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Document and Entity Information (USD $)
6 Months Ended
Apr. 29, 2012
Document and Entity Information [Abstract]
Entity Registrant Name APPLIED MATERIALS INC /DE
Entity Central Index Key 0000006951
Document Type 10-Q
Document Period End Date Apr 29, 2012
Amendment Flag false
Document Fiscal Year Focus 2012
Document Fiscal Period Focus Q2
Current Fiscal Year End Date --10-28
Entity Well Known Seasoned Issuer Yes
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Filer Category Large Accelerated Filer
Entity Common Stock Shares Outstanding 1,281,712,814
Entity Public Float $ 15,382,534,908
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Consolidated Condensed Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Income Statement [Abstract]
Net sales $ 2,541 $ 2,862 $ 4,730 $ 5,549
Cost of products sold 1,530 1,673 2,933 3,224
Gross margin 1,011 1,189 1,797 2,325
Operating expenses:
Research, development and engineering 321 297 625 567
Selling, general and administrative 281 219 584 440
Restructuring charges and asset impairments 0 (4) 0 (33)
Total operating expenses 602 512 1,209 974
Income from operations 409 677 588 1,351
Impairment of strategic investments (Notes 3 and 4) 3 0 3 0
Interest and other expenses 23 5 47 10
Interest and other income, net 4 14 8 25
Income before income taxes 387 686 546 1,366
Provision for income taxes 98 197 140 371
Net income $ 289 $ 489 $ 406 $ 995
Earnings per share:
Basic and diluted (in dollars per share) $ 0.22 $ 0.37 $ 0.31 $ 0.75
Weighted average number of shares:
Basic (in shares) 1,289 1,320 1,294 1,322
Diluted (in shares) 1,301 1,333 1,305 1,333
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Consolidated Condensed Statements of Comprehensive Income (Unaudited) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Statement of Income and Comprehensive Income [Abstract]
Net income $ 289 $ 489 $ 406 $ 995
Other comprehensive income, net of tax:
Change in unrealized net gain on investments 2 (1) 3 (2)
Change in unrealized net gain on derivative instruments 0 3 0 2
Change in defined benefit plan liability 0 (1) 0 (1)
Change in cumulative translation adjustments (2) 0 (2) 0
Other comprehensive income (loss) 0 1 1 (1)
Comprehensive income $ 289 $ 490 $ 407 $ 994
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Consolidated Condensed Balance Sheets (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Current assets:
Cash and cash equivalents (Notes 3 and 4) $ 1,761 [1] $ 5,960 [1]
Short-term investments (Notes 3 and 4) 409 [1] 283 [1]
Accounts receivable, net (Note 6) 1,785 [1] 1,532 [1]
Inventories (Note 7) 1,594 [1] 1,701 [1]
Deferred income taxes, net 572 [1] 580 [1]
Other current assets 209 [1] 299 [1]
Total current assets 6,330 [1] 10,355 [1]
Long-term investments (Notes 3 and 4) 1,071 [1] 931 [1]
Property, plant and equipment, net (Note 7) 939 [1] 866 [1]
Goodwill (Notes 8 and 9) 3,939 [1] 1,335 [1]
Purchased technology and other intangible assets, net (Notes 8 and 9) 1,464 [1] 211 [1]
Deferred income taxes and other assets 134 [1] 163 [1]
Total assets 13,877 [1] 13,861 [1]
Current liabilities:
Current portion of long-term debt 1 [1] 0 [1]
Accounts payable and accrued expenses (Note 7) 1,466 [1] 1,520 [1]
Customer deposits and deferred revenue (Note 7) 1,113 [1] 1,116 [1]
Income taxes payable 86 [1] 158 [1]
Total current liabilities 2,666 [1] 2,794 [1]
Long-term debt (Note 10) 1,946 [1] 1,947 [1]
Employee benefits and other liabilities 562 [1] 320 [1]
Total liabilities 5,174 [1] 5,061 [1]
Stockholders' equity (Note 11):
Common stock 13 [1] 13 [1]
Additional paid-in capital 5,730 [1] 5,616 [1]
Retained earnings 13,217 [1] 13,029 [1]
Treasury stock (10,264) [1] (9,864) [1]
Accumulated other comprehensive income 7 [1] 6 [1]
Total stockholders' equity 8,703 [1] 8,800 [1]
Total liabilities and stockholders' equity $ 13,877 [1] $ 13,861 [1]
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Consolidated Condensed Statements of Stockholders' Equity (Unaudited) (USD $)
In Millions, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income
Beginning Balance at Oct. 30, 2011 $ 8,800 [1] $ 13 $ 5,616 $ 13,029 $ (9,864) $ 6
Beginning Balance (in shares) at Oct. 30, 2011 1,306 573
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 406 406
Other comprehensive income 1 1
Dividends (218) (218)
Share-based compensation 96 96
Stock options assumed in connection with acquisition 11 11
Issuance under stock plans, net of tax detirminent of $14 and other 7 7
Issuance under stock plans, net of tax detriment of $14 and other (in shares) 10
Common stock repurchases (400) (400)
Common stock repurchases (in shares) 34 (34) 34
Ending Balance at Apr. 29, 2012 $ 8,703 [1] $ 13 $ 5,730 $ 13,217 $ (10,264) $ 7
Ending Balance (in shares) at Apr. 29, 2012 1,282 607
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Consolidated Condensed Statements of Stockholders' Equity (Unaudited) (Parenthetical) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Apr. 29, 2012
Statement of Stockholders' Equity [Abstract]
Tax detriment included in issuance under stock plans $ (14)
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Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Apr. 29, 2012
May 01, 2011
Cash flows from operating activities:
Net income $ 406 $ 995
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization 220 128
Net loss on dispositions and fixed asset retirements 3 1
Provision for bad debts 9 0
Restructuring charges and asset impairments 0 (33)
Deferred income taxes 28 (17)
Net recognized loss on investments 10 5
Impairment of strategic investments 3 0
Share-based compensation 96 72
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable (67) (85)
Inventories 357 (246)
Prepaid income taxes 18 (110)
Other current assets 114 20
Other assets 0 (2)
Accounts payable and accrued expenses (268) 25
Customer deposits and deferred revenue (55) 432
Income taxes payable (93) (64)
Employee benefits and other liabilities 3 8
Cash provided by operating activities 784 1,129
Cash flows from investing activities:
Capital expenditures (76) (81)
Cash paid for acquisition, net of cash acquired (4,186) 0
Proceeds from sale of facility 0 39
Proceeds from sales and maturities of investments 560 904
Purchases of investments (714) (896)
Cash used in investing activities (4,416) (34)
Cash flows from financing activities:
Debt repayments 0 (1)
Proceeds from common stock issuances 45 59
Common stock repurchases (400) (268)
Payment of dividends to stockholders (208) (186)
Cash used in financing activities (563) (396)
Effect of exchange rate changes on cash and cash equivalents (4) 1
Increase (decrease) in cash and cash equivalents (4,199) 700
Cash and cash equivalents - beginning of period 5,960 [1] 1,858
Cash and cash equivalents - end of period 1,761 [1] 2,558
Supplemental cash flow information:
Cash payments for income taxes 179 556
Cash refunds from income taxes 4 2
Cash payments for interest $ 48 $ 7
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Basis of Presentation
6 Months Ended
Apr. 29, 2012
Accounting Policies [Abstract]
Basis of Presentation
Basis of Presentation
Basis of Presentation
In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October 30, 2011 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applied’s Annual Report on Form 10-K for the fiscal year ended October 30, 2011 (2011 Form 10-K). Applied’s results of operations for the three and six months ended April 29, 2012 are not necessarily indicative of future operating results. Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2012 and 2011 each contain 52 weeks, and the first half of fiscal 2012 and 2011 each contained 26 weeks.
In November 2011, Applied completed its acquisition of Varian Semiconductor Equipment Associates, Inc. (Varian). Beginning in the first quarter of fiscal 2012, the acquired business is included in Applied’s consolidated results of operations and the results of the Silicon Systems Group and Applied Global Services segments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, Applied evaluates its estimates, including those related to accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of share-based awards, and income taxes, among others. Applied bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Revenue Recognition
Applied recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to buyer is fixed or determinable; and collectability is probable. Applied’s shipping terms are customarily FOB Applied shipping point or equivalent terms. Applied’s revenue recognition policy generally results in revenue recognition at the following points: (1) for all transactions where legal title passes to the customer upon shipment, Applied recognizes revenue upon shipment for all products that have been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks is deferred, and that revenue is recognized upon completion of the installation-related tasks; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized at customer technical acceptance; (3) for transactions where legal title does not pass at shipment, revenue is recognized when legal title passes to the customer, which is generally at customer technical acceptance; and (4) for arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. Applied limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. In cases where Applied has sold products that have been demonstrated to meet product specifications prior to shipment, Applied believes that at the time of delivery, it has an enforceable claim to amounts recognized as revenue. The completed contract method is used for thin film solar lines. Spare parts revenue is generally recognized upon shipment, and services revenue is generally recognized over the period that the services are provided.

