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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



Form 10-K



Mark one

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934



For the fiscal year ended October 25, 1998



[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934



For the transition period from __________ to

Commission file number 0-6920



APPLIED MATERIALS, INC.

(Exact name of registrant as specified in its charter)





DELAWARE                          94-1655526

(State or other jurisdiction             (I.R.S. Employer

of incorporation or organization)         Identification No.)





3050 Bowers Avenue, Santa Clara, California            95054

(Address of principal executive offices)            (Zip Code)





Registrant's telephone number, including area code (408) 727-5555



Securities registered pursuant to Section 12(b) of the Act:



Name of each exchange

Title of class                      on which registered

--------------                     ---------------------

None                                  None



Securities registered pursuant to Section 12(g) of the Act:



Common Stock, $.01 par value



Indicate by check mark whether the registrant (1) has filed all reports

required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the

registrant was required to file such reports), and (2) has been subject to such

filing requirements for the past 90 days. Yes [X] No [ ].



Indicate by check mark if disclosure of delinquent filers pursuant to Item

405 of Regulation S-K is not contained herein, and will not be contained, to the

best of registrant's knowledge, in definitive proxy or information statements

incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K. [X]



Aggregate market value of the voting stock held by nonaffiliates of the

registrant as of December 18, 1998: $16,799,361,740



Number of shares outstanding of the issuer's Common Stock, $.01 par value,

as of December 18, 1998: 371,763,263



DOCUMENTS INCORPORATED BY REFERENCE:



Portions of the Applied Materials 1998 Annual Report for the year ended

October 25, 1998 are incorporated by reference into Parts I, II and IV of this

Form 10-K.



Portions of the definitive Proxy Statement for Applied Materials' Annual

Meeting of Stockholders to be held on March 31, 1999 are incorporated by

reference into Part III of this Form 10-K.



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When used in this Form 10-K, the words "anticipate," "estimate," "expect," and

similar expressions are intended to identify forward-looking statements. These

forward-looking statements reflect management's opinion as of the date hereof

and are subject to certain risks and uncertainties that could cause actual

results to differ materially from those stated or implied. Applied Materials,

Inc. (Applied Materials or the Company) assumes no obligation to update this

information. Risks and uncertainties include, but are not limited to, those

discussed in the section entitled "Management's Discussion and Analysis-

Trends, Risks and Uncertainties" in the Applied Materials 1998 Annual Report,

which section is incorporated herein by reference.



PART I



ITEM 1: BUSINESS



Organized in 1967, Applied Materials develops, manufactures, markets and

services semiconductor wafer fabrication equipment and related spare parts for

the worldwide semiconductor industry. The Company's customers include

semiconductor wafer manufacturers and semiconductor integrated circuit (IC)

manufacturers, who either use the ICs they manufacture in their own products or

sell them to other companies. In early fiscal 1999, the Company entered the

semiconductor and electronics manufacturing execution systems software and

services business through its acquisition of Consilium, Inc.



PRODUCTS



Applied Materials' products are used to build ICs, or chips, on a substrate of

material (typically silicon). These products, also referred to as equipment or

systems, are designed using sophisticated physics, chemistry and engineering

technology to provide chipmakers productive, reliable and cost-effective

solutions for the manufacture of their products.



Building a chip requires the deposition of a series of film layers, which may be

conductors, insulators (called "dielectrics") or semiconductors. The deposition

of these film layers is interspersed with numerous other processes that create

circuit patterns, remove portions of the film layers, and perform other

functions, such as heat treatment, measurement and inspection. Most advanced

chip designs require well over 300 individual steps, so many of these processes

are performed multiple times. Most chips are built on a base of silicon, called

a wafer, and consist of two main structures. The lower structure is made up of

components, typically transistors or capacitors, that perform the "smart"

functions of the chip. The upper structure consists of the "interconnect"

circuitry that connects the components.



Applied Materials' product line includes equipment capable of performing the

following major steps in the chip-building process: film deposition, etching,

ion implantation, rapid thermal processing (RTP), chemical mechanical polishing

(CMP), reticle inspection, wafer defect detection and review, and metrology. In

calendar 1998, the Company estimates that it was the leading supplier of

chemical and physical vapor deposition, plasma etch, epitaxial deposition, RTP

and CMP systems to the semiconductor industry.



SYSTEM ARCHITECTURES



The architecture of most semiconductor processing equipment is basically either

a "batch" or "single-wafer" type. Batch systems process many wafers at once,

whereas single-wafer systems process each wafer individually. Among single-wafer

systems, there are single-chamber and multi-chamber designs. Multi-chamber

systems can accept two or more individual processing chambers or stations on a

"platform" and can process wafers in each of these chambers simultaneously.



In addition to the process precision and control afforded by single-wafer

process chambers, the multi-chamber platform concept provides customers a

significant benefit in processing productivity and integration. Several process

chambers can be mounted on a platform, which acts as a central wafer-handling

system. This architecture provides a closed, vacuum controlled environment for

the wafer and enables the system to process several wafers simultaneously. Since

Applied Materials' first multi-chamber platform (the Precision 5000(R)) was

introduced in 1987, the use of multi-chamber platform technology has helped the

Company achieve fast and efficient entry into new market segments by allowing

new technology development to focus on the process chamber.



Applied Materials is the global leader in single-wafer, multi-chamber platforms,

and has four major processing architectures--the Precision 5000, the Centura(R),

the Endura(R) and the Producer(TM) platforms, which together have a global

installed base exceeding 6,500 systems. These platforms currently support

chemical vapor deposition, physical vapor deposition, RTP, epitaxy,





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polysilicon and plasma etch technologies. The Company's Mirra(R) CMP, ion

implantation, reticle inspection, wafer defect detection and review, and

metrology systems each use their own proprietary platform due to the unique

nature of their technologies.



PROCESS TECHNOLOGIES



Deposition. Deposition is a fundamental step in fabricating an integrated

circuit. During deposition, a layer of either electrically insulating

(dielectric) or electrically conductive material is deposited or grown on a

wafer. The Company offers products in chemical vapor deposition, physical vapor

deposition, epitaxial deposition and polysilicon deposition. Additionally, the

Company offers certain types of dielectric deposition processes with its RTP

systems (see page 5).



Chemical Vapor Deposition (CVD) Systems. CVD is used to deposit films that

function as dielectrics (insulators), metals (conductors) or semiconductors

(partial conductors). Applied Materials uses three platforms for depositing

dielectric CVD films: Precision 5000, Centura and Producer. The Company entered

the CVD market with the Precision 5000 platform in 1987, and continued product

development on the Precision 5000 and Centura platforms during the 1990s. The

Producer was introduced in June 1998 for high-volume blanket film applications,

and features unique Twin-Chamber(TM) process modules with two single-wafer

process chambers per module unit. Up to three Twin-Chamber modules can be

mounted on each Producer platform, thus considerably increasing wafer throughput

by allowing six wafers to be processed simultaneously. Producer offers many of

the Company's standard dielectric CVD applications for blanket (non-gap-fill)

films.



High-Density Plasma CVD (HDP-CVD) is one of the most advanced technology market

segments in dielectric CVD because of its ability to fill very small, deep

spaces (gaps) without voids. In November 1996, the Company launched a

second-generation HDP-CVD technology, called the Ultima HDP-CVD(TM) Centura. A

unique "Remote Plasma Clean" technology was first introduced on the Ultima

HDP-CVD system, and has since been expanded to other CVD systems, offering

"soft" chamber cleaning without damage to chamber parts and virtually zero

perfluorocompound "global warming" emissions. This feature provides

environmental benefits that are becoming increasingly important to chipmakers.



Other dielectric CVD process technologies include films deposited using

plasma-enhanced CVD (PECVD) methods as well as sub-atmospheric CVD (SACVD)

methods. A steady stream of chamber enhancements and new chamber designs -- like

the zero-consumables xZ(TM)-series of chambers -- have contributed to the

continuing acceptance of these products in the most advanced fabs. The Company's

newest dielectric film is Black Diamond(TM), a low dielectric constant (low k)

film used as insulating material between copper circuit lines.



Metal films are used in specific areas of an integrated circuit to form the

interconnect circuitry, or wiring, of a semiconductor device. Applied Materials

has offered metal CVD systems since 1989, beginning with blanket tungsten

capability on the Precision 5000 CVD system and later extended to the Centura

platform. Since that time, tungsten silicide, titanium, titanium nitride and

aluminum have been added to the Company's metal CVD capabilities. Fiscal 1998

new process announcements included a proprietary low-resistivity tungsten

process that cuts the electrical resistance of tungsten by up to 40 percent. A

new type of titanium/titanium nitride (Ti/TiN) process using TiCl4 chemistry was

launched for very small, deep contacts in DRAM (Dynamic Random Access Memory)

ICs.



Physical Vapor Deposition (PVD) Systems. PVD is mainly a physical, rather than

chemical, process used to deposit metal films on a wafer. Applied Materials

entered the PVD market in April 1990 with the Endura PVD system. This system is

designed with a multi-chamber, dual-loadlock architecture that moves a wafer

through a staged vacuum sequence to an ultra-high vacuum level, which ensures

maximum purity of the deposited films. The Endura system, with its many

subsequent enhancements, has been the basis for a broad range of advanced PVD

applications. A variety of process advancements have also been continually

introduced to keep pace with customers' changing technology requirements.



