant revenue to stay at the current revenue levels through the year or improve? And I'm also wondering if you see an expansion in that market, 14-nanometer logic or 20-nanometer foundry?

I'll talk about the year and, Mike, maybe you want to talk about the future technology generations. For the year, this is -- the second quarter was just a very, very strong quarter, record quarter for Varian since its inception. So, while I'd like to see every quarter going forward at this level, I think it'll move in line with the rest of the industry. But very, very strong overall.

Again, we think that making advanced transistors is a very intricate business and implant is going to play an increasingly big role in that. It was part of our thesis from the very beginning of why we were attracted to Varian and the implant business. So we believe that it will be a bigger part of gateless transistors. We think it will be a bigger part of how you dope thin-fed transistors. So we think that this is going to continue to have a growing SAM over the upcoming generations of the technology.

Okay. Just to clarify why was Q1 so strong for implant, or Q2, sorry?

Well really, foundry in both our share at foundries, but because 28-nanometer transistors, you can see all of our transistor businesses rise. Epi gets -- there's more passes of epi. There's more implants to adjust the transistors. There's more metal passes to ensure that the transistor performance, the turn-on voltages are set at the right levels. So these devices are getting more complex. We have great technology and products that are really aimed at exactly -- we've been working for years with customers exactly for this inflection.

And your final question comes from the line of Mahesh Sanganeria, RBC Capital Markets.

One question on buyback. It looks like you have been buying back about $15 million, $20 million, around $11. Should we think of that, that is going to be the level, and you will increase or decrease at lower and higher prices in terms of buyback?

What we've said is historically, we've been pretty ratable when we are buying and we've said with the kind of volatility that we're seeing in the markets today that we're going to be a little bit more opportunistic. And so we won't forecast ahead of the quarter what amount we're going to buy, but we certainly expect to be active buyers at these levels.

And we'd like to thank everyone for joining us this afternoon. A replay of this call will be available on our website beginning at 5:00 p.m. Pacific Time today. Thank you for your continued interest in Applied Materials.

Once again, we'd like to thank everyone for joining today's call. You may now disconnect.