When a sales arrangement contains multiple elements, such as hardware and services and/or software products, Applied allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Applied generally utilizes the ESP due to the nature of its products. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue, as amended.
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Earnings Per Share
6 Months Ended
Apr. 29, 2012
Earnings Per Share [Abstract]
Earnings Per Share
Earnings Per Share
Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, restricted stock units, and employee stock purchase plan shares) outstanding during the period. Applied’s net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to the Company’s non-complex capital structure.
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Numerator:
 
 
 
 
 
 
 
Net income
$
289

 
$
489

 
$
406

 
$
995

Denominator:
 
 
 
 
 
 
 
Weighted average common shares outstanding
1,289

 
1,320

 
1,294

 
1,322

Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares
12

 
13

 
11

 
11

Denominator for diluted earnings per share
1,301

 
1,333

 
1,305

 
1,333

Basic and diluted earnings per share
$
0.22

 
$
0.37

 
$
0.31

 
$
0.75

Potentially dilutive securities
8

 
18

 
13

 
18

 

Potentially dilutive securities attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share because the combined exercise price, average unamortized fair value and assumed tax benefits upon the exercise of options and the vesting of restricted stock units were greater than the average market price of the Company’s shares, and therefore their inclusion would have been anti-dilutive.
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Cash, Cash Equivalents and Investments
6 Months Ended
Apr. 29, 2012
Cash and Cash Equivalents [Abstract]
Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments
Summary of Cash, Cash Equivalents and Investments
The following tables summarize Applied’s cash, cash equivalents and investments by security type:
April 29, 2012
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(In millions)
Cash
$
620

 
$

 
$

 
$
620

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
1,141

 

 

 
1,141

Total Cash equivalents
1,141

 

 

 
1,141

Total Cash and Cash equivalents
$
1,761

 
$

 
$

 
$
1,761

Short-term and long-term investments:
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
302

 
$
1

 
$

 
$
303

Non-U.S. government securities*
22

 

 

 
22

Municipal securities
395

 
2

 

 
397

Commercial paper, corporate bonds and medium-term notes
314

 
3

 

 
317

Asset-backed and mortgage-backed securities
301

 
3

 
1

 
303

Total fixed income securities
1,334

 
9

 
1

 
1,342

Publicly traded equity securities
45

 
30

 
6

 
69

Equity investments in privately-held companies
69

 

 

 
69

Total short-term and long-term investments
$
1,448

 
$
39

 
$
7

 
$
1,480

Total Cash, Cash equivalents and Investments
$
3,209

 
$
39

 
$
7

 
$
3,241

______________
*
Includes agency and corporate debt securities guaranteed by non-U.S. governments, which consist of Canada, Australia, and Germany.


October 30, 2011
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair  Value
 
(In millions)
Cash
$
297

 
$

 
$

 
$
297

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
5,663

 

 

 
5,663

Total Cash equivalents
5,663

 

 

 
5,663

Total Cash and Cash equivalents
$
5,960

 
$

 
$

 
$
5,960

Short-term and long-term investments:
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
184

 
$
1

 
$

 
$
185

Non-U.S. government securities
40

 

 

 
40

Municipal securities
371

 
2

 

 
373

Commercial paper, corporate bonds and medium-term notes
216

 
3

 
1

 
218

Asset-backed and mortgage-backed securities
307

 
3

 
1

 
309

Total fixed income securities
1,118

 
9

 
2

 
1,125

Publicly traded equity securities
8

 
19

 

 
27

Equity investments in privately-held companies
62

 

 

 
62

Total short-term and long-term investments
$
1,188

 
$
28

 
$
2

 
$
1,214

Total Cash, Cash equivalents and Investments
$
7,148

 
$
28

 
$
2

 
$
7,174


Maturities of Investments
The following table summarizes the contractual maturities of Applied’s investments at April 29, 2012:
 
Cost
 
Estimated
Fair  Value
 
(In millions)
Due in one year or less
$
365

 
$
365

Due after one through five years
667

 
672

Due after five years
1

 
2

No single maturity date**
415

 
441

 
$
1,448

 
$
1,480

______________
**
Securities with no single maturity date include publicly-traded and privately-held equity securities, and asset-backed and mortgage-backed securities.


Gains and Losses on Investments
Gross realized gains and losses on sales of investments during the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Gross realized gains
$
1

 
$
8

 
$
2

 
$
13

Gross realized losses
$
1

 
$
1

 
$
2

 
$
1


At April 29, 2012, Applied had a gross unrealized loss of $1 million due to a decrease in the fair value of certain fixed income securities. Applied regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether an unrealized loss was considered to be temporary, or other-than-temporary and therefore impaired, include: the length of time and extent to which fair value has been lower than the cost basis; the financial condition, credit quality and near-term prospects of the investee; and whether it is more likely than not that Applied will be required to sell the security prior to recovery. Generally, the contractual terms of investments in marketable securities do not permit settlement at prices less than the amortized cost of the investments. Applied determined that the gross unrealized losses on its marketable securities at April 29, 2012 and May 1, 2011 were temporary in nature and therefore it did not recognize any impairment of its marketable securities for the three and six months ended April 29, 2012 and May 1, 2011. During the first half of fiscal 2012, Applied determined that certain of its equity investments held in privately held companies were other-than-temporarily impaired and, accordingly, recognized impairment charges of $3 million for the three and six months ended April 29, 2012. Applied did not recognize any impairment on its equity investments in privately-held companies for the three and six months ended May 1, 2011.
The following table provides the fair market value of Applied’s investments with unrealized losses that were not deemed to be other-than-temporarily impaired as of April 29, 2012.
 
In Loss Position for
Less Than 12 Months
 
Total
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Asset-backed and mortgage-backed securities
$
42

 
$
1

 
$
42

 
$
1

Publicly traded equity securities
$
19

 
$
6

 
$
19

 
$
6

Total
$
61

 
$
7

 
$
61

 
$
7

The following table provides the fair market value of Applied’s investments with unrealized losses that were not deemed to be other-than-temporarily impaired as of October 30, 2011.
 
In Loss Position for
Less Than 12 Months
 
Total
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Commercial paper, corporate bonds and medium-term notes
$
32

 
$
1

 
$
32

 
$
1

Asset-backed and mortgage-backed securities
77

 
1

 
77

 
1

Total
$
109

 
$
2

 
$
109

 
$
2


Unrealized gains and temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income (loss), net of any related tax effect. Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss) to results of operations.
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Fair Value Measurements
6 Months Ended
Apr. 29, 2012
Fair Value Disclosures [Abstract]
Fair Value Measurements
Fair Value Measurements
Applied’s financial assets are measured and recorded at fair value, except for equity investments held in privately-held companies. These equity investments are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when events or circumstances indicate that an other-than-temporary decline in value may have occurred. Applied’s nonfinancial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment when events or circumstances indicate that an other-than-temporary decline in value may have occurred.
Fair Value Hierarchy
Applied uses the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Applied’s investments are comprised primarily of debt securities that are classified as available-for-sale and recorded at their fair values. In determining the fair value of investments, Applied uses pricing information from pricing services that value securities based on quoted market prices and models that utilize observable market inputs. In the event a fair value estimate is unavailable from a pricing service, Applied generally obtains non-binding price quotes from brokers. Applied then reviews the information provided by the pricing services or brokers to determine the fair value of its short-term and long-term investments. In addition, to validate pricing information obtained from pricing services, Applied periodically performs supplemental analysis on a sample of securities. Applied reviews any significant unanticipated differences identified through this analysis to determine the appropriate fair value.
Investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments. As of April 29, 2012, substantially all of Applied’s available-for-sale, short-term and long-term investments were recognized at fair value that was determined based upon observable inputs.
 

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Financial assets and liabilities (excluding cash balances) measured at fair value on a recurring basis are summarized below as of April 29, 2012 and October 30, 2011:
 
April 29, 2012
 
October 30, 2011
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
(In millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
1,141

 
$

 
$
1,141

 
$
5,663

 
$

 
$
5,663

U.S. Treasury and agency securities
93

 
210

 
303

 
109

 
76

 
185

Non-U.S. government securities

 
22

 
22

 

 
40

 
40

Municipal securities

 
397

 
397

 

 
373

 
373

Commercial paper, corporate bonds and medium-term notes

 
317

 
317

 

 
218

 
218

Asset-backed and mortgage-backed securities

 
303

 
303

 

 
309

 
309

Publicly traded equity securities
69

 

 
69

 
27

 

 
27

Total
$
1,303

 
$
1,249

 
$
2,552

 
$
5,799

 
$
1,016

 
$
6,815

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation
$
7

 
$

 
$
7

 
$

 
$

 
$

Total
$
7

 
$

 
$
7

 
$

 
$

 
$


The deferred compensation liability represents our obligation to pay benefits under a non-qualified deferred compensation plan. The related investments, held in a rabbi trust, consist of equity securities, primarily mutual funds, and are classified as Level 1 in the valuation hierarchy.
There were no transfers in and out of Level 1 and Level 2 fair value measurements during either the three or six months ended April 29, 2012 and May 1, 2011. Applied did not have any financial assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of April 29, 2012 or October 30, 2011.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
Equity investments in privately-held companies are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. If Applied determines that an other-than-temporary impairment has occurred, the investment will be written down to its estimated fair value based on available information, such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. Equity investments in privately-held companies totaled $69 million at April 29, 2012, of which $52 million of investments were accounted for under the cost method of accounting and $17 million of Level 3 investments had been measured at fair value on a non-recurring basis due to an other-than-temporary decline in value. At October 30, 2011, equity investments in privately-held companies totaled $62 million, of which $40 million of investments were accounted for under the cost method of accounting and $22 million of Level 3 investments had been measured at fair value on a non-recurring basis due to an other-than-temporary decline in value. During the three and six months ended April 29, 2012, Level 3 equity investments in privately-held companies of $5 million were transferred to Level 1 assets measured at fair value on a recurring basis due to change in investee structure which improved price transparency.