Ion Metal Plasma (IMP) PVD, introduced in 1997, uses a proprietary technology to

allow metal atoms to fill very narrow, deep structures with a uniform layer of

film. IMP has been generally accepted by the industry as a technology that

extends low-cost PVD technology to future processing schemes. IMP technology is

used in Applied Materials' Endura Electra(TM) Barrier/Seed Cu system and Endura

Ti/TiN Liner/Barrier systems.



The flexible architecture of the Endura system has encouraged the development of

integrated processes that combine multiple PVD processes or integrated

combinations of metal CVD and PVD technologies. In 1996, two integrated

processes combining metal CVD and PVD technologies were announced on the Endura

platform. The Endura Advanced Liner system features PVD titanium technology

coupled with either CVD TiN or IMP PVD TiN to form the critical liner/barrier

films in interconnect structures. The Cool Al(TM)





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process uses CVD aluminum and PVD aluminum for the bulk filling of very small,

deep interconnect structures. The low temperature of the process is compatible

with the low k dielectric films that are being developed to make high speed,

multi-level devices at or below 0.25-micron design geometries.



Epitaxial Deposition Systems. Epitaxial deposition (epitaxy or epi) systems grow

a layer of extremely pure silicon on a wafer in a perfectly uniform

crystalline structure to form a high quality base for building certain types of

chips. Applied Materials' experience in epi dates from the Company's inception.

In 1993, the Company introduced the Epi Centura, a single-wafer, multi-chamber

epi system for wafers up to 200mm (8 inches) in diameter. The Epi Centura is

also being used to develop and manufacture leading-edge silicon-germanium

(SiGe)-based devices for faster performing transistors with lower power

consumption.



Polysilicon Deposition Systems. Polysilicon (often called poly) is a material

used to form various portions of a transistor structure within a semiconductor

device. In September 1992, the Company announced the Poly Centura, a

single-wafer, multi-chamber system that deposits thin polysilicon films at high

temperatures. The Polycide Centura, launched in December 1993, combines chambers

for polysilicon and tungsten silicide deposition in an integrated process to

create the "polycide" structures found in advanced semiconductors. By depositing

both films in a single integrated sequence under vacuum, the Polycide Centura

avoids oxide growth at the film interface for high device reliability. An

enhancement was made to the system in 1998 called the Polycide xZ system, which

features the extension of the integrated polysilicon-tungsten silicide process

technology to the most recent "xZ" process chamber for tungsten silicide.



In 1997, using a variant of the technology for polysilicon deposition, Applied

Materials launched a new process for depositing high-temperature, single-wafer

silicon nitride, a film previously deposited almost exclusively in batch

furnaces. The process control of the single-wafer approach results in films of

greater uniformity and precision, which is increasingly important as transistor

structures shrink to smaller dimensions.



Dry Etching. The etching process selectively removes patterned material from the

surface of a wafer to create the device structures. With the advent of

sub-micron feature sizes, "dry" (plasma) etching has become one of the most

frequently-used processes in semiconductor manufacturing. Applied Materials

entered the etch market in 1981, and has since introduced systems for etching

three basic materials, including metal, silicon and dielectric films.



Since 1993, the Company has launched a series of MxP(TM) process chambers for

metal, dielectric and silicon etching, available on both the Precision 5000 and

Centura platforms. This reactive ion etch chamber has proven capable of

continuous technology improvements, with the latest chamber enhancement in use

for 0.25-micron designs. In addition to providing excellent etch technology, MxP

chambers are known for reliability and low operating costs in high-volume

production environments.



Beginning in 1996, the Company introduced a new series of high-density plasma

etch systems for critical, advanced etch applications. The introductions of the

Metal Etch DPS(TM) (Decoupled Plasma Source) Centura system and the Silicon Etch

DPS Centura system target 0.35-micron and below device designs for etching metal

and silicon, respectively. In July 1997, a second-generation chamber design was

introduced for the Metal Etch DPS Centura system, employing several key

engineering enhancements to the system. Both DPS etch systems offer leading-edge

technology for multiple device generations: from 0.35-micron to 0.18-micron

feature sizes and beyond.



In April 1997, the Company launched its most advanced, high-density plasma

system for etching dielectric films, called the Dielectric Etch IPS(TM) Centura.

It is designed for etching very small, deep interconnect structures, including

damascene, as well as for other dielectric etch applications.



Ion Implantation. Ion implantation inserts carefully controlled amounts of

selected impurities or "dopant" elements into parts of a transistor structure to

create the electronic properties that govern the transistor's operation. Applied

Materials entered the high-current portion of the implant market in 1985 with

the Precision Implant 9000 and introduced the Precision Implant 9200 in 1988. In

November 1992, the Company introduced a new high-current ion implantation

system, the Precision Implant 9500, for the production of high-density

semiconductors, such as 16Mb and 64Mb memory devices and advanced

microprocessors.



In 1996, the Company introduced a new series of compact implant systems with the

Implant xR80, and subsequently added two new systems to the xR family--the

Implant xR120 and Implant xR LEAP(TM) (Low Energy Advanced Processing). The

xR120 extended the energy range of the xR80 to 120 kilovolts while maintaining

the same small size. The xR LEAP enhanced low energy performance by





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doubling beam current in the sub-5 kilovolt energy range. These systems were

enhanced in 1997 with an "S" series that offers significantly increased system

throughput and lower cost of ownership.



In 1998, the low-energy capabilities of the xR LEAP system were being used by

many chipmakers to create ultra-shallow junction transistors, enabling denser

and higher speed devices. The xR LEAP system is being used in collaboration with

the Company's RTP (see below) technology to offer the Ultra-Shallow Junction

Equipment Set Solution, a module consisting of both implant and RTP technologies

that has been optimized for the highest degree of technical performance. Also in

1998, the Company entered into a collaborative arrangement with Orion

Technologies for the development of a completely new generation of ion implant

systems.



Rapid Thermal Processing (RTP). RTP subjects the wafer to short, intense bursts

of heat to modify the properties of various materials, such as those implanted

with dopants. In June 1995, Applied Materials launched its first RTP system, the

RTP Centura. Its proprietary temperature sensing and heating calibration

technologies allow wafer temperature control that is completely insensitive to

wafer backside emissivity. An enhanced version, called the XE model, was

introduced in 1997, with a further enhancement, called the XEplus, in August

1998. Moving beyond core heat treatment applications, the Company's RTP system

is now also used to deposit very thin dielectric films. A nitric oxide process

deposits critical (50 angstroms) gate dielectric layers required for the most

advanced logic, DRAM and flash memory devices. A wet oxide process, introduced

in 1997, can grow gate oxides as thin as 25 angstroms.



Chemical Mechanical Polishing (CMP). CMP is a process in which uneven film

material is removed from the wafer to create a flat (planarized) surface, thus

making it easier to pattern subsequent layers before etching. The Company

announced its entry into the CMP market with the Mirra CMP system in December

1995. This system uses a four-station, rotating "carousel" design, in which

three separate "active" planarization stations process wafers while a fourth

station loads and unloads wafers. In June 1997, the Company announced the new

Titan Head(TM) polishing unit for the Mirra CMP system, which allows better

uniformity and a higher degree of planarity than traditional polishing heads.

The Mirra CMP system has steadily expanded its library of CMP processes, which

now includes several dielectric films as well as tungsten.



RETICLE INSPECTION, WAFER DEFECT DETECTION AND REVIEW, AND METROLOGY



Reticle Inspection. Reticles are high precision quartz plates that contain

microscopic images of electronic circuits. These recticles are used to transfer

circuit patterns onto semiconductor wafers to fabricate ICs. The reticle must be

defect-free, with perfect image fidelity, because any imperfection will be

replicated on the wafer. Reticle inspection systems look for possible defects

that could be transmitted to the design pattern on the wafer. Applied Materials'

RT 8000 reticle inspection system was upgraded in August 1998 to the RT 8200ES

with a variety of new features that improved its sensitivity, productivity and

reliability to meet the demands of the sub-0.25 micron, 256Mb generation of

semiconductor devices. The RT 8200ES doubles the scan speed and throughput of

the earlier model and reduces reticle inspection cost. The system's enhanced

sensitivity capabilities enable detection for the most advanced technologies

such as optical proximity correction and phase-shifting masks.



Wafer Defect Detection and Review. Patterned wafer defect detection systems

inspect wafers as they move between processing steps. Defect detection requires

advanced image-capturing technology combined with high-speed computer data

processing to maintain high yield in chip production. Defects may include

particles, design abnormalities and other problems. Launched in February 1998,

the WF-731 and WF-736 DUO are used to inspect highly advanced semiconductor

devices and perform "on-the-fly" classification of defects as they are detected.

Defect Review Scanning Electron Microscopes (DR-SEMs) analyze and then classify

even smaller defects on the wafer, such as small particles, scratches or

residues. Introduced in May 1998, Applied Materials' SEMVision(TM) system

reviews and classifies a broad range of defect types found on blanket or

patterned wafers. SEMVision is the industry's first high-throughput, fully

automatic DR-SEM, marking a major advance over conventional, manually operated

systems.



