The Scoop...

The long journey up

Now the world's leading semiconductor equipment manufacturer, Applied Materials was founded in 1967 in the Santa Clara Valley. As an industry pioneer, the company grew quickly and went public in 1972. Its growth was tempered, however, by slowdowns in the U.S. economy and the semiconductor industry. To revitalize business, the company made changes in its upper-level management, and James Morgan was picked in 1976 to replace founder Michael McNeilly as CEO. In 1979, Morgan foresaw opportunity in Asia, and Applied moved into Japan with a joint venture. Morgan's strategy paid off - the company's understanding of Japanese markets and business practices enabled Applied to beat out its American competitors as Japan became a world leader in production of semiconductors.

AM takes its lumps

When hard times hit the industry again in the mid-80s, Applied Materials reacted by concentrating on research and development budget. Applied unveiled a silicon wafer-production process that revolutionized the industry and launched the company to the top. In 1998, the company's historically happy relationship with Asia would lead to problems, as the troubled state of Asian economies pushed already sagging demand for semiconductors drastically downward. With its earnings faltering, Applied was forced to cut 2,000 jobs worldwide - 15 percent of its workforce. The company fought its way back in 1999, bringing back up its employee numbers, landing a 51 percent sales jump to $1.12 billion in May, and earning one of the Environmental Protection Agency's 1999 Climate Protection Awards for its technical innovation and leadership. Sales reached a record $2.19 billion level only a year later in May 2000, proving that Applied Materials had regained the track of success.

Paving the information superhighway

High-visibility companies such as Microsoft and Intel may be leading the parade on the information superhighway, but Applied Materials helped pave the silicon road. The company is the world's leading producer of equipment used to transform silicon wafers into semiconductors, the base for a computer's microprocessors. As the company says, "We make the systems that make the chips that make the products that change the world." Applied Materials machinery is the equipment of choice for many segments of the chip-making industry, including deposition (deposition of film on silicon wafers, chemically or otherwise), etching (etching semiconductor layers), and ion implantation. Not surprisingly, the company's largest customer is Intel.

On the acquisition prowl

Along with its troubles, Applied Materials has also seen its share of triumphs. In 1998, the company bought Consilium, a semiconductor manufacturing software and services provider, in a $42 million stock swap. Analysts greeted the move favorably, especially given the transition of chipmakers to 300 millimeter manufacturing process technology. In 1999 the company again strengthened its position through acquisition, adding chemical-mechanical polishing (CMP) machines to its line through its $135.5 million purchase of Obsidian Inc. Applied Materials grabbed attention in March 2000 when it acquired Etec Systems in a $1.9 billion stock-for-stock merger, the industry's largest acquisition deal to date.