During the first half of fiscal 2012, Applied determined that certain of its equity investments held in privately held companies were other-than-temporarily impaired and, accordingly, recognized impairment charges of $3 million for the three and six months ended April 29, 2012. Applied did not recognize any impairment on its equity method investments in privately-held companies for the three and six months ended May 1, 2011.
Other
The carrying amounts of Applied’s financial instruments, including cash and cash equivalents, accounts receivable, notes payable, and accounts payable and accrued expenses, approximate fair value due to the short maturities of these financial instruments. At April 29, 2012, the carrying amount of long-term debt was $1.9 billion and the estimated fair value was $2.2 billion. The estimated fair value of long-term debt is determined by Level 2 inputs and is based on quoted market prices for the same or similar issues.
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Derivative Instruments and Hedging Activities
6 Months Ended
Apr. 29, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities
Derivative Financial Instruments
Applied conducts business in a number of foreign countries, with certain transactions denominated in local currencies, such as Japanese yen, euro, Israeli shekel, Taiwanese dollar and Swiss franc. Applied uses derivative financial instruments, such as forward exchange contracts and currency option contracts, to hedge certain forecasted foreign currency denominated transactions expected to occur typically within the next 24 months. The purpose of Applied’s foreign currency management is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated revenues, costs and eventual cash flows. The terms of currency instruments used for hedging purposes are generally consistent with the timing of the transactions being hedged. Applied does not use derivative financial instruments for trading or speculative purposes.
Derivative instruments and hedging activities, including foreign currency exchange contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized currently in earnings. All of Applied’s derivative financial instruments are recorded at their fair value in other current assets or in accounts payable and accrued expenses.
Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income or loss (AOCI) in stockholders’ equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to derivative instruments included in AOCI at April 29, 2012 is expected to be reclassified into earnings within 12 months. Changes in the fair value of currency forward exchange and option contracts due to changes in time value are excluded from the assessment of effectiveness. Both ineffective hedge amounts and hedge components excluded from the assessment of effectiveness are recognized promptly in earnings. If the transaction being hedged is no longer probable to occur, or if a portion of any derivative is deemed to be ineffective, Applied promptly recognizes the gain or loss on the associated financial instrument in general and administrative expenses. The amount recognized due to discontinuance of cash flow hedges that were probable not to occur by the end of the originally specified time period was not significant for the three and six months ended April 29, 2012 and May 1, 2011.
Additionally, forward exchange contracts are generally used to hedge certain foreign currency denominated assets or liabilities. These derivatives are typically entered into once per month and are not designated for hedge accounting treatment. Accordingly, changes in the fair value of these hedges are recorded promptly in earnings to offset the changes in the fair value of the assets or liabilities being hedged.
The fair values of derivative instruments at April 29, 2012 and October 30, 2011 were not material.
 

The effect of derivative instruments on the Consolidated Condensed Statement of Operations for the three and six months ended April 29, 2012 and May 1, 2011 was as follows:
 
 
 
Three Months Ended April 29, 2012
 
Three Months Ended May 1, 2011
Effective Portion
 
Ineffective Portion and Amount
Excluded from
Effectiveness
Testing
 
Effective Portion
 
Ineffective Portion and Amount
Excluded from
Effectiveness
Testing
 
Location of Gain or
(Loss) Reclassified
from AOCI into
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
 
 
(In millions)
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Cost of products sold
 
$
6

 
$
4

 
$
(1
)
 
$
8

 
$
1

 
$
(1
)
Foreign exchange contracts
General and administrative
 

 
1

 

 

 
2

 
(1
)
Total
 
 
$
6

 
$
5

 
$
(1
)
 
$
8

 
$
3

 
$
(2
)

 
 
 
Six Months Ended April 29, 2012
 
Six Months Ended May 1, 2011
Effective Portion
 
Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing
 
Effective Portion
 
Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing
 
Location of Gain or
(Loss) Reclassified
from AOCI into
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
 
 
(In millions)
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Cost of products sold
 
$
5

 
$
6

 
$

 
$
12

 
$
5

 
$
(3
)
Foreign exchange contracts
General and administrative
 

 
(2
)
 
(1
)
 

 
3

 
(1
)
Total
 
 
$
5

 
$
4

 
$
(1
)
 
$
12

 
$
8

 
$
(4
)


 
 
 
 
Amount of Gain or (Loss) Recognized in Income
 
 
Three Months Ended
 
Six Months Ended
Location of Gain or
(Loss) Recognized
in Income
 
April 29, 2012
 
May 1, 2011
 
April 29, 2012
 
May 1, 2011
 
 
 
(In millions)
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
General and
administrative
 
$
8

 
$
1

 
$
14

 
$
3

Total
 
 
$
8

 
$
1

 
$
14

 
$
3



Credit Risk Contingent Features
If Applied’s credit rating were to fall below investment grade, it would be in violation of credit risk contingent provisions of the derivative instruments discussed above, and certain counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a net liability position was immaterial as of April 29, 2012.
Entering into foreign exchange contracts with banks exposes Applied to credit-related losses in the event of the banks’ nonperformance. However, Applied’s exposure is not considered significant.
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Accounts Receivable, Net
6 Months Ended
Apr. 29, 2012
Receivables [Abstract]
Accounts Receivable, Net
Accounts Receivable, Net
Applied has agreements with various financial institutions to sell accounts receivable and discount promissory notes from selected customers. Applied also discounts letters of credit through various financial institutions. Applied sells its accounts receivable without recourse. Details of discounted letters of credit, factored accounts receivable and discounted promissory notes for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Discounted letters of credit
$

 
$
50

 
$

 
$
173

Factored accounts receivable and discounted promissory notes

 
19

 
70

 
55

Total
$

 
$
69

 
$
70

 
$
228


Financing charges on the sale of receivables and discounting of letters of credit are included in interest expense in the accompanying Consolidated Condensed Statements of Operations and were not material for both periods presented.
Accounts receivable are presented net of allowance for doubtful accounts of $82 million at April 29, 2012 and $73 million at October 30, 2011. Applied sells principally to manufacturers within the semiconductor, display and solar industries. As a result of challenging economic and industry conditions, certain of these manufacturers may experience difficulties in meeting their obligations in a timely manner. While Applied believes that its allowance for doubtful accounts is adequate and represents Applied’s best estimate as of April 29, 2012, Applied will continue to closely monitor customer liquidity and other economic conditions, which may result in changes to Applied’s estimates regarding collectability.
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Balance Sheet Detail
6 Months Ended
Apr. 29, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Balance Sheet Detail
Balance Sheet Detail
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Inventories
 
 
 
Customer service spares
$
306

 
$
328

Raw materials
383

 
407

Work-in-process
338

 
336

Finished goods*
567

 
630

 
$
1,594

 
$
1,701

 _______________
*
Included in finished goods inventory is $186 million at April 29, 2012, and $224 million at October 30, 2011, of newly-introduced systems at customer locations where the sales transaction did not meet Applied’s revenue recognition criteria as set forth in Note 1, Basis of Presentation. Finished goods inventory also includes $195 million and $140 million of evaluation inventory at April 29, 2012 and October 30, 2011, respectively.

 
Useful Life
 
April 29,
2012
 
October 30,
2011
 
(In years)
 
(In millions)
Property, Plant and Equipment, Net
 
 
 
 
 
Land and improvements
 
 
$
169

 
$
163

Buildings and improvements
3-30
 
1,190

 
1,155

Demonstration and manufacturing equipment
3-5
 
753

 
686

Furniture, fixtures and other equipment
3-15
 
735

 
722

Construction in progress
 
 
31

 
12

Gross property, plant and equipment
 
 
2,878

 
2,738

Accumulated depreciation
 
 
(1,939
)
 
(1,872
)
 
 
 
$
939

 
$
866



In the first quarter of fiscal 2011, Applied received $39 million in proceeds from the sale of a property located in North America and incurred a loss of $1 million on the transaction.
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Accounts Payable and Accrued Expenses
 
 
 
Accounts payable
$
507

 
$
484

Compensation and employee benefits
355

 
455

Warranty
152

 
168

Dividends payable
115

 
104

Other accrued taxes
70

 
81

Interest payable
30

 
31

Restructuring reserve
6

 
11

Other
231

 
186

 
$
1,466

 
$
1,520


As of April 29, 2012, other accrued expenses included a $16 million acquisition obligation for untendered Varian shares.



 
April 29,
2012
 
October 30,
2011
 
(In millions)
Customer Deposits and Deferred Revenue
 
 
 
Customer deposits
$
191

 
$
249

Deferred revenue
922

 
867

 
$
1,113

 
$
1,116


Applied typically receives deposits on future deliverables from customers in its Energy and Environmental Solutions and Display segments. In certain instances, customer deposits may be received from customers in the Applied Global Services segment.
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Business Combination
6 Months Ended
Apr. 29, 2012
Business Combinations [Abstract]
Business Combination
Business Combination
On November 10, 2011, Applied completed the acquisition of Varian, a public company manufacturer of semiconductor processing equipment and the leading supplier of ion implantation equipment used by chip makers around the world, for an aggregate purchase price of $4.2 billion in cash, net of cash acquired and assumed earned equity awards of $27 million, pursuant to an Agreement and Plan of Merger (the Merger Agreement) dated as of May 3, 2011. Applied’s primary reasons for this acquisition were to complement existing product offerings and to provide opportunities for future growth. Varian designs, markets, manufactures and services ion implantation systems. These systems are primarily used in the manufacture of transistors, which are a basic building block of integrated circuits (ICs) or microchips. Ion implantation systems create a beam of electrically charged particles called ions, which are implanted into transistor structures at precise locations and depths, changing the electrical properties of the semiconductor device. These implantation systems may also be used in other areas of IC manufacture for modifying the material properties of the semiconductor devices, as well as in manufacturing crystalline-silicon solar cells.
Applied allocated the purchase price of this acquisition to tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values. Applied preliminarily recorded $2.6 billion in goodwill, which represented the excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed in the acquisition. Of this amount, $1.8 billion of goodwill was allocated to the Silicon Systems Group segment, and the remainder was allocated to the Applied Global Services segment. Goodwill associated with the acquisition is primarily attributable to the opportunities from the addition of Varian's product portfolio which complement Applied's Silicon Systems Group's suite of products, including providing integrated process solutions to customers. Goodwill is not deductible for tax purposes. A discussion of the subsequent revision made during the second quarter of fiscal 2012 to the initial preliminary purchase price allocation is included in Note 9, Goodwill, Purchased Technology and Other Intangible Assets. The estimated fair value assigned to identifiable assets acquired and liabilities assumed was based upon preliminary estimates. Valuations and assumptions pertaining to income taxes are subject to change as additional information is obtained during the measurement period.