Metrology. SEMs use an electron beam to image and measure surface features on a

semiconductor wafer at a much higher resolution than images captured by optical

microscopes. Critical Dimension (CD) SEMs are used by semiconductor makers to

measure the "dimension" of critical sub-micron-sized design features on a chip,

thus assuring the accuracy of the manufacturing process. Applied Materials'

7830Si CD-SEM, introduced in 1997, generates images of critical device

structures having depth to width ratios of up to 10:1 with high resolution of

the bottom details of these structures. The production-proven OperatorFree(TM)

platform allows advanced measurement of 0.18-micron processes with 3-nanometer

precision for lines and spaces.





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300mm



Throughout its history, the semiconductor industry has migrated to increasingly

larger wafer sizes--from one and two-inch wafers in its early days, through

several intermediate sizes, to today's 200mm (8 inch) standard. To gain the

economic advantages of a larger surface area on which to fabricate semiconductor

devices, the industry is generally anticipating that 300mm (12 inches) will be

the next wafer size (300mm wafers have a 2.25x-greater surface area than 200mm

wafers). The hardware required for processing 300mm wafers will be entirely new

or scaled up from 200mm dimensions depending on the equipment's configuration.

The Company is designing some systems with dual 200mm-300mm capabilities.



With many customers in the planning process for possible migration to 300mm

wafer fabs, Applied Materials has been developing a complete line of 300mm

systems in its mainstream process technologies, covering more than 60

applications. In March 1997, Applied Materials shipped the industry's first

300mm system, for RTP, to a customer. Several other 300mm systems, including epi

and CVD systems, have been delivered to customers and to industry consortia at

various locations, including a multi-system purchase by Semiconductor 300 in

Dresden, Germany, the industry's only operating 300mm fab. The success of these

new and enhanced products in the market has yet to be determined. Over the

course of fiscal 1998, and particularly in the second half, the Company's 300mm

product development efforts were reduced significantly to reflect the

semiconductor industry's decision to slow migration to 300mm wafer processing.



EQUIPMENT SET SOLUTIONS



Applied Materials is proactive in developing advanced technology that enables

chipmakers to meet the demand for more complex chips. In addition to

manufacturing, selling and supporting individual systems, the Company has

recently begun to offer customers fully supported, integrated "sets" of

equipment designed to reduce customers' development and engineering time and

enable faster time-to-market when those customers introduce new chip

technologies. An Equipment Set Solution(TM) (ESS(TM)) combines multiple systems

and/or technologies into a single package.



TRANSITION TO NEW MATERIALS



After decades of using the same materials to build ICs, advanced generation

devices are now being designed with many new materials. Each new material

involves a number of challenges in making it a reliable part of the

semiconductor device. The most significant material change involves a switch

from aluminum to copper as the conducting material used in the interconnect.



In the next several years, the Company believes that chipmakers will transition

from aluminum to copper as the interconnect material in ICs to reduce costs and

improve speed and performance. Applied Materials has been working with key

customers to develop copper-related technologies and believes that such

technologies will be available to meet the anticipated demand. In December 1997,

Applied Materials announced the industry's first system for depositing the

critical barrier and copper seed layers of the copper interconnect structure --

the Endura Electra Barrier/Seed Cu system. The barrier and seed layers are key

to ensuring the integrity of the copper structure.



In November 1998, Applied Materials announced the industry's first integrated,

multi-system product for building the copper interconnect structure (Copper

Interconnect ESS). Since using copper will demand a new process methodology, the

Copper Interconnect ESS eases the transition to these new materials for

chipmakers by providing a completely demonstrated, tested and pre-qualified set

of systems. This set of systems includes the following products, technologies

and services: Black Diamond low k deposition system; Dielectric Etch IPS Centura

system; 7830Si CD-SEM; Endura Electra Barrier/Seed Cu system; electroplating

technology; Mirra CMP Cu system; low temperature annealing technology; WF-736

DUO system; SEMVision(TM); test chips; mask set for test chips; and Applied

Materials' ESS start-up and implementation support package at the customer's

location.



The Copper Interconnect ESS can be fully demonstrated in Applied Materials' new

Equipment and Process Integration Center (EPIC) facility. Opened in November

1998, EPIC houses all of the equipment and processes needed for chipmakers to

develop and test a multi-level metal, completely integrated copper interconnect

process before installing it in their fabs.



In addition to the transition to copper wiring on the IC, many chipmakers are

planning to incorporate new low k dielectric (insulating) materials between the

metal lines to replace the conventional silicon dioxide dielectric for better

performance. In November 1998, Applied Materials introduced Black Diamond, a

product that provides chipmakers a cost efficient low k dielectric deposition

solution for this application. This film can be integrated with other existing

process technologies.





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There are other new materials being evaluated for use in the transistor

structure, particularly high k dielectrics that can store a larger charge in the

capacitor of memory chips. The first of these new materials is tantalum

pentoxide, which was introduced in July 1998 on the Company's Tanox xZ Centura

system.



CUSTOMER SERVICE AND SUPPORT



The Installed Base Support Services organization (IBSS) plays a unique and

critical role in the Company's ability to satisfy its customers' production

requirements. IBSS installs equipment and provides warranty service worldwide

through offices located in the United States, Europe (including Israel), Japan,

Korea, Taiwan and Asia-Pacific (China and Southeast Asia). IBSS has more than

2,000 highly-trained customer engineers and process support engineers, usually

located in or near the customers' fab site, servicing more than 10,000 Applied

Materials' systems currently operating in customer facilities. IBSS also manages

a complex global spare parts operation. Semiconductor fabrication systems are

highly complex, often elaborately customized machines with thousands of

specialized parts. Having the required consumable and spare parts available to

customers anywhere in the world on very short notice enables a cost-effective,

profitable production system. In addition, IBSS provides service and labor,

technical training, product enhancements and systems refurbishment.



The Company maintains approximately 79 sales and service offices worldwide, with

29 offices located in North America (primarily the United States), 14 in Europe,

23 in Japan, 6 in Korea, 2 in Taiwan and 5 in Asia-Pacific.



BACKLOG



The Company's backlog decreased from $1.7 billion at October 26, 1997 to $917

million at October 25, 1998. The Company schedules production of its systems

based upon order backlog and customer commitments. Backlog includes only orders

for which written authorizations have been accepted and shipment dates within 12

months have been assigned. However, customers may delay delivery of products or

cancel orders at their option. Due to possible customer changes in delivery

schedules and cancellation of orders, the Company's backlog at any particular

date is not necessarily indicative of actual sales for any succeeding period. A

reduction of backlog during any particular period could have a material adverse

effect on the Company's business, financial condition and results of operations.



MANUFACTURING, RAW MATERIALS AND SUPPLIES



The Company's manufacturing activities consist primarily of assembling various

commercial and proprietary components into finished systems, principally in the

United States, with additional operations in England, Israel, Japan, Korea and

Taiwan. Production requires some raw materials and a wide variety of mechanical

and electrical components that are manufactured to the Company's specifications.

The Company uses numerous suppliers to supply parts, components and

subassemblies (collectively, "parts") for the manufacture and support of its

products. Although the Company makes reasonable efforts to ensure that parts are

available from multiple suppliers, this is not always possible; accordingly,

certain key parts may be obtained from a single supplier or a limited group of

suppliers. These suppliers are, in some cases, thinly capitalized, independent

companies that generate significant portions of their business from the Company

and/or a small group of other companies in the semiconductor industry. The

Company has sought, and will continue to seek, to minimize the risk of

production and service interruptions and/or shortages of key parts by: (1)

selecting and qualifying alternative suppliers for key parts; (2) monitoring the

financial stability of key suppliers; and (3) maintaining appropriate

inventories of key parts. There can be no assurance that the Company's results

of operations will not be materially and adversely affected if, in the future,

the Company is unable to receive a sufficient supply of parts to meet its

requirements in a timely and cost-effective manner.



MARKETING AND SALES



Because of the highly technical nature of its products, the Company markets its

products worldwide through a direct sales force, with sales and service offices

in the United States, Europe, Japan, Korea, Taiwan and Asia-Pacific. For the

fiscal year ended October 25, 1998, net sales to customers in North America

(primarily the United States), Europe, Japan, Korea, Taiwan and Asia-Pacific

were 38 percent, 16 percent, 17 percent, 4 percent, 20 percent and 5 percent,

respectively, of the Company's total net sales. The Company's business is not

usually seasonal in nature, but it is cyclical based on the capital equipment

investment patterns of major semiconductor manufacturers. These expenditure

patterns are based on many factors, including anticipated market demand for

integrated circuits, the development of new technologies and global and regional

economic conditions.





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The Company sells systems and provides services to customers located throughout

the world. Managing global operations and sites located throughout the world

presents challenges associated with, among other things, cultural diversities

and organizational alignment. Moreover, each region in the global semiconductor

equipment market exhibits unique characteristics that can cause capital

equipment investment patterns to vary significantly from period to period.

Periodic economic downturns, trade balance issues, political instability and

fluctuations in interest and foreign currency exchange rates are all risks that

could materially and adversely affect, and in the past have affected, global

product and service demand, and therefore, the Company's financial performance.



Information on sales to unaffiliated customers, transfers among geographic

regions, net sales, income/(loss) from operations and identifiable assets

attributable to the Company's geographic regions is included in Note 12 of Notes

to Consolidated Financial Statements contained in the Applied Materials 1998

Annual Report, which note is incorporated herein by reference.



