AMAT beams into solar market with Applied Films purchase

May 4, 2006 – Applied Materials Inc., Santa Clara, CA, has agreed to acquire Longmont, CO-based Applied Films Corp. for approximately $464 million in stock, giving the semiconductor equipment giant complementary thin-film deposition technologies for its flat-panel display systems as well as inroads into the fast-growing solar market.

The acquisition is seen opening up new growth opportunities in the solar cell market, as well as in flexible electronics applications, stated Mark Pinto, Applied Materials SVP and CTO. “In solar cell manufacturing, we expect to help customers deliver higher levels of output at lower production cost,” he said. “By combining Applied Films’ existing platforms with Applied Materials’ broad process portfolio and global customer relationships, we can also accelerate a number of new applications for electronics on flexible substrates.”

Applied Films’ physical vapor deposition (PVD)-based flat-panel display (FPD) products are seen complementing Applied Materials’ existing FPD thin-film deposition capabilities. Applied Materials’ chemical vapor deposition and test equipment for the FPD’s transistor layer also meshes well with Applied Films’ FPD color filter systems and large-area PVD expertise, the companies stated.

Applied Films’ expansion into the solar cell market came partly from a restructuring earlier this year to consolidate its solar-related activities, separately from its display and glass divisions, as it integrates recently acquired thin-film deposition equipment manufacturer Vacuum Coating Technologies, Fairfield, CA.

Under terms of this deal, which has been approved by both companies’ boards of directors, Applied will pay $28.50/share in cash for each outstanding share of Applied Films, representing abut $303 million net of Applied Films’ existing cash and marketable securities, and will assume Applied Films’ outstanding stock options and other equity awards. The deal is expected to be closed by Applied Materials’ fiscal 3Q06, ending in July.

After the deal was announced, Applied Films stock soared 21% to $28.01/share — essentially eliminating the 22% premium of Applied Materials’ acquisition price. Applied Materials’ stock was trading about 2% higher on the news.

Applied Materials posted a $143 million profit in its most recent quarter, fiscal 1Q06 ended in January, a 42% decrease sequentially, on 8% higher sales of $1.86 billion. Compared with a year ago, Applied’s sales were down 4%, with profits down 51%. Applied Films reported a net loss in its fiscal 3Q06 (ended April 1) of $16.6 million on sales of $60.1 million, compared with net losses of $8.0 million on $52.1 million in sales in fiscal 2Q06, and a $15.0 million net loss on $44.9 million in sales a year ago.


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