The following table summarizes the preliminary allocation of the assets acquired and liabilities assumed at the acquisition date:
Estimated Fair Values
Acquisition
2012
 
(In millions)
Cash and cash equivalents
$
632

Short-term investments
56

Accounts receivable, net
194

Inventories
250

Deferred income taxes and other current assets
66

Long-term investments
62

Property and equipment, net
104

Goodwill
2,604

Purchased intangible assets
1,365

Other assets
10

Total assets acquired
5,343

Accounts payable and accrued expenses
(134
)
Customer deposits and deferred revenue
(52
)
Income taxes payable
(60
)
Deferred income taxes
(211
)
Other liabilities
(25
)
Total liabilities assumed
(482
)
Purchase price allocated
$
4,861


 
The following table presents detail of the purchase price allocated to purchased intangible assets of Varian at the acquisition date:
 
Useful
Life
 
Purchased
Intangible  Assets
2012
 
(In years)
 
(In millions)
Developed technology
1-7
 
$
987

Customer relationships
15
 
150

In-process technology
 
 
142

Patents and trademarks
10
 
69

Backlog
1
 
7

Covenant not to compete
2
 
10

Total purchased intangible assets
 
 
$
1,365



The results of operations of Varian are included in Applied’s consolidated results of operations, primarily in the results for the Silicon Systems Group and Applied Global Services segments, beginning in the first quarter of fiscal 2012. For the three months ended April 29, 2012, net sales of Varian products of approximately $333 million and an operating loss of approximately $1 million were included in the consolidated results of operations. For the six months ended April 29, 2012, net sales of Varian products of approximately $535 million and an operating loss of approximately $131 million were included in the consolidated results of operations. For the three and six months ended April 29, 2012, results of operations included charges of $69 million and $222 million, respectively, attributable to inventory fair value adjustments on products sold, amortization of purchased intangible assets, share-based compensation associated with accelerated vesting, deal costs and other integration costs associated with the acquisition. Of these amounts, deal costs and other acquisition-related costs of $1 million and $37 million were not allocated to the segments for the three and six months ended April 29, 2012, respectively. Deal costs are included in selling, general and administrative expenses in Applied's consolidated results of operations.
The following unaudited pro forma consolidated results of operations assume the acquisition was completed as of the beginning of the fiscal reporting periods presented. The pro forma consolidated results of operations for the three and six months ended May 1, 2011 combine the results of Applied for the three and six months ended May 1, 2011, with the results of Varian for the three and six months ended April 1, 2011.
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Net sales
$
2,541

 
$
3,192

 
$
4,730

 
$
6,161

Net income
$
308

 
$
508

 
$
503

 
$
957

Basic and diluted earnings per share
$
0.24

 
$
0.38

 
$
0.39

 
$
0.72


The pro forma results above include adjustments related to the purchase price allocation and financing of the acquisition, primarily to increase depreciation and amortization with the higher values of property, plant and equipment and identifiable intangible assets, to increase interest expense for the additional debt incurred to complete the acquisition, and to reflect the related income tax effect. The pro forma results for the three and six months ended May 1, 2011 include costs of $15 million and $117 million, respectively, which reduced net income due to inventory fair value adjustments on products sold, share-based compensation associated with accelerated vesting and acquisition-related costs, which are not expected to occur in future quarters. The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at the beginning of the fiscal reporting period indicated nor is it necessarily indicative of future operating results. The pro forma information does not include any (i) potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition or (ii) transaction or integration costs relating to the acquisition.
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Goodwill, Purchased Technology and Other Intangible Assets
6 Months Ended
Apr. 29, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Purchased Technology and Other Intangible Assets
Goodwill, Purchased Technology and Other Intangible Assets
Goodwill and Purchased Intangible Assets
Applied’s methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the cost of the acquisition over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. Applied assigns assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process.
Goodwill and purchased intangible assets with indefinite useful lives are not amortized, but are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment, especially in emerging markets. Applied regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results.
In fiscal 2011, Applied adopted authoritative guidance which allows entities to use a qualitative approach to test goodwill for impairment. This authoritative guidance permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. In the first step of the two-step goodwill impairment test, Applied would compare the estimated fair value of each reporting unit to its carrying value. Applied’s reporting units are consistent with the reportable segments identified in Note 15, Industry Segment Operations, based on the manner in which Applied operates its business and the nature of those operations. Applied determines the fair value of each of its reporting units based on a weighting of income and market approaches. Under the income approach, Applied calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Estimated future cash flows will be impacted by a number of factors including anticipated future operating results, estimated cost of capital and/or discount rates. Under the market approach, Applied estimates the fair value based on market multiples of revenue or earnings for comparable companies, as appropriate. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then Applied would perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. Applied would then allocate the fair value of the reporting unit to all of the assets and liabilities of that unit, as if Applied had acquired the reporting unit in a business combination, with the fair value of the reporting unit being the “purchase price.” The excess of the “purchase price” over the carrying amounts assigned to assets and liabilities represents the implied fair value of goodwill. If Applied determined that the carrying value of a reporting unit’s goodwill exceeded its implied fair value, Applied would record an impairment charge equal to the difference.
In the second quarter of fiscal 2011, Applied negotiated the divestiture of certain assets held in the Applied Global Services segment and determined the trade name included in assets held for sale to be impaired and recorded $18 million of impairment charges. Applied performed a qualitative assessment to test goodwill for impairment in the fourth quarter of fiscal 2011, and determined that it was more likely than not that each of its reporting units’ fair value exceeded its carrying value and that it was not necessary to perform the two-step goodwill impairment test. Applied tested goodwill of the Energy and Environmental Solutions reporting unit for potential impairment during the second quarter of fiscal 2012 in light of second quarter developments that included current industry trends, financial performance, weaker short-term outlooks, and other adverse operating conditions within the solar industry. The results of the first step of the impairment test indicated that goodwill of the Energy and Environmental Solutions reporting unit was not impaired.

 


Applied utilized an equal weighting of both the discounted cash flow method of the income approach and the guideline company method of the market approach to estimate the fair value of the Energy and Environmental Solutions reporting unit. The results of the first step of the impairment test indicated that goodwill within the Energy and Environmental Solutions reporting unit was not impaired, as the estimated fair value in excess of carrying value was approximately $700 million (or 73 percent over the carrying value of the reporting unit) at April 1, 2012. The evaluation of goodwill for impairment requires the exercise of significant judgment. The estimates used in the impairment testing were consistent with the discrete forecasts that Applied uses to manage its business, and considered the significant developments that occurred during the quarter. Under the discounted cash flow method, cash flows beyond the discrete forecasts were estimated using a terminal growth rate, which considered the long-term earnings growth rate specific to the Energy and Environmental Solutions reporting unit. The estimated future cash flows were discounted to present value using a discount rate that was the value-weighted average of the reporting unit's estimated cost of equity and debt derived using both known and estimated market metrics, and was adjusted to reflect risk factors that considered both the timing and risks associated with the estimated cash flows. The tax rate used in the discounted cash flow method reflected the international structure currently in place, which is consistent with the market participant perspective. Under the guideline company method, market multiples were applied to forecasted revenues and earnings before interest, taxes, depreciation and amortization. The market multiples used were consistent with the median multiples based on comparable publicly-traded companies. While there are inherent uncertainties related to the significant assumptions used and management's application of these assumptions in conducting the goodwill impairment analysis, Applied believes that the assumptions used provide a reasonable estimate of the fair value of the Energy and Environmental Solutions reporting unit.

Applied also tested goodwill of the Display reporting unit for potential impairment during the second quarter of fiscal 2012 in light of second quarter developments that included current industry trends, the Display reporting unit's financial performance and short-term outlook. The results of the first step of the impairment test indicated that goodwill of the Display reporting unit was not impaired and the estimated fair value of the reporting unit was more than 100 percent over the carrying value of the reporting unit.

In the event of future changes in business conditions in the markets in which the Display and Energy and Environmental Solutions reporting units operate, Applied will be required to reassess and update its forecasts and estimates used in future impairment analyses. If the results of these analyses are lower than current estimates, a material impairment charge may result at that time. As discussed in Note 16, Subsequent Event, on May 10, 2012, Applied announced that a committee of the Board of Directors approved a plan to restructure the Energy and Environmental Solutions segment. The restructuring plan is not expected to have a significant impact on the fair value of the Energy and Environmental Solutions reporting unit.
During the first half of fiscal 2012, goodwill and other indefinite-lived intangible assets increased by $2.7 billion due to the acquisition of Varian as discussed in Note 8, Business Combination. Of this amount, an adjustment of $64 million to increase goodwill was recorded in the second quarter of fiscal 2012 related to the changes in net assets acquired from the Varian acquisition during the measurement period as Applied obtained the necessary information to compute the U.S. tax liability on undistributed earnings of non-U.S. subsidiaries as of the acquisition date. Of the total adjustment in the second quarter of fiscal 2012, $44 million was allocated to the Silicon Systems Group segment and the remainder was allocated to Applied Global Services segment.

Details of indefinite-lived intangible assets were as follows:
 
April 29, 2012
 
October 30, 2011
Goodwill
 
Other
Intangible
Assets
 
Total
 
Goodwill
 
Other
Intangible
Assets
 
Total
 
(In millions)
Silicon Systems Group
$
2,151

 
$
142

 
$
2,293

 
$
381

 
$

 
$
381

Applied Global Services
1,027

 

 
1,027

 
193

 

 
193

Display
116

 

 
116

 
116

 

 
116

Energy and Environmental Solutions
645

 

 
645

 
645

 

 
645

Carrying amount
$
3,939

 
$
142

 
$
4,081

 
$
1,335

 
$

 
$
1,335


Other intangible assets that are not subject to amortization consist primarily of in-process technology, which will be subject to amortization upon commercialization. The fair value assigned to in-process technology was determined using the income approach based on estimates and judgments regarding risks inherent in the development process, including the likelihood of achieving technological success and market acceptance. If an in-process technology project is abandoned, the acquired technology attributable to the project will be written-off.
Finite-Lived Purchased Intangible Assets
Applied amortizes purchased intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from 1 to 15 years.
Applied evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. Applied assesses the fair value of the assets based on the amount of the undiscounted future cash flow that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset, plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When Applied identifies an impairment, Applied reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach.
Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. Applied evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, Applied reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environment, technological advances, and changes in cost structure.
 