RESEARCH, DEVELOPMENT AND ENGINEERING



Applied Materials' long-term growth strategy requires continued development of

new semiconductor manufacturing technology. The Company's significant investment

in research, development and engineering (RD&E) has generally enabled it to

deliver new products and technologies before the emergence of strong

competition, thus allowing customers to incorporate these products into their

manufacturing plans at an early stage in the technology selection cycle. The

Company works closely with its global customers to design systems that meet

their planned technical and production requirements. Engineering organizations

are located in the United States, England, Israel and Japan, with process

support and customer demonstration laboratories in the United States, England,

Israel, Japan, Korea and Taiwan.



In fiscal 1998, the Company invested $644 million, or 15.9 percent of net sales,

in RD&E for product development and engineering programs to improve or sustain

existing product lines. During fiscal 1996 and 1997, RD&E expenses were $481

million and $568 million, respectively. The Company has spent an average of 13

percent of net sales on RD&E over the last five years. In addition to RD&E in

specific product technologies, the Company maintains ongoing programs in

software, automation control systems, materials research, microcontamination and

environmental control that have applications to its products.



Key activities during fiscal 1998 involved development of a number of process

technologies used in fabricating the copper/low k interconnect structure for

emerging copper-based devices. These technologies include copper CMP,

electrochemical deposition, copper etch, low k dielectric CVD and

inspection/metrology tools.



As part of its technology development program, Applied Materials has built the

semiconductor equipment industry's first complete interconnect fabrication line,

containing all necessary process tools to fabricate and test the interconnect

structures in copper-based devices. This facility enables customers to develop

and test a completely integrated copper interconnect process flow before

installing it in their fab.



COMPETITION



The global semiconductor equipment industry is highly competitive and is

characterized by increasingly rapid technological advancements and demanding

worldwide service requirements. Applied Materials' ability to compete depends on

its ability to continually improve its products, processes and services, as well

as its ability to develop new products that meet constantly evolving customer

requirements. Each of the Company's products competes in markets defined by the

particular wafer fabrication process it performs. There are several companies

that compete with Applied Materials in each of these markets. Competitors are

primarily based in the United States, Japan and Europe, and range in size from

small companies competing in specific market segments (single product) to large

multinationals with products that span several market segments. At present, no

single company competes with Applied Materials in all of the same market

segments. Competitors in a given technology tend to have different degrees of

market presence in the various regional geographic markets. Competition is based

on many factors, primarily technological advancements, productivity and

cost-effectiveness, customer support, contamination control and overall product

quality. Management believes that the Company's competitive position in each of

its served markets is based on the ability of its products and services to

address customer requirements related to these competitive factors. Management

believes that the Company is a strong competitor with respect to its products,

services and resources. However, new products, pricing pressures, rapid changes

in technology and other competitive actions from both new and existing

competitors could materially affect the Company's market position.







8

9





APPLIED KOMATSU TECHNOLOGY, INC. JOINT VENTURE



In September 1993, the Company entered into an agreement with Komatsu, Ltd. to

form Applied Komatsu Technology, Inc. (AKT), a joint venture corporation that

develops, manufactures and markets systems used to produce Flat Panel Displays

for laptop, notebook and palmtop computers, desktop monitors, digital/video

cameras, portable televisions and instrument displays. During the fourth fiscal

quarter of 1998, the Company decided to discontinue the operations of AKT. The

Company's interest in this joint venture will be wound down over a period not to

exceed twelve months from the date of the decision to discontinue operations. As

a result of this decision, AKT has stopped selling PVD and Etch systems and has

ceased development efforts on new and next generation systems and technology.

AKT will continue to offer its existing CVD product line for sale and will also

provide existing customers with ongoing system support. See "Management's

Discussion and Analysis - AKT Joint Venture" and Note 4 of Notes to Consolidated

Financial Statements, which are incorporated herein by reference from the

Applied Materials 1998 Annual Report.



ACQUISITION



On October 12, 1998, the Company announced that it entered into an agreement to

acquire Consilium, Inc. (Consilium), a leading independent supplier of

integrated semiconductor and electronics manufacturing execution systems

software and services, in a stock-for-stock merger. The acquisition was

consummated on December 11, 1998 and will be accounted for as a pooling of

interests. The Company issued approximately 2 million shares of its common stock

in connection with this transaction. Consilium's financial condition and

historical results of operations are not material in relation to the Company's

financial condition and historical results of operations.



PATENTS AND LICENSES



Management believes that the Company's competitive position is significantly

dependent upon skills in engineering, production and marketing, rather than its

patent position. However, protection of the Company's technology assets by

obtaining and enforcing patents is important. Therefore, the Company has an

active program to file patent applications in the United States and other

countries for inventions that the Company considers significant. The Company has

a number of patents in the United States and other countries and additional

applications are pending for new developments in its equipment and processes. In

addition to patents, the Company also possesses other proprietary intellectual

property, including trademarks, know-how, trade secrets and copyrights.



The Company enters into patent and technology licensing agreements with other

companies when management determines it is in the Company's best interest. The

Company pays royalties under existing patent license agreements for the use, in

several of its products, of certain patented technologies that are licensed to

the Company for the life of the patents. The Company also receives royalties

from licenses granted to third parties. Royalties received from third parties

have not been, and are not expected to be, material.



In the normal course of business, the Company from time to time receives and

makes inquiries regarding possible patent infringement. In dealing with such

inquiries, it may become necessary or useful for the Company to obtain or grant

licenses or other rights. However, there can be no assurance that such licenses

or rights will be available to the Company on commercially reasonable terms.

Although there can be no assurance about the outcome of patent infringement

inquiries, the Company believes it is unlikely that their resolution will have a

material adverse effect on its financial condition or results of operations.



ENVIRONMENTAL MATTERS



Two of the Company's locations have been designated as Superfund sites by the

United States Environmental Protection Agency since 1987; however, neither

compliance with Federal, State and local provisions regulating discharge of

materials into the environment, nor remedial agreements or other actions

relating to the environment, has had, or is expected to have, a material effect

on the Company's capital expenditures, financial condition, results of

operations or competitive position. The Company has been designated a

"Responsible Party" by the U.S. Environmental Protection Agency with respect to

one site and a "Potentially Responsible Party" with respect to the other site.





9

10



EMPLOYEES



At October 25, 1998, the Company employed 12,060 regular employees. In the

high-technology industry, competition for highly-skilled employees is intense.

The Company believes that its future success is highly dependent upon on its

continued ability to attract and retain qualified employees. There can be no

assurance that the Company will be able to attract and retain qualified

employees. In response to the current semiconductor industry downturn, the

Company completed two separate restructuring actions in 1998 that reduced its

global workforce by approximately 2,800 employees. All activities of the Company

were subject to this restructuring effort. None of the Company's employees are

represented by a trade union, and management considers its relations with

employees to be good.



ITEM 2:  PROPERTIES



Certain information concerning the Company's principal properties at October 25,

1998 is set forth below:



<TABLE>

<CAPTION>

SQUARE

LOCATION              TYPE                   PRINCIPAL USE                     FOOTAGE         OWNERSHIP

--------              ----                   -------------                    ---------        ---------

<S>                     <C>                   <C>                                   <C>              <C>

Santa Clara, CA      Office, plant &       Headquarters, Marketing,                968,000          owned

warehouse             Manufacturing, Distribution,          3,120,000 (1)      leased

Research and Engineering



Austin, TX           Office, plant &       Manufacturing                           824,000          owned

warehouse                                                     320,000          leased



Horsham, England     Office, plant &       Manufacturing, Research                 126,000          leased

warehouse             and Engineering



Narita, Japan        Office, plant &       Manufacturing, Research                 222,000(2)       owned

warehouse             and Engineering



Chunan, Korea        Office, plant &       Manufacturing, Research                 107,000          owned

warehouse             and Engineering



Hsinchu, Taiwan      Office, plant &       Manufacturing, Research                  89,000          owned

warehouse             and Engineering                         130,000          leased



Tel Aviv, Israel     Office                Research and Engineering                 21,000          leased



Nes Ziona, Israel    Office, plant         Manufacturing, Research                  72,000          leased

& warehouse           and Engineering



Yavne, Israel        Office, plant         Manufacturing, Research                  55,000          leased

& warehouse           and Engineering

</TABLE>



- -------------

(1) Includes approximately 765,000 square feet that is either currently being

subleased or is being marketed for sublease.



(2) Subject to loans of $43 million, secured by property and equipment having an

approximate net book value of $63 million at October 25, 1998.



The Company also leases office space for 79 sales and service offices throughout

the world: 29 offices are located in North America (primarily the United

States), 14 in Europe, 23 in Japan, 6 in Korea, 2 in Taiwan and 5 in

Asia-Pacific.



The Company currently owns 167,000 square feet of manufacturing and other

operating facilities in California that have not yet been completed and placed

in service. In addition, the Company is currently constructing 330,000 square

feet of manufacturing facilities in Texas.



10

11



The Company also owns 99 acres of buildable land in Austin, Texas, 43 acres of

buildable land in Santa Clara, California and 9 acres of buildable land in

Narita, Japan. The Austin, Santa Clara and Narita land can accommodate

approximately 1,509,000, 1,046,000 and 766,000 square feet, respectively, of

additional building space to help satisfy the Company's current and future

needs.



Management considers the above facilities suitable and adequate to meet the

Company's requirements.



ITEM 3:  LEGAL PROCEEDINGS



In April 1997, the Company initiated separate lawsuits against AST Electronik

GmbH and AST Electronik USA, Inc. (collectively AST), and AG Associates, Inc.

(AG) (case no. C-97-20375-RWM) in the United States District Court for the

Northern District of California, alleging infringement of certain patents

concerning rapid thermal processing technology. Discovery has commenced and

trial in the AG matter has been set for July 1999. In October 1997, AST and AG

each filed counterclaims against the Company alleging patent infringement

concerning related technology. AG later filed additional counterclaims, alleging

infringement of several patents. These additional counterclaims were dismissed

by the court in July 1998. In response, in August 1998, AG filed two separate

patent infringement lawsuits based on these same patents, one in the United

States District Court for the Northern District of California (case no.

C98-03044-WHO) and one in the United States District Court for the District of

Delaware (civil action no. 98-479). No trial dates have been set in these

actions. The Company and AST have resolved their dispute under terms and

conditions set forth in a Memorandum of Understanding signed by the parties, and

a final Settlement Agreement is being completed. The settlement is not expected

to be material. The Company continues to believe it has meritorious claims and

defenses against AG, and intends to pursue them vigorously.



As a result of the Company's acquisition of Orbot Instruments, Ltd. (Orbot), the

Company is involved in a lawsuit captioned KLA Instruments Corporation (KLA) v.

Orbot (case no. C93-20886-JW) in the United States District Court for the

Northern District of California. KLA alleges that Orbot infringes one patent

regarding equipment for the inspection of masks and reticles, and seeks an

injunction, damages and such other relief as the Court may find appropriate.

There has been limited discovery, but no trial date has been set. Management

believes it has meritorious defenses and intends to pursue them vigorously.



On June 13, 1997, the Company filed a lawsuit against Varian Associates, Inc.

(Varian) captioned Applied Materials, Inc. v. Varian Associates, Inc. (case no.

C-97-20523-RMW), alleging infringement of several of the Company's patents

concerning physical vapor deposition (PVD) technology. The complaint was later

amended on July 7, 1997 to include Novellus Systems, Inc. (Novellus) as a

defendant as a result of Novellus' acquisition of Varian's thin film systems PVD

business. The Company seeks damages for past infringement, a permanent

injunction, treble damages for willful infringement, pre-judgment interest and

attorneys' fees. Varian answered the complaint by denying all allegations,

counterclaiming for declaratory judgment of invalidity and unenforceability and

alleging conduct by the Company in violation of antitrust laws. On June 23,

1997, Novellus filed a separate lawsuit against the Company captioned Novellus

Systems, Inc. v. Applied Materials, Inc. (case no. C-97-20551-EAI), alleging

infringement by the Company of three patents concerning PVD technology that were

formerly owned by Varian. On July 8, 1997, Varian filed a separate lawsuit

against the Company captioned Varian Associates, Inc. v. Applied Materials, Inc.

(case no. C-97-20597-PVT), alleging a broad range of conduct in violation of

federal antitrust laws and state unfair competition and business practice laws.

Discovery has commenced in these actions, but no trial dates have been set.

Management believes it has meritorious claims and defenses and intends to

pursue them vigorously.



During fiscal 1998, the Company settled all outstanding litigation with ASM

International N.V. As a result of this settlement, the Company received a

convertible note for $80 million, against which $15 million was collected in

November 1997. Because of the impact of the current industry downturn on ASM's

financial condition and liquidity, ASM was not able to pay the $65 million

remaining balance at the maturity date. Therefore, ASM's obligations under the

November 1997 litigation settlement agreement were restructured in December

1998. Pursuant to the new agreement, ASM paid $20 million upon completion of the

restructuring, and agreed to pay $10 million on November 2, 1999 and $35 million

no later than November 2, 2000. Certain other obligations of ASM were also

modified; however, these modifications are not expected to be material to the

Company's financial condition or results of operations.



In November 1997, OKI Electric Industry, Co., Ltd. (OKI) filed suit against one

of the Company's wholly-owned subsidiaries, Applied Materials Japan (AMJ), in

Tokyo District Court in Japan, alleging that AMJ is obligated to indemnify OKI

for a portion of patent license royalties paid by OKI to Texas Instruments, Inc.

Several hearings have been held, but no trial date has been set. Management

believes it has meritorious defenses and intends to pursue them vigorously.





11

12



The Company is subject to various other legal proceedings and claims, either

asserted or unasserted, that arise in the ordinary course of business. Although

the outcome of these claims cannot be predicted with certainty, management does

not believe that any of these legal matters will have a material adverse effect

on the Company's financial condition or results of operations.



ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS IN FOURTH FISCAL

QUARTER OF 1998



None.



EXECUTIVE OFFICERS OF THE REGISTRANT



The following table and notes thereto identify and set forth information about

the Company's five executive officers:



<TABLE>

<CAPTION>



NAME OF INDIVIDUAL                     CAPACITIES IN WHICH SERVED

------------------                     --------------------------

<C>                           <S>

James C. Morgan(1).......  Chairman of the Board of Directors and Chief

Executive Officer



Dan Maydan(2)............  President of the Company and Chairman of Applied

Komatsu Technology, Inc.



Joseph R. Bronson(3).....  Senior Vice President, Office of the President, Chief

Financial Officer and Chief Administrative Officer



Sasson Somekh(4).......... Senior Vice President, Office of the President



David N.K. Wang(5)........ Senior Vice President, Office of the President

</TABLE>



- ----------

(1) Mr. Morgan, age 60, has been Chief Executive Officer since 1977 and

Chairman of the Board of Directors since 1987. Mr. Morgan also served as

President of the Company from 1976 to 1987.



(2) Dr. Maydan, age 63, was appointed President of the Company in December 1993.

Dr. Maydan served as Executive Vice President from 1990 to December 1993.

Prior to that, Dr. Maydan had been Group Vice President since February 1989.

Dr. Maydan joined the Company in 1980 as a Director of Technology.



(3) Mr. Bronson, age 50, was appointed Senior Vice President, Office of the

President, Chief Financial Officer and Chief Administrative Officer in

January 1998. Mr. Bronson served as Group Vice President from April 1994 to

January 1998. Prior to that, Mr. Bronson had been Vice President since

November 1990. Mr. Bronson joined the Company in September 1984 as Corporate

Controller.



(4) Dr. Somekh, age 52, was appointed to the Office of the President in January

1998, and was appointed Senior Vice President of the Company in December

1993. Dr. Somekh served as Group Vice President from 1990 to 1993. Prior to

that, Dr. Somekh had been a divisional Vice President. Dr. Somekh joined the

Company in 1980 as a Project Manager.



(5) Dr. Wang, age 52, was appointed to the Office of the President in January

1998, and was appointed Senior Vice President of the Company in December

1993. Dr. Wang served as Group Vice President from 1990 to 1993. Prior to

that, Dr. Wang had been a divisional Vice President. Dr. Wang joined Applied

Materials in 1980 as a Manager, Process Engineering and Applications.





PART II



ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



"Stock Price History" on page 66 of the Applied Materials 1998 Annual Report is

incorporated herein by reference.



The Company's common stock is traded on the Nasdaq over-the-counter market. As

of December 18, 1998, there were approximately 5,791 holders of record of the

common stock.



To date, the Company has paid no cash dividends to its stockholders. The Company

has no plans to pay cash dividends in the near future.





12

13



ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA



"Selected Consolidated Financial Data" on page 29 of the Applied Materials 1998

Annual Report is incorporated herein by reference.



ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS



"Management's Discussion and Analysis" on pages 30 through 43 of the Applied

Materials 1998 Annual Report is incorporated herein by reference.



ITEM 7a: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



"Market Risk Disclosure" on page 43 of the Applied Materials 1998 Annual Report

is incorporated herein by reference.



ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



The consolidated financial statements, together with the report thereon of

PricewaterhouseCoopers LLP, Independent Accountants, dated November 17, 1998,

except as to Note 14 which is dated as of December 23, 1998, and appearing on

pages 44 through 64 and page 66 of the Applied Materials 1998 Annual Report, are

incorporated herein by reference.



ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE



None.



PART III



Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, portions of

the information required by Part III of Form 10-K are incorporated by reference

from the Company's Proxy Statement to be filed with the Commission in connection

with the 1999 Annual Meeting of Stockholders ("the Proxy Statement").



ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



(a) Information concerning directors of the Company appears in the Company's

Proxy Statement, under Item 1 -- "Election of Directors." This portion of

the Proxy Statement is incorporated herein by reference.



(b) For information with respect to Executive Officers, see Part I of this

Annual Report on Form 10-K.



ITEM 11: EXECUTIVE COMPENSATION



Information concerning executive compensation appears in the Company's Proxy

Statement, under Item 1 -- "Election of Directors." This portion of the Proxy

Statement is incorporated herein by reference.



ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



Information concerning the security ownership of certain beneficial owners and

management appears in the Company's Proxy Statement, under Item 1 -- "Election

of Directors." This portion of the Proxy Statement is incorporated herein by

reference.



ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Information concerning certain relationships and related transactions appears in

the Company's Proxy Statement, under Item 1 -- "Election of Directors." This

portion of the Proxy Statement is incorporated herein by reference.