Details of finite-lived intangible assets were as follows:
 
April 29, 2012
 
October 30, 2011
Purchased
Technology
 
Other
Intangible
Assets
 
Total
 
Purchased
Technology
 
Other
Intangible
Assets
 
Total
 
(In millions)
Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
Silicon Systems Group
$
1,300

 
$
252

 
$
1,552

 
$
310

 
$
20

 
$
330

Applied Global Services
28

 
44

 
72

 
28

 
40

 
68

Display
110

 
33

 
143

 
110

 
33

 
143

Energy and Environmental Solutions
106

 
232

 
338

 
105

 
232

 
337

Gross carrying amount
$
1,544

 
$
561

 
$
2,105

 
$
553

 
$
325

 
$
878

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
Silicon Systems Group
$
(334
)
 
$
(23
)
 
$
(357
)
 
$
(256
)
 
$
(8
)
 
$
(264
)
Applied Global Services
(21
)
 
(37
)
 
(58
)
 
(20
)
 
(31
)
 
(51
)
Display
(104
)
 
(26
)
 
(130
)
 
(102
)
 
(25
)
 
(127
)
Energy and Environmental Solutions
(54
)
 
(184
)
 
(238
)
 
(48
)
 
(177
)
 
(225
)
Accumulated amortization
$
(513
)
 
$
(270
)
 
$
(783
)
 
$
(426
)
 
$
(241
)
 
$
(667
)
Carrying amount
$
1,031

 
$
291

 
$
1,322

 
$
127

 
$
84

 
$
211


During the first half of fiscal 2012, the change in gross carrying amount of the amortized intangible assets was approximately $1.2 billion, due to the acquisition of Varian as discussed in Note 8, Business Combination.
In the second quarter of fiscal 2011, Applied negotiated the divestiture of certain assets held in the Applied Global Services segment and determined identified purchased technology and finite-lived intangible assets included in assets held for sale to be impaired and recorded $6 million of impairment charges.
Details of amortization expense were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Silicon Systems Group
$
45

 
$
3

 
$
93

 
$
7

Applied Global Services
2

 
2

 
7

 
4

Display
2

 
2

 
3

 
4

Energy and Environmental Solutions
6

 
6

 
13

 
12

Total
$
55

 
$
13

 
$
116

 
$
27



For the three and six months ended April 29, 2012 and May 1, 2011, amortization expense was charged to the following categories:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Cost of products sold
$
45

 
$
9

 
$
97

 
$
18

Research, development and engineering
1

 

 
1

 

Selling, general and administrative
9

 
4

 
18

 
9

Total amortization expense
$
55

 
$
13

 
$
116

 
$
27


 

As of April 29, 2012, future estimated amortization expense is expected to be as follows:
 
Amortization Expense
 
(In millions)
2012
$
109

2013
209

2014
199

2015
183

2016
174

Thereafter
448

 
$
1,322

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Borrowing Facilities and Long-Term Debt
6 Months Ended
Apr. 29, 2012
Debt Disclosure [Abstract]
Borrowing Facilities and Long Term-Debt
Borrowing Facilities and Long-Term Debt
Applied has credit facilities for unsecured borrowings in various currencies of up to $1.6 billion, of which $1.5 billion is comprised of a committed four-year revolving credit agreement with a group of banks that is scheduled to expire in May 2015. This agreement provides for borrowings in United States dollars at interest rates keyed to one of the two rates selected by Applied for each advance and includes financial and other covenants with which Applied was in compliance at April 29, 2012. Remaining credit facilities in the amount of approximately $99 million are with Japanese banks. Applied’s ability to borrow under these facilities is subject to bank approval at the time of the borrowing request, and any advances will be at rates indexed to the banks’ prime reference rate denominated in Japanese yen. No amounts were outstanding under any of the credit facilities at April 29, 2012 or October 30, 2011.
Long-term debt outstanding was as follows:
 
Principal Amount
 
 
 
 
 
 
Due Date
April 29, 2012
 
October 30, 2011
 
Stated
Interest Rate
 
Effective
Interest Rate
 
Interest Payment Dates
 
(In millions)
 
 
 
 
 
 
June 15, 2016
$
400

 
$
400

 
2.650%
 
2.666%
 
June 15, December 15
October 15, 2017
200

 
200

 
7.125%
 
7.190%
 
April 15, October 15
June 15, 2021
750

 
750

 
4.300%
 
4.326%
 
June 15, December 15
June 15, 2041
600

 
600

 
5.850%
 
5.879%
 
June 15, December 15
Other debt

 
1

 
 
 
 
 
 
 
1,950

 
1,951

 
 
 
 
 
 
Total unamortized discount
(4
)
 
(4
)
 
 
 
 
 
 
Total long-term debt
$
1,946

 
$
1,947

 
 
 
 
 
 

Applied has debt agreements that contain financial and other covenants. These covenants require Applied to maintain certain minimum financial ratios. At April 29, 2012, Applied was in compliance with all such covenants.
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation
6 Months Ended
Apr. 29, 2012
Equity [Abstract]
Stockholders' Equity, Comprehensive Income and Share-Based Compensation
Stockholders’ Equity, Comprehensive Income and Share-Based Compensation
Accumulated Other Comprehensive Income
Components of accumulated other comprehensive income, on an after-tax basis where applicable, were as follows:
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Pension liability
$
(25
)
 
$
(25
)
Unrealized gain on investments, net
20

 
17

Cumulative translation adjustments
12

 
14

 
$
7

 
$
6


Stock Repurchase Program
On March 5, 2012, Applied's Board of Directors approved a new stock repurchase program authorizing up to $3.0 billion in repurchases over the next three years ending in March 2015. Under this authorization, Applied purchased shares of its common stock under a systematic stock repurchase program and may also make supplemental stock repurchases from time to time, depending on market conditions, stock price and other factors. Applied's stock repurchase program authorized on March 8, 2010 was terminated concurrent with the start of the new repurchase program.

The following table summarizes Applied’s stock repurchases for the three and six months ended April 29, 2012 and May 1, 2011:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Shares of common stock repurchased
16

 
8

 
34

 
19

Cost of stock repurchased
$
200

 
$
118

 
$
400

 
$
268

Average price paid per share
$
12.33

 
$
15.54

 
$
11.60

 
$
14.48


Dividends
The following table summarizes the dividends declared by Applied's Board of Directors during fiscal 2012:
Date Declared
Record Date
Payable Date
Amount per Share
Aggregate Amount
(In millions)
December 6, 2011
February 23, 2012
March 15, 2012
$0.08
$103
March 5, 2012
May 24, 2012
June 14, 2012
$0.09
$115

Applied currently anticipates that it will continue to pay cash dividends on a quarterly basis in the future, although the declaration and amount of any future cash dividend are at the discretion of the Board of Directors and will depend on Applied’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination that cash dividends are in the best interest of Applied and its stockholders.

Share-Based Compensation
Applied has adopted stock plans that permit grants to employees of share-based awards, including stock options, restricted stock, restricted stock units, performance shares and performance units. In addition, the Employee Stock Incentive Plan provides for the automatic grant of restricted stock units to non-employee directors and permits the grant of share-based awards to non-employee directors and consultants. Applied also has two Employee Stock Purchase Plans, one for United States employees and a second for international employees (collectively, ESPP), which enable eligible employees to purchase Applied common stock.
During the three and six months ended April 29, 2012 and May 1, 2011, Applied recognized share-based compensation expense related to stock options, ESPP shares, restricted stock units, restricted stock, performance shares and performance units. Total share-based compensation and related tax benefits were as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Share-based compensation
$
43

 
$
38

 
$
96

 
$
72

Tax benefit recognized
$
12

 
$
11

 
$
27

 
$
21



The effect of share-based compensation on the results of operations for the three and six months ended April 29, 2012 and May 1, 2011 was as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Cost of products sold
$
14

 
$
13

 
$
27

 
$
24

Research, development, and engineering
13

 
12

 
26

 
22

Selling, general and administrative
16

 
13

 
43

 
26

Total share-based compensation
$
43

 
$
38

 
$
96

 
$
72



The cost associated with share-based awards that are subject solely to time-based vesting requirements, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved.
At April 29, 2012, Applied had $289 million in total unrecognized compensation expense, net of estimated forfeitures, related to grants of stock options, restricted stock units, restricted stock, performance units, performance shares and shares issued under Applied’s ESPP, which will be recognized over a weighted average period of 2.7 years. On March 6, 2012, Applied's stockholders approved the amended and restated Employee Stock Incentive Plan (the Plan), which included an increase of 125 million shares of Applied common stock available for issuance under the Plan and other amendments to the Plan. Also, upon approval of the amended and restated Plan, the 2000 Global Equity Incentive Plan, which had approximately 76 million shares available for issuance, became unavailable for any future grants. At April 29, 2012, there were 199 million shares available for grants of stock options, restricted stock units, restricted stock, performance units, performance shares and other share-based awards under the Plan, and an additional 51 million shares available for issuance under the ESPP .

Stock Options
Applied grants options to purchase, at future dates, shares of its common stock to employees and consultants. The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Options typically vest over three to four years, subject to the grantee’s continued service with Applied through the scheduled vesting date, and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. There were no stock options granted in the six months ended April 29, 2012 and May 1, 2011.
Stock option activity for the six months ended April 29, 2012 was as follows:
 
Shares
 
Weighted
Average
Exercise
Price
 
(In millions, except per share amounts)
Outstanding at October 30, 2011
30

 
$
13.05

Assumed in Varian acquisition
5

 
$
4.85

Exercised
(2
)
 
$
6.72

Canceled and forfeited
(8
)
 
$
16.70

Outstanding at April 29, 2012
25

 
$
10.78

Exercisable at April 29, 2012
23

 
$
11.13


Restricted Stock Units, Restricted Stock, Performance Shares and Performance Units
Restricted stock units are converted into shares of Applied common stock upon vesting on a one-for-one basis. Restricted stock has the same rights as other issued and outstanding shares of Applied common stock except these shares have no right to dividends and are held in escrow until the award vests. Performance shares and performance units are awards that result in a payment to a grantee in shares of Applied common stock on a one-for-one basis if performance goals and/or other vesting criteria established by the Human Resources and Compensation Committee of Applied’s Board of Directors (the Committee) are achieved or the awards otherwise vest. Restricted stock units, restricted stock and performance units typically vest over four years and vesting usually is subject to the grantee’s continued service with Applied and, in some cases, achievement of specified performance goals. The compensation expense related to the service-based awards is determined using the fair market value of Applied common stock on the date of the grant, and the compensation expense is recognized over the vesting period.