13

14



PART IV



ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



(a)  1. FINANCIAL STATEMENTS



The consolidated financial statements listed in the accompanying "Index

to Financial Statements and Financial Statement Schedule" are

incorporated herein by reference from the Applied Materials 1998 Annual

Report.



2. FINANCIAL STATEMENT SCHEDULE



The financial statement schedule listed in the accompanying "Index to

Financial Statements and Financial Statement Schedule" is filed as part

of this Annual Report on Form 10-K.



3. EXHIBITS



The exhibits listed in the accompanying index to exhibits are filed or

incorporated by reference as part of this Annual Report on Form 10-K.



(b)  The Company filed a Report on Form 8-K on October 23, 1998. The report

contains the Company's press release, dated October 23, 1998, announcing

the completion of a previously announced restructuring plan and one-time

charges for the fourth fiscal quarter of 1998.



INDEX TO FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

(Item 14(a))



<TABLE>

<CAPTION>

ANNUAL REPORT

PAGE NUMBER

-------------

<S>                                                                          <C>

(1) Financial Statements

Consolidated Statements of Operations for the Fiscal Years Ended

October 27, 1996, October 26, 1997 and October 25, 1998...............     44



Consolidated Balance Sheets at October 26, 1997 and October 25,

1998..................................................................     45



Consolidated Statements of Stockholders' Equity for the Fiscal Years

Ended October 27, 1996, October 26, 1997 and October 25, 1998.........     46



Consolidated Statements of Cash Flows for the Fiscal Years Ended

October 27, 1996, October 26, 1997 and October 25, 1998...............     47



Notes to Consolidated Financial Statements............................  48 - 64



Report of Independent Accountants.....................................     66

</TABLE>



<TABLE>

<CAPTION>

FORM 10-K

PAGE NUMBER

-----------

<S>                                                                             <C>

(2) Financial Statement Schedule



Report of Independent Accountants on Financial Statement Schedule.......    19



Schedule II -- Valuation and Qualifying Accounts........................    20

</TABLE>



Schedules not listed above have been omitted because they are not required or

the information required to be set forth therein is included in the Consolidated

Financial Statements or Notes to Consolidated Financial Statements.



The consolidated financial statements listed in the above index that are

included in the Applied Materials 1998 Annual Report are incorporated herein by

reference. With the exception of the pages listed in the above index and the

portion of such report referred to in items 1, 5, 6, 7, 7a and 8 of this Form

10-K, the Applied Materials 1998 Annual Report is not to be deemed filed as part

of this report.





14

15



INDEX TO EXHIBITS



These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of

Regulation S-K:



EXHIBIT NO.                            DESCRIPTION

-----------                            -----------

2.1      Agreement and Plan of Merger, by and among Applied Materials,

Inc., Orion Corp. I, and Opal, Inc. dated as of November 24, 1996,

previously filed with the Company's Annual Report on Form 10-K for

the year ended October 27, 1996, and incorporated herein by

reference.

2.2      Stock Purchase Agreement dated as of November 24, 1996 by and

among Applied Materials, Inc., Orbot Instruments, Ltd. and the

Stockholders of Orbot Instruments, Ltd., previously filed with the

Company's Annual Report on Form 10-K for the year ended October

27, 1996, and incorporated herein by reference.

2.3      Agreement and Plan of Merger And Reorganization between Applied

Materials, Inc. and Consilium, Inc., previously filed with the

Company's Form S-4A dated November 6, 1998, and incorporated

herein by reference.

3(i)     Certificate of Incorporation of Applied Materials, Inc., a

Delaware corporation, as amended to March 18, 1996, previously

filed with the Company's Annual Report on Form 10-K for the year

ended October 27, 1996, and incorporated herein by reference.

3(i)(a)  Amendment to Articles of Incorporation dated March 27, 1998,

previously filed with the Company's Form 10-Q for the quarter

ended July 26, 1998, and incorporated herein by reference.

3(i)(b)  Articles of Incorporation (as amended to March 27, 1998),

previously filed with the Company's Form 10-Q for the quarter

ended July 26, 1998, and incorporated herein by reference.

3(ii)    Bylaws of Applied Materials, Inc., as amended to December 13,

1996, previously filed with the Company's Annual Report on Form

10-K for the year ended October 27, 1996, and incorporated herein

by reference.

4.1      Rights Agreement, dated as of June 14, 1989, between Applied

Materials, Inc. and Bank of America NT&SA, as Rights Agent,

including Form of Rights Certificate and Form of Summary of Rights

to Purchase Common Stock, previously filed with the Company's

report on Form 8-K dated June 14, 1989, and incorporated herein by

reference.

4.2      Form of Indenture (including form of debt security) dated as of

August 24, 1994 between Applied Materials, Inc. and Harris Trust

Company of California, as Trustee, previously filed with the

Company's Form 8-K on August 17, 1994, and incorporated herein by

reference.

10.1*     The 1976 Management Stock Option Plan, as amended to October 5,

1993, previously filed with the Company's Form 10-K for fiscal

year 1993, and incorporated herein by reference.

10.2*     Applied Materials, Inc., Supplemental Income Plan, as amended,

including Participation Agreements with James C. Morgan, Walter

Benzing, and Robert Graham, previously filed with the Company's

Form 10-K for fiscal year 1981, and incorporated herein by

reference.

10.3*     Amendment to Supplemental Income Plan, dated July 20, 1984,

previously filed with the Company's Form 10-K for fiscal year

1984, and incorporated herein by reference.

10.4*     The Applied Materials Employee Financial Assistance Plan,

previously filed with the Company's definitive Proxy Statement in

connection with the Annual Meeting of Shareholders held on March

5, 1981, and incorporated herein by reference.

10.5*     The 1985 Stock Option Plan for Non-Employee Directors, previously

filed with the Company's Form 10-K for fiscal year 1985, and

incorporated herein by reference.

10.6*     Amendment 1 to the 1985 Stock Option Plan for Non-Employee

Directors dated June 14, 1989, previously filed with the Company's

Form 10-K for fiscal year 1989, and incorporated herein by

reference.

10.7*     Applied Materials, Inc. Supplemental Income Plan as amended to

December 15, 1988, including the Participation Agreement with

James C. Morgan, previously filed with the Company's Form 10-K for

fiscal year 1988, and incorporated herein by reference.





15

16



10.8      License Agreement dated January 1, 1992 between the Company and

Varian Associates, Inc., previously filed with the Company's Form

10-K for fiscal year 1992, and incorporated herein by reference.

10.9*     Amendment dated December 9, 1992 to Applied Materials, Inc.

Supplemental Income Plan dated June 4, 1981 (as amended to

December 15, 1988), previously filed with the Company's Form 10-K

for fiscal year 1993, and incorporated herein by

reference.

10.10*    The Applied Materials, Inc. Executive Deferred Compensation Plan

dated July 1, 1993 and as amended on September 2, 1993, previously

filed with the Company's Form 10-Q for the quarter ended August 1,

1993, and incorporated herein by reference.

10.11     Joint Venture Agreement between Applied Materials, Inc. and

Komatsu, Ltd. dated September 14, 1993 and exhibits thereto,

previously filed with the Company's Form 10-K for fiscal year

1993, and incorporated herein by reference. (Confidential

treatment has been requested for certain portions of the

agreement).

10.12*    Amendment No. 2 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated September 10, 1992, previously

filed with the Company's Form 10-K for fiscal year 1993, and

incorporated herein by reference.

10.13*    Amendment No. 3 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated October 5, 1993, previously

filed with the Company's Form 10-K for fiscal year 1993, and

incorporated herein by reference.

10.14*    Amendment No. 2 to the Applied Materials, Inc. Executive Deferred

Compensation Plan, dated May 9, 1994, previously filed with the

Company's Form 10-Q for the quarter ended May 1, 1994, and

incorporated herein by reference.

10.15*    Amendment No. 4 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated December 8, 1993, previously

filed with the Company's Form 10-Q for the quarter ended May 1,

1994, and incorporated herein by reference.

10.16*    Applied Komatsu Technology, Inc. 1994 Executive Incentive Stock

Purchase Plan, together with forms of Promissory Note, 1994

Executive Incentive Stock Purchase Agreement, and Loan and

Security Agreement, previously filed with the Company's Form 10-Q

for the quarter ended July 31, 1994, and incorporated herein by

reference.

10.17*    The Applied Materials, Inc. 1995 Equity Incentive Plan, dated

April 5, 1995, previously filed with the Company's Form 10-Q for

the quarter ended April 30, 1995, and incorporated herein by

reference.

10.18*    The Applied Materials, Inc. Senior Executive Bonus Plan, dated

September 23, 1994, previously filed with the Company's Form 10-Q

for the quarter ended April 30, 1995, and incorporated herein by

reference.

10.19*    The Applied Materials, Inc. Executive Deferred Compensation Plan,

as amended and restated on April 1, 1995, previously filed with

the Company's Form 10-Q for the quarter ended April 30, 1995, and

incorporated herein by reference.

10.20     Applied Materials, Inc. Medium-Term Notes, Series A Distribution

Agreement, dated August 24, 1995, previously filed with the

Company's Form 10-K for fiscal year 1995, and incorporated herein

by reference.