Restricted stock units, restricted stock, performance shares and performance units granted to certain executive officers and other key employees are also subject to the achievement of specified performance goals (performance-based awards). These performance-based awards become eligible to vest only if performance goals are achieved and then actually will vest only if the grantee remains employed by Applied through each applicable vesting date.

For performance-based awards granted during fiscal 2011 and 2010, the performance goals require (i) the achievement of targeted annual, adjusted operating profit margin levels compared to Applied’s peer companies in at least one of the four fiscal years beginning with the fiscal year of the grant, and (ii) that Applied’s annual adjusted operating profit margin is positive in such year. An award that has become eligible for time-based vesting based on achievement of the performance goals will vest over approximately four years from the date of grant, provided that the grantee remains employed by Applied through each scheduled vesting date. Performance-based awards that do not become eligible for time-based vesting in a particular year may become eligible for time-based vesting in subsequent years up until the fourth fiscal year after grant, after which they are forfeited if the required performance goals have not been achieved. During the six months ended April 29, 2012 the Committee granted performance-based awards that require the achievement of positive and relative annual, adjusted operating profit margin goals in a manner similar to the previously granted performance-based awards, with additional shares becoming eligible for time-based vesting depending on certain levels of achievement of Applied’s total shareholder return (TSR) relative to a peer group comprised of companies in the Standard & Poor’s 500 Information Technology Index measured at the end of a two-year period beginning fiscal 2012. The fair value of these performance-based awards is estimated on the date of the grant and assumes that the specified performance goals will be achieved. If the goals are achieved, these awards vest over a specified remaining service period as described above. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the service period and is reduced for estimated forfeitures.
As of April 29, 2012, 100 percent of the performance-based awards granted in fiscal 2011 had been earned based on performance and became subject to the additional time-based vesting requirements. As of April 29, 2012, 82 percent of the performance-based awards granted in fiscal 2010 had been earned based on performance and became subject to the additional time-based vesting requirements. The remaining 18 percent of the awards may still be earned, depending on future performance in one or both of fiscal years 2012 and 2013.
Restricted stock unit, restricted stock and performance unit activity for the six months ended April 29, 2012 was as follows:
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Weighted
Average
Remaining
Contractual Term
 
(In millions, except per share amounts)
Non-vested restricted stock units, restricted stock and performance units at October 30, 2011
28

 
$
12.64

 
2.8
 Years
Granted
15

 
$
10.69

 
 
Vested
(7
)
 
$
12.86

 
 
Canceled
(1
)
 
$
12.89

 
 
Non-vested restricted stock units, restricted stock and performance units at April 29, 2012
35

 
$
11.76

 
2.9
 Years

At April 29, 2012, 1 million additional performance-based awards could be earned upon certain levels of achievement of Applied’s TSR relative to a peer group at a future date.

Employee Stock Purchase Plans
Under the ESPP, substantially all employees may purchase Applied common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Applied common stock at the beginning or end of each 6-month purchase period, subject to certain limits. Based on the Black-Scholes option pricing model, the weighted average estimated fair value of purchase rights under the ESPP was $2.89 and $3.61 for the three and six months ended April 29, 2012 and May 1, 2011, respectively. The number of shares issued under the ESPP during the three and six months ended April 29, 2012 and May 1, 2011 was 3 million. Compensation expense associated with the ESPP is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Underlying assumptions used in the model are outlined in the following table:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
ESPP:
 
 
 
 
 
 
 
Dividend yield
2.94%
 
1.98%
 
2.94%
 
1.98%
Expected volatility
33%
 
27%
 
33%
 
27%
Risk-free interest rate
0.12%
 
0.17%
 
0.12%
 
0.17%
Expected life (in years)
0.5
 
0.5
 
0.5
 
0.5
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Employee Benefit Plans
6 Months Ended
Apr. 29, 2012
Compensation and Retirement Disclosure [Abstract]
Employee Benefit Plans
Employee Benefit Plans
Applied sponsors a number of employee benefit plans, including defined benefit plans of certain foreign subsidiaries, and a plan that provides certain medical and vision benefits to eligible retirees. A summary of the components of net periodic benefit costs of these defined and postretirement benefit plans for the three and six months ended April 29, 2012 and May 1, 2011 is presented below:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Service cost
$
4

 
$
4

 
$
8

 
$
8

Interest cost
3

 
3

 
7

 
7

Expected return on plan assets
(3
)
 
(3
)
 
(6
)
 
(6
)
Amortization of actuarial loss
1

 
1

 
1

 
1

Net periodic benefit cost
$
5

 
$
5

 
$
10

 
$
10

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Income Taxes
6 Months Ended
Apr. 29, 2012
Income Tax Disclosure [Abstract]
Income Taxes
Income Taxes
Applied’s effective income tax rate for the second quarter of fiscal 2012 and fiscal 2011 was a provision of 25.3 percent and 28.7 percent, respectively. Applied's effective income tax rate for the first six months of fiscal 2012 and fiscal 2011 was a provision of 25.6 percent and 27.2 percent, respectively. The rates for the three and six months ended April 29, 2012 were both lower than the rates for the comparable periods in the prior year primarily due to a favorable U.S. Internal Revenue Service audit settlement and changes in the composition of income in jurisdictions outside the U.S. with tax incentives. Applied’s future effective income tax rate depends on various factors, such as tax legislation and the geographic composition of Applied’s pre-tax income. Management carefully monitors these factors and timely adjusts the interim income tax rate accordingly.
Applied’s tax returns remain subject to examination by taxing authorities for fiscal 2004 and later years.
The timing of the resolution of income tax examinations, as well as the amounts and timing of various tax payments that may be made as part of the resolution process, is highly uncertain and could cause an impact to Applied’s consolidated results of operations. This could also cause large fluctuations in the balance sheet classification of current assets and non-current assets and liabilities. Applied expects that unrecognized tax benefits will decrease by $9 million in the next 12 months.
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Warranty, Guarantees and Contingencies
6 Months Ended
Apr. 29, 2012
Commitments and Contingencies Disclosure [Abstract]
Warranty, Guarantees and Contingencies
Warranty, Guarantees and Contingencies
Warranty
Changes in the warranty reserves during the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Beginning balance
$
161

 
$
173

 
$
168

 
$
155

Provisions for warranty
33

 
48

 
62

 
99

Consumption of reserves
(42
)
 
(37
)
 
(78
)
 
(70
)
Ending balance
$
152

 
$
184

 
$
152

 
$
184


Applied products are generally sold with a 12-month warranty period following installation. The provision for the estimated cost of warranty is recorded when revenue is recognized. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product, configuration and geographic region. Quarterly warranty consumption is generally associated with sales that occurred during the preceding four quarters, and quarterly warranty provisions are generally related to the current quarter’s sales.

Guarantees
In the ordinary course of business, Applied provides standby letters of credit or other guarantee instruments to third parties as required for certain transactions initiated by either Applied or its subsidiaries. As of April 29, 2012, the maximum potential amount of future payments that Applied could be required to make under these guarantee agreements was approximately $49 million. Applied has not recorded any liability in connection with these guarantee agreements beyond that required to appropriately account for the underlying transaction being guaranteed. Applied does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these guarantee agreements.
Applied also has agreements with various banks to facilitate subsidiary banking operations worldwide, including overdraft arrangements, issuance of bank guarantees, and letters of credit. As of April 29, 2012, Applied Materials, Inc. has provided parent guarantees to banks for approximately $188 million to cover these services.
Legal Matters
Jusung
Applied has been engaged in several lawsuits and patent and administrative proceedings with Jusung Engineering Co., Ltd. and/or Jusung Pacific Co., Ltd. (Jusung) in Taiwan and South Korea since 2003, and more recently in China, involving technology used in manufacturing liquid crystal displays (LCDs). Applied believes that it has meritorious claims and defenses against Jusung that it intends to pursue vigorously.
In 2004, Applied filed a complaint for patent infringement against Jusung in the Hsinchu District Court in Taiwan seeking damages and a permanent injunction for infringement of a patent related to chemical vapor deposition (CVD) equipment. Jusung filed a counterclaim against Applied. On December 31, 2010, the Hsinchu District Court dismissed both actions, and appeals by both parties remain pending at the Taiwan Intellectual Property Court. Jusung unsuccessfully sought invalidation of Applied’s CVD patent in the Taiwanese Intellectual Property Office (TIPO). In September 2010, the Taipei Supreme Administrative Court dismissed Jusung’s appeal of the TIPO’s decision. In 2009, Jusung filed a second action with the TIPO seeking invalidation of Applied’s CVD patent, which action remains pending.
In 2006, Applied filed an action in the TIPO challenging the validity of a Jusung patent related to separability of the transfer chamber on a CVD tool. Jusung sued Applied and AKT America in the Hsinchu District Court in Taiwan alleging infringement of the same patent. In March 2009, the Hsinchu District Court dismissed Jusung’s lawsuit; in October, 2010, the Taiwan Intellectual Property Court dismissed Jusung’s appeal; and on December 1, 2011, the Supreme Administrative Court dismissed Jusung’s further appeal. Separately, the TIPO granted requests by Applied and another party to invalidate Jusung’s patent. Following intermediate court appeals, on December 15, 2011, the Supreme Administrative Court dismissed Jusung’s further appeal, irrevocably invalidating Jusung’s patent. In November 2009, Applied filed an action in China with the Patent Reexamination Board of the State Intellectual Property Office seeking to invalidate a Chinese counterpart to Jusung’s separable chamber patent. On June 18, 2010, the Patent Reexamination Board issued a decision invalidating Jusung’s patent in China. Jusung appealed to the Beijing No. 1 Intermediate People’s Court and on June 13, 2011, this Court dismissed Jusung’s appeal. Jusung appealed this decision to the Beijing High People’s Court in July 2011, and Jusung’s appeal remains pending.
In 2006, Jusung filed a complaint of private prosecution in the Taipei District Court of Taiwan alleging that Applied’s outside counsel received from the Court and used a copy of an expert report that Jusung had filed in the ongoing patent infringement lawsuits that Jusung had intended to remain confidential. The complaint named as defendants Applied’s outside counsel in Taiwan, as well as Michael R. Splinter, Applied’s Chairman, President and Chief Executive Officer, as the statutory representative of Applied. The Taipei District Court dismissed the private prosecution complaint, and the matter was transferred to the Taipei District Attorney’s Office. The Taipei District Attorney’s Office issued six separate rulings not to prosecute, each of which Jusung appealed. In the first five instances, the Taiwan High Court District Attorney returned the matter to the Taipei District Attorney’s Office for further consideration. Following the sixth ruling not to prosecute, the Taiwan High Court District Attorney dismissed Jusung’s appeal. Jusung then petitioned to the Taipei District Court for a trial, and on February 7, 2012, the Court dismissed Jusung’s petition.