10.21*    Resolution pertaining to the Amendment of the Applied Materials,

Inc. 1995 Equity Incentive Plan, adopted by the Stock Option and

Compensation Committee of the Board of Directors of Applied

Materials on December 12, 1996, previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.22     Participation Agreement dated as of April 30, 1997 among Applied

Materials, Inc. (as Lessee and Construction Agent), Credit Suisse

Leasing 92A, L.P., (as Lessor and Borrower), Greenwich funding

Corporation (as CP Lender), The Persons Named on Schedule I (as

Eurodollar Lenders) and Credit Suisse First Boston (acting through

its New York Branch, as Agent), previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.23     Appendix 1 to Participation Agreement, Master Lease Agreement and

Loan Agreement, dated as of April 30, 1997 (Definitions and

Interpretation) for Applied Materials, Inc., previously filed with

the Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.24     Loan Agreement dated as of April 30, 1997 among Credit Suisse

Leasing 92A, L.P. (as





16

17

Borrower), Greenwich Funding Corporation (as CP Lender), The

Persons Named on Schedule I (as Eurodollar Lenders) and Credit

Suisse First Boston (acting through its New York Branch, as Agent)

for Revolving Commercial Paper, Eurodollar Credit and Base Rate

Program, previously filed with the Company's Form 10-Q for the

quarter ended April 27, 1997, and incorporated herein by

reference.

10.25     Real Estate and Equipment Facility Master Lease dated as of April

30, 1997 between Credit Suisse Leasing 92A, L.P. (as Lessor), and

Applied Materials, Inc. (as Lessee), previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.26     Underwriting Agreement between Applied Materials, Inc. and Morgan

Stanley & Co. Incorporated dated October 9, 1997, previously filed

with the Company's Form S-3 dated October 9, 1997, and

incorporated herein by reference.

10.27     Prospectus Supplement for Applied Materials' $400 million Senior

Notes dated October 9, 1997, previously filed with the Company's

Form S-3 dated October 9, 1997, and incorporated herein by

reference.

10.28     $250,000 Five Year Credit Agreement and $250,000 364-Day Credit

Agreement, each dated as of March 13, 1998 among Applied

Materials, Inc., Morgan Guaranty Trust Company of New York, as

Documentation Agent and Administrative Agent, and Citicorp

Securities, Inc., as Syndication Agent, previously filed with the

Company's Form 10-Q for the quarter ended April 26, 1998, and

incorporated herein by reference.

10.29*    Amendment No. 1 to the Applied Materials, Inc. Executive Deferred

Compensation Plan dated August 1, 1997, previously filed with the

Company's Form 10-Q for the quarter ended July 26, 1998, and

incorporated herein by reference.

10.30*    Amendment No. 2 to the Applied Materials, Inc. Executive Deferred

Compensation Plan dated December 1, 1997, previously filed with

the Company's Form 10-Q for the quarter ended July 26, 1998, and

incorporated herein by reference.

10.31*    Applied Materials, Inc. 1995 Equity Incentive Plan, as amended on

March 17, 1998, previously filed with the Company's Preliminary

Proxy Statement dated January 27, 1998, and incorporated herein by

reference.

10.32     Letters of Guarantee dated October 28, 1998 between Applied

Materials, Inc. and Bank of Tokyo-Mitsubishi, Ltd., Sanwa Bank,

Ltd., Sakura Bank, Ltd. and Sumitomo Bank, Ltd. on behalf of

Applied Komatsu Technology, Inc.

10.33     Promissory Note dated December 15, 1998 between Applied Materials,

Inc. and Applied Komatsu Technology America, Inc.

10.34     Receivables Purchase Agreement dated October 22, 1998 between

Applied Materials, Inc. and Deutsche Financial Services

Corporation.

10.35*    Amendment No. 1 to the Applied Materials, Inc. Senior Executive

Bonus Plan dated September 2, 1998.

12.1      Ratio of Earnings to Fixed Charges.

13        Applied Materials 1998 Annual Report for the fiscal year ended

October 25, 1998 (to the extent expressly incorporated by

reference).

21        Subsidiaries of Applied Materials, Inc.

23        Consent of Independent Accountants.

24        Power of Attorney.

27        Financial Data Schedule: filed electronically.



- -----------

*   Indicates, as required by Item 14(a)3, a management contract or compensatory

plan or arrangement.





17

18



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange

Act of 1934, the registrant has duly caused this report to be signed on its

behalf by the undersigned, thereunto duly authorized.



APPLIED MATERIALS, INC.



By /s/ JAMES C. MORGAN

-----------------------------------

James C. Morgan

Chairman of the Board and

Chief Executive Officer



Dated: January 20, 1999



Pursuant to the requirements of the Securities Exchange Act of 1934, this report

has been signed below by the following persons on behalf of the registrant and

in the capacities and on the dates indicated.



<TABLE>

<CAPTION>



NAME                                      TITLE                                 DATE

----                                      -----                                 ----

<S>                                        <C>                                      <C>

/s/ JAMES C. MORGAN                        Chairman of the Board and                January 20, 1999

- ---------------------------------------    Chief Executive Officer

James C. Morgan





/s/ JOSEPH R. BRONSON                      Senior Vice President,                   January 20, 1999

- ---------------------------------------    Office of the President,

Joseph R. Bronson                          Chief Financial Officer and

Chief Administrative Officer

(Principal Financial Officer)





/s/ MICHAEL K. O'FARRELL                   Vice President, Global Controller        January 20, 1999

- ---------------------------------------    and Chief Accounting Officer

Michael K. O'Farrell                       (Principal Accounting Officer)



Directors:

James C. Morgan                            Director

Dan Maydan*                                Director

Michael H. Armacost*                       Director

Deborah A. Coleman*                        Director

Herbert M. Dwight, Jr.*                    Director

Philip V. Gerdine*                         Director

Tsuyoshi Kawanishi*                        Director

Paul R. Low*                               Director

Alfred J. Stein*                           Director

</TABLE>



* By /s/ JAMES C. MORGAN

------------------------------------

James C. Morgan, Attorney-in-Fact **



**By authority of the power of attorney filed herewith.





18

19



REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULE



To the Board of Directors of Applied Materials, Inc.



Our audits of the consolidated financial statements referred to in our report

dated November 17, 1998, except as to Note 14, which is dated as of December 23,

1998, appearing on page 66 of the 1998 Annual Report to Stockholders of Applied

Materials, Inc. (which report and consolidated financial statements are

incorporated by reference in this Annual Report on Form 10-K), also included an

audit of the Financial Statement Schedule listed in Item 14(a) of this Form

10-K. In our opinion, this Financial Statement Schedule presents fairly, in all

material respects, the information set forth therein when read in conjunction

with the related consolidated financial statements.



/s/  PRICEWATERHOUSECOOPERS LLP

- --------------------------------

PricewaterhouseCoopers LLP





San Jose, California

November 17, 1998





19

20



SCHEDULE II



VALUATION AND QUALIFYING ACCOUNTS



ALLOWANCE FOR DOUBTFUL ACCOUNTS

(Dollars in thousands)



<TABLE>

<CAPTION>



BALANCE AT            ADDITIONS-                            BALANCE

FISCAL YEAR      BEGINNING OF YEAR     CHARGED TO INCOME     DEDUCTIONS     AT END OF YEAR

-----------      -----------------     -----------------     ----------     --------------

<S>                        <C>                 <C>                 <C>              <C>

1996               $ 3,017             $ 1,548             $  (396)         $ 4,169

1997               $ 4,169             $ 2,433             $(1,024)         $ 5,578

1998               $ 5,578             $    --             $(4,948)         $   630

</TABLE>







20

21



EXHIBITS INDEX



These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of

Regulation S-K:



EXHIBIT NO.                            DESCRIPTION

-----------                            -----------

2.1      Agreement and Plan of Merger, by and among Applied Materials,

Inc., Orion Corp. I, and Opal, Inc. dated as of November 24, 1996,

previously filed with the Company's Annual Report on Form 10-K for

the year ended October 27, 1996, and incorporated herein by

reference.

2.2      Stock Purchase Agreement dated as of November 24, 1996 by and

among Applied Materials, Inc., Orbot Instruments, Ltd. and the

Stockholders of Orbot Instruments, Ltd., previously filed with the

Company's Annual Report on Form 10-K for the year ended October

27, 1996, and incorporated herein by reference.

2.3      Agreement and Plan of Merger And Reorganization between Applied

Materials, Inc. and Consilium, Inc., previously filed with the

Company's Form S-4A dated November 6, 1998, and incorporated

herein by reference.

3(i)     Certificate of Incorporation of Applied Materials, Inc., a

Delaware corporation, as amended to March 18, 1996, previously

filed with the Company's Annual Report on Form 10-K for the year

ended October 27, 1996, and incorporated herein by reference.

3(i)(a)  Amendment to Articles of Incorporation dated March 27, 1998,

previously filed with the Company's Form 10-Q for the quarter

ended July 26, 1998, and incorporated herein by reference.

3(i)(b)  Articles of Incorporation (as amended to March 27, 1998),

previously filed with the Company's Form 10-Q for the quarter

ended July 26, 1998, and incorporated herein by reference.

3(ii)    Bylaws of Applied Materials, Inc., as amended to December 13,

1996, previously filed with the Company's Annual Report on Form

10-K for the year ended October 27, 1996, and incorporated herein

by reference.

4.1      Rights Agreement, dated as of June 14, 1989, between Applied

Materials, Inc. and Bank of America NT&SA, as Rights Agent,

including Form of Rights Certificate and Form of Summary of Rights

to Purchase Common Stock, previously filed with the Company's

report on Form 8-K dated June 14, 1989, and incorporated herein by

reference.

4.2      Form of Indenture (including form of debt security) dated as of

August 24, 1994 between Applied Materials, Inc. and Harris Trust

Company of California, as Trustee, previously filed with the

Company's Form 8-K on August 17, 1994, and incorporated herein by

reference.

10.1*     The 1976 Management Stock Option Plan, as amended to October 5,

1993, previously filed with the Company's Form 10-K for fiscal

year 1993, and incorporated herein by reference.

10.2*     Applied Materials, Inc., Supplemental Income Plan, as amended,

including Participation Agreements with James C. Morgan, Walter

Benzing, and Robert Graham, previously filed with the Company's

Form 10-K for fiscal year 1981, and incorporated herein by

reference.

10.3*     Amendment to Supplemental Income Plan, dated July 20, 1984,

previously filed with the Company's Form 10-K for fiscal year

1984, and incorporated herein by reference.

10.4*     The Applied Materials Employee Financial Assistance Plan,

previously filed with the Company's definitive Proxy Statement in

connection with the Annual Meeting of Shareholders held on March

5, 1981, and incorporated herein by reference.

10.5*     The 1985 Stock Option Plan for Non-Employee Directors, previously

filed with the Company's Form 10-K for fiscal year 1985, and

incorporated herein by reference.

10.6*     Amendment 1 to the 1985 Stock Option Plan for Non-Employee

Directors dated June 14, 1989, previously filed with the Company's

Form 10-K for fiscal year 1989, and incorporated herein by

reference.

10.7*     Applied Materials, Inc. Supplemental Income Plan as amended to

December 15, 1988, including the Participation Agreement with

James C. Morgan, previously filed with the Company's Form 10-K for

fiscal year 1988, and incorporated herein by reference.

22



10.8      License Agreement dated January 1, 1992 between the Company and

Varian Associates, Inc., previously filed with the Company's Form

10-K for fiscal year 1992, and incorporated herein by reference.

10.9*     Amendment dated December 9, 1992 to Applied Materials, Inc.

Supplemental Income Plan dated June 4, 1981 (as amended to

December 15, 1988), previously filed with the Company's Form 10-K

for fiscal year 1993, and incorporated herein by

reference.

10.10*    The Applied Materials, Inc. Executive Deferred Compensation Plan

dated July 1, 1993 and as amended on September 2, 1993, previously

filed with the Company's Form 10-Q for the quarter ended August 1,

1993, and incorporated herein by reference.

10.11     Joint Venture Agreement between Applied Materials, Inc. and

Komatsu, Ltd. dated September 14, 1993 and exhibits thereto,

previously filed with the Company's Form 10-K for fiscal year

1993, and incorporated herein by reference. (Confidential

treatment has been requested for certain portions of the

agreement).

10.12*    Amendment No. 2 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated September 10, 1992, previously

filed with the Company's Form 10-K for fiscal year 1993, and

incorporated herein by reference.

10.13*    Amendment No. 3 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated October 5, 1993, previously

filed with the Company's Form 10-K for fiscal year 1993, and

incorporated herein by reference.

10.14*    Amendment No. 2 to the Applied Materials, Inc. Executive Deferred

Compensation Plan, dated May 9, 1994, previously filed with the

Company's Form 10-Q for the quarter ended May 1, 1994, and

incorporated herein by reference.

10.15*    Amendment No. 4 to Applied Materials, Inc. 1985 Stock Option Plan

for Non-Employee Directors, dated December 8, 1993, previously

filed with the Company's Form 10-Q for the quarter ended May 1,

1994, and incorporated herein by reference.

10.16*    Applied Komatsu Technology, Inc. 1994 Executive Incentive Stock

Purchase Plan, together with forms of Promissory Note, 1994

Executive Incentive Stock Purchase Agreement, and Loan and

Security Agreement, previously filed with the Company's Form 10-Q

for the quarter ended July 31, 1994, and incorporated herein by

reference.

10.17*    The Applied Materials, Inc. 1995 Equity Incentive Plan, dated

April 5, 1995, previously filed with the Company's Form 10-Q for

the quarter ended April 30, 1995, and incorporated herein by

reference.

10.18*    The Applied Materials, Inc. Senior Executive Bonus Plan, dated

September 23, 1994, previously filed with the Company's Form 10-Q

for the quarter ended April 30, 1995, and incorporated herein by

reference.

10.19*    The Applied Materials, Inc. Executive Deferred Compensation Plan,

as amended and restated on April 1, 1995, previously filed with

the Company's Form 10-Q for the quarter ended April 30, 1995, and

incorporated herein by reference.

10.20     Applied Materials, Inc. Medium-Term Notes, Series A Distribution

Agreement, dated August 24, 1995, and incorporated herein by

reference.

10.21*    Resolution pertaining to the Amendment of the Applied Materials,

Inc. 1995 Equity Incentive Plan, adopted by the Stock Option and

Compensation Committee of the Board of Directors of Applied

Materials on December 12, 1996, previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.22     Participation Agreement dated as of April 30, 1997 among Applied

Materials, Inc. (as Lessee and Construction Agent), Credit Suisse

Leasing 92A, L.P., (as Lessor and Borrower), Greenwich funding

Corporation (as CP Lender), The Persons Named on Schedule I (as

Eurodollar Lenders) and Credit Suisse First Boston (acting through

its New York Branch, as Agent), previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.23     Appendix 1 to Participation Agreement, Master Lease Agreement and

Loan Agreement, dated as of April 30, 1997 (Definitions and

Interpretation) for Applied Materials, Inc., previously filed with

the Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.24     Loan Agreement dated as of April 30, 1997 among Credit Suisse

Leasing 92A, L.P. (as

23

Borrower), Greenwich Funding Corporation (as CP Lender), The

Persons Named on Schedule I (as Eurodollar Lenders) and Credit

Suisse First Boston (acting through its New York Branch, as Agent)

for Revolving Commercial Paper, Eurodollar Credit and Base Rate

Program, previously filed with the Company's Form 10-Q for the

quarter ended April 27, 1997, and incorporated herein by

reference.

10.25     Real Estate and Equipment Facility Master Lease dated as of April

30, 1997 between Credit Suisse Leasing 92A, L.P. (as Lessor), and

Applied Materials, Inc. (as Lessee), previously filed with the

Company's Form 10-Q for the quarter ended April 27, 1997, and

incorporated herein by reference.

10.26     Underwriting Agreement between Applied Materials, Inc. and Morgan

Stanley & Co. Incorporated dated October 9, 1997, previously filed

with the Company's Form S-3 dated October 9, 1997, and

incorporated herein by reference.

10.27     Prospectus Supplement for Applied Materials' $400 million Senior

Notes dated October 9, 1997, previously filed with the Company's

Form S-3 dated October 9, 1997, and incorporated herein by

reference.

10.28     $250,000 Five Year Credit Agreement and $250,000 364-Day Credit

Agreement, each dated as of March 13, 1998 among Applied

Materials, Inc., Morgan Guaranty Trust Company of New York, as

Documentation Agent and Administrative Agent, and Citicorp

Securities, Inc., as Syndication Agent, previously filed with the

Company's Form 10-Q for the quarter ended April 26, 1998, and

incorporated herein by reference..

10.29*    Amendment No. 1 to the Applied Materials, Inc. Executive Deferred

Compensation Plan dated August 1, 1997, previously filed with the

Company's Form 10-Q for the quarter ended July 26, 1998, and

incorporated herein by reference.

10.30*    Amendment No. 2 to the Applied Materials, Inc. Executive Deferred

Compensation Plan dated December 1, 1997, previously filed with

the Company's Form 10-Q for the quarter ended July 26, 1998, and

incorporated herein by reference.

10.31*    Applied Materials, Inc. 1995 Equity Incentive Plan, as amended on

March 17, 1998, previously filed with the Company's Preliminary

Proxy Statement dated January 27, 1998, and incorporated herein by

reference.

10.32     Letters of Guarantee dated October 28, 1998 between Applied

Materials, Inc. and Bank of Tokyo-Mitsubishi, Ltd., Sanwa Bank,

Ltd., Sakura Bank, Ltd. and Sumitomo Bank, Ltd. on behalf of

Applied Komatsu Technology, Inc.

10.33     Promissory Note dated December 15, 1998 between Applied Materials,

Inc. and Applied Komatsu Technology America, Inc.

10.34     Receivables Purchase Agreement dated October 22, 1998 between

Applied Materials, Inc. and Deutsche Financial Services

Corporation.

10.35*    Amendment No. 1 to the Applied Materials, Inc. Senior Executive

Bonus Plan dated September 2, 1998.

12.1      Ratio of Earnings to Fixed Charges.

13        Applied Materials 1998 Annual Report for the fiscal year ended

October 25, 1998 (to the extent expressly incorporated by

reference).

21        Subsidiaries of Applied Materials, Inc.

23        Consent of Independent Accountants.

24        Power of Attorney.

27        Financial Data Schedule: filed electronically.



- -----------

*   Indicates, as required by Item 14(a)3, a management contract or compensatory

plan or arrangement.





19