Korea Criminal Proceedings
In February 2010, the Seoul Prosecutor’s Office for the Eastern District of Korea (the Prosecutor’s Office) indicted employees of several companies for the alleged improper receipt and use of confidential information belonging to Samsung Electronics Co., Ltd. (Samsung), a major Applied customer based in Korea. The Prosecutor’s Office did not name Applied or any of its subsidiaries as a party to the criminal action. The individuals charged included the former head of Applied Materials Korea (AMK), who at the time of the indictment was a vice president of Applied Materials, Inc., and certain other AMK employees. Hearings on these matters are ongoing in the Seoul Eastern District Court. Applied and Samsung entered into a settlement agreement effective as of November 1, 2010, which resolves potential civil claims related to this matter, which is separate from and does not affect the criminal proceedings.
From time to time, Applied receives notification from third parties, including customers and suppliers, seeking indemnification, litigation support, payment of money or other actions by Applied in connection with claims made against them. In addition, from time to time, Applied receives notification from third parties claiming that Applied may be or is infringing or misusing their intellectual property or other rights. Applied also is subject to various other legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business.
 
Although the outcome of the above-described matters or these claims and proceedings cannot be predicted with certainty, Applied does not believe that any of these proceedings or other claims will have a material adverse effect on its consolidated financial condition or results of operations.
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and costs can be reasonably estimated. Environmental liabilities classified as current are included in accounts payable and accrued expenses with the non-current portion included in other liabilities. Generally, the timing of these accruals is based on the completion of a feasibility study or a commitment to a formal plan of action. Environmental liabilities are based on best estimates of probable undiscounted future costs based on currently available information. Should new information become available, the liability would be adjusted.
In connection with the acquisition of Varian, Applied assumed certain environmental liabilities, including environmental investigation and remediation costs. Environmental remediation costs incurred were not material for the three and six months ended April 29, 2012. At April 29, 2012, Applied’s environmental liability was $9 million, of which $8 million was classified as non-current and included in other liabilities. As part of accounting for the acquisition of Varian, Applied performed a review and assessment of the assumed environmental liabilities. Management believes that the liability arising from environmental-related matters is not material to Applied’s consolidated financial position.
Prior to the acquisition, Varian had entered into a settlement agreement with an insurance company to pay a portion of the past and future environmental-related expenditures. Accordingly, as part of the acquisition, Applied recorded a receivable of $2 million as of April 29, 2012, which is included in other assets.
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Industry Segment Operations
6 Months Ended
Apr. 29, 2012
Segment Reporting [Abstract]
Industry Segment Operations
Industry Segment Operations

Applied’s four reportable segments are: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. Applied’s chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. Segment information is presented based upon Applied’s management organization structure as of April 29, 2012, and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to Applied’s reportable segments.

Each reportable segment is separately managed and has separate financial results that are reviewed by Applied’s chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating income is determined based upon internal performance measures used by Applied’s chief operating decision-maker.

Applied derives the segment results directly from its internal management reporting system. The accounting policies Applied uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics including orders, net sales and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. Applied does not allocate to its reportable segments certain operating expenses that it manages separately at the corporate level, which include costs related to share-based compensation; certain management, finance, legal, human resources, and research, development and engineering functions provided at the corporate level; and unabsorbed information technology and occupancy. In addition, Applied does not allocate to its reportable segments restructuring and asset impairment charges and any associated adjustments related to restructuring actions, unless these charges or adjustments pertain to a specific reportable segment. Segment operating income excludes interest income/expense and other financial charges and income taxes. Management does not consider the unallocated costs in measuring the performance of the reportable segments.

In November 2011, Applied completed its acquisition of Varian. Beginning in the first quarter of fiscal 2012, the acquired business is primarily included in the results for the Silicon Systems Group and Applied Global Services segments, with certain corporate functions included in corporate and unallocated costs.

The Silicon Systems Group segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging, and ion implantation.

The Applied Global Services segment includes technically differentiated products and services to improve operating efficiency, reduce operating costs and lessen the environmental impact of semiconductor, display and solar customers’ factories. Applied Global Services’ products consist of spares, services, certain earlier generation products, remanufactured equipment, and products that have reached a particular stage in the product lifecycle. Customer demand for these products and services is fulfilled through a global distribution system with trained service engineers located in close proximity to customer sites.

The Display segment encompasses products for manufacturing LCDs, organic light-emitting diodes, and other display technologies for TVs, personal computers, tablets, smart phones, and other consumer-oriented devices.

The Energy and Environmental Solutions segment includes products for fabricating solar photovoltaic cells and modules, high throughput roll-to-roll coating systems for flexible electronics and web products, and systems used in the manufacture of energy-efficient glass.

Net sales and operating income (loss) for each reportable segment for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
 
Net Sales
 
Operating
Income  (loss)
 
Net Sales
 
Operating
Income  (loss)
 
(In millions)
April 29, 2012:
 
 
 
 
 
 
 
Silicon Systems Group
$
1,777

 
$
504

 
$
3,121

 
$
775

Applied Global Services
551

 
109

 
1,085

 
216

Display
134

 
7

 
238

 
12

Energy and Environmental Solutions
79

 
(63
)
 
286

 
(86
)
Total Segment
$
2,541

 
$
557

 
$
4,730

 
$
917

May 1, 2011:
 
 
 
 
 
 
 
Silicon Systems Group
$
1,453

 
$
491

 
$
2,950

 
$
1,034

Applied Global Services
614

 
91

 
1,181

 
176

Display
158

 
31

 
305

 
58

Energy and Environmental Solutions
637

 
170

 
1,113

 
313

Total Segment
$
2,862

 
$
783

 
$
5,549

 
$
1,581



Operating results for the three and six months ended May 1, 2011 included favorable adjustments of $8 million and $36 million, respectively, related to a restructuring program announced in fiscal 2010, which was reported in the Energy and Environmental Solutions segment.

In the second quarter of fiscal 2011, Applied negotiated the divestiture of certain assets held in the Applied Global Services segment and determined identified intangible assets and purchased technology included in assets held for sale to be impaired. Results for the three and six months ended May 1, 2011 included impairment charges of $24 million, which were reported in the Applied Global Services segment.
 
As discussed in Note 16, Subsequent Event, on May 10, 2012, Applied announced that a committee of the Board of Directors approved a plan to restructure the Energy and Environmental Solutions segment.

Reconciliations of total segment operating income to Applied’s consolidated operating income for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Total segment operating income
$
557

 
$
783

 
$
917

 
$
1,581

Corporate and unallocated costs
(148
)
 
(126
)
 
(329
)
 
(251
)
Restructuring and asset impairment benefit, net

 
20

 

 
21

Income from operations
$
409

 
$
677

 
$
588

 
$
1,351



Corporate and unallocated costs for the three and six months ended April 29, 2012 included deal costs and other acquisition-related costs related to the Varian acquisition of $1 million and $37 million, respectively.

The following companies accounted for at least 10 percent of Applied’s net sales for the six months ended April 29, 2012, which were for products in multiple reportable segments.
 
April 29, 2012
Samsung Electronics Co., Ltd .
30
%
Taiwan Semiconductor Manufacturing Company Limited
13
%
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Subsequent Event
6 Months Ended
Apr. 29, 2012
Subsequent Events [Abstract]
Subsequent Event
Subsequent Event
On May 10, 2012, Applied announced that a committee of the Board of Directors approved a plan (the Restructuring Plan) to restructure the Company’s Energy and Environmental Solutions segment in light of challenging industry conditions affecting the solar photovoltaic and light-emitting diode (LED) equipment markets. These actions are consistent with the Company’s previously-stated goal to reduce the Energy and Environmental Solutions segment’s annual revenue breakeven level. As part of the Restructuring Plan, Applied expects to relocate manufacturing, business operations and customer support functions of precision wafering systems and significantly reduce LED development activities, which will impact up to approximately 250 positions globally. The total estimated pre-tax cost of implementing the Restructuring Plan is expected to be in the range of approximately $70 million to $100 million, which will be incurred over a period of 12 to 18 months beginning in the third quarter of fiscal 2012.
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Basis of Presentation (Policies)
6 Months Ended
Apr. 29, 2012
Accounting Policies [Abstract]
Basis of Presentation
Basis of Presentation
In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October 30, 2011 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applied’s Annual Report on Form 10-K for the fiscal year ended October 30, 2011 (2011 Form 10-K). Applied’s results of operations for the three and six months ended April 29, 2012 are not necessarily indicative of future operating results. Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2012 and 2011 each contain 52 weeks, and the first half of fiscal 2012 and 2011 each contained 26 weeks.
In November 2011, Applied completed its acquisition of Varian Semiconductor Equipment Associates, Inc. (Varian). Beginning in the first quarter of fiscal 2012, the acquired business is included in Applied’s consolidated results of operations and the results of the Silicon Systems Group and Applied Global Services segments.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, Applied evaluates its estimates, including those related to accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of share-based awards, and income taxes, among others. Applied bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Revenue Recognition
Revenue Recognition
Applied recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to buyer is fixed or determinable; and collectability is probable. Applied’s shipping terms are customarily FOB Applied shipping point or equivalent terms. Applied’s revenue recognition policy generally results in revenue recognition at the following points: (1) for all transactions where legal title passes to the customer upon shipment, Applied recognizes revenue upon shipment for all products that have been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks is deferred, and that revenue is recognized upon completion of the installation-related tasks; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized at customer technical acceptance; (3) for transactions where legal title does not pass at shipment, revenue is recognized when legal title passes to the customer, which is generally at customer technical acceptance; and (4) for arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. Applied limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. In cases where Applied has sold products that have been demonstrated to meet product specifications prior to shipment, Applied believes that at the time of delivery, it has an enforceable claim to amounts recognized as revenue. The completed contract method is used for thin film solar lines. Spare parts revenue is generally recognized upon shipment, and services revenue is generally recognized over the period that the services are provided.

When a sales arrangement contains multiple elements, such as hardware and services and/or software products, Applied allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Applied generally utilizes the ESP due to the nature of its products. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue, as amended.
Employee Stock Purchase Plans
Employee Stock Purchase Plans
Under the ESPP, substantially all employees may purchase Applied common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Applied common stock at the beginning or end of each 6-month purchase period, subject to certain limits.
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Earnings Per Share (Tables)
6 Months Ended
Apr. 29, 2012
Earnings Per Share [Abstract]
Elements used in computing both basic and diluted net earnings per share
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Numerator:
 
 
 
 
 
 
 
Net income
$
289

 
$
489

 
$
406

 
$
995

Denominator:
 
 
 
 
 
 
 
Weighted average common shares outstanding
1,289

 
1,320

 
1,294

 
1,322

Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares
12

 
13

 
11

 
11

Denominator for diluted earnings per share
1,301

 
1,333

 
1,305

 
1,333

Basic and diluted earnings per share
$
0.22

 
$
0.37

 
$
0.31

 
$
0.75

Potentially dilutive securities
8

 
18

 
13

 
18

 

Potentially dilutive securities attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share because the combined exercise price, average unamortized fair value and assumed tax benefits upon the exercise of options and the vesting of restricted stock units were greater than the average market price of the Company’s shares, and therefore their inclusion would have been anti-dilutive.
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Cash, Cash Equivalents and Investments (Tables)
3 Months Ended
Apr. 29, 2012
Cash and Cash Equivalents [Abstract]
Summary of cash, cash equivalents and investments
The following tables summarize Applied’s cash, cash equivalents and investments by security type:
April 29, 2012
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(In millions)
Cash
$
620

 
$

 
$

 
$
620

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
1,141

 

 

 
1,141

Total Cash equivalents
1,141

 

 

 
1,141

Total Cash and Cash equivalents
$
1,761

 
$

 
$

 
$
1,761

Short-term and long-term investments:
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
302

 
$
1

 
$

 
$
303

Non-U.S. government securities*
22

 

 

 
22

Municipal securities
395

 
2

 

 
397

Commercial paper, corporate bonds and medium-term notes
314

 
3

 

 
317

Asset-backed and mortgage-backed securities
301

 
3

 
1

 
303

Total fixed income securities
1,334

 
9

 
1

 
1,342

Publicly traded equity securities
45

 
30

 
6

 
69

Equity investments in privately-held companies
69

 

 

 
69

Total short-term and long-term investments
$
1,448

 
$
39

 
$
7

 
$
1,480

Total Cash, Cash equivalents and Investments
$
3,209

 
$
39

 
$
7

 
$
3,241

______________
*
Includes agency and corporate debt securities guaranteed by non-U.S. governments, which consist of Canada, Australia, and Germany.


October 30, 2011
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair  Value
 
(In millions)
Cash
$
297

 
$

 
$

 
$
297

Cash equivalents:
 
 
 
 
 
 
 
Money market funds
5,663

 

 

 
5,663

Total Cash equivalents
5,663

 

 

 
5,663

Total Cash and Cash equivalents
$
5,960

 
$

 
$

 
$
5,960

Short-term and long-term investments:
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
184

 
$
1

 
$

 
$
185

Non-U.S. government securities
40

 

 

 
40

Municipal securities
371

 
2

 

 
373

Commercial paper, corporate bonds and medium-term notes
216

 
3

 
1

 
218

Asset-backed and mortgage-backed securities
307

 
3

 
1

 
309

Total fixed income securities
1,118

 
9

 
2

 
1,125

Publicly traded equity securities
8

 
19

 

 
27

Equity investments in privately-held companies
62

 

 

 
62

Total short-term and long-term investments
$
1,188

 
$
28

 
$
2

 
$
1,214

Total Cash, Cash equivalents and Investments
$
7,148

 
$
28

 
$
2

 
$
7,174


Contractual maturities of investments
The following table summarizes the contractual maturities of Applied’s investments at April 29, 2012:
 
Cost
 
Estimated
Fair  Value
 
(In millions)
Due in one year or less
$
365

 
$
365

Due after one through five years
667

 
672

Due after five years
1

 
2

No single maturity date**
415

 
441

 
$
1,448

 
$
1,480

______________
**
Securities with no single maturity date include publicly-traded and privately-held equity securities, and asset-backed and mortgage-backed securities.
Gains and losses on investments
Gross realized gains and losses on sales of investments during the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Gross realized gains
$
1

 
$
8

 
$
2

 
$
13

Gross realized losses
$
1

 
$
1

 
$
2

 
$
1

Gross unrealized losses and the fair market value of investments
The following table provides the fair market value of Applied’s investments with unrealized losses that were not deemed to be other-than-temporarily impaired as of April 29, 2012.
 
In Loss Position for
Less Than 12 Months
 
Total
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Asset-backed and mortgage-backed securities
$
42

 
$
1

 
$
42

 
$
1

Publicly traded equity securities
$
19

 
$
6

 
$
19

 
$
6

Total
$
61

 
$
7

 
$
61

 
$
7

The following table provides the fair market value of Applied’s investments with unrealized losses that were not deemed to be other-than-temporarily impaired as of October 30, 2011.
 
In Loss Position for
Less Than 12 Months
 
Total
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Commercial paper, corporate bonds and medium-term notes
$
32

 
$
1

 
$
32

 
$
1

Asset-backed and mortgage-backed securities
77

 
1

 
77

 
1

Total
$
109

 
$
2

 
$
109

 
$
2

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Fair Value Measurements (Tables)
3 Months Ended
Apr. 29, 2012
Fair Value Disclosures [Abstract]
Financial assets and liabilities measured at fair value on a recurring basis
Financial assets and liabilities (excluding cash balances) measured at fair value on a recurring basis are summarized below as of April 29, 2012 and October 30, 2011:
 
April 29, 2012
 
October 30, 2011
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
(In millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
1,141

 
$

 
$
1,141

 
$
5,663

 
$

 
$
5,663

U.S. Treasury and agency securities
93

 
210

 
303

 
109

 
76

 
185

Non-U.S. government securities

 
22

 
22

 

 
40

 
40

Municipal securities

 
397

 
397

 

 
373

 
373

Commercial paper, corporate bonds and medium-term notes

 
317

 
317

 

 
218

 
218

Asset-backed and mortgage-backed securities

 
303

 
303

 

 
309

 
309

Publicly traded equity securities
69

 

 
69

 
27

 

 
27

Total
$
1,303

 
$
1,249

 
$
2,552

 
$
5,799

 
$
1,016

 
$
6,815

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation
$
7

 
$

 
$
7

 
$

 
$

 
$

Total
$
7

 
$

 
$
7

 
$

 
$

 
$

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Derivative Instruments and Hedging Activities (Tables)
6 Months Ended
Apr. 29, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Effect of derivative instruments on the consolidated statement of operations
The effect of derivative instruments on the Consolidated Condensed Statement of Operations for the three and six months ended April 29, 2012 and May 1, 2011 was as follows:
 
 
 
Three Months Ended April 29, 2012
 
Three Months Ended May 1, 2011
Effective Portion
 
Ineffective Portion and Amount
Excluded from
Effectiveness
Testing
 
Effective Portion
 
Ineffective Portion and Amount
Excluded from
Effectiveness
Testing
 
Location of Gain or
(Loss) Reclassified
from AOCI into
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
 
 
(In millions)
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Cost of products sold
 
$
6

 
$
4

 
$
(1
)
 
$
8

 
$
1

 
$
(1
)
Foreign exchange contracts
General and administrative
 

 
1

 

 

 
2

 
(1
)
Total
 
 
$
6

 
$
5

 
$
(1
)
 
$
8

 
$
3

 
$
(2
)

 
 
 
Six Months Ended April 29, 2012
 
Six Months Ended May 1, 2011
Effective Portion
 
Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing
 
Effective Portion
 
Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing
 
Location of Gain or
(Loss) Reclassified
from AOCI into
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
Gain or
(Loss)
Recognized
in AOCI
 
Gain or (Loss)
Reclassified
from AOCI into
Income
 
Gain or (Loss)
Recognized in
Income
 
 
 
(In millions)
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Cost of products sold
 
$
5

 
$
6

 
$

 
$
12

 
$
5

 
$
(3
)
Foreign exchange contracts
General and administrative
 

 
(2
)
 
(1
)
 

 
3

 
(1
)
Total
 
 
$
5

 
$
4

 
$
(1
)
 
$
12

 
$
8

 
$
(4
)
Derivatives not designated as hedging instruments in statement of operations
 
 
 
Amount of Gain or (Loss) Recognized in Income
 
 
Three Months Ended
 
Six Months Ended
Location of Gain or
(Loss) Recognized
in Income
 
April 29, 2012
 
May 1, 2011
 
April 29, 2012
 
May 1, 2011
 
 
 
(In millions)
Derivatives Not Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
General and
administrative
 
$
8

 
$
1

 
$
14

 
$
3

Total
 
 
$
8

 
$
1

 
$
14

 
$
3

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Accounts Receivable, Net (Tables)
6 Months Ended
Apr. 29, 2012
Receivables [Abstract]
Sale and discounting of accounts receivable
Details of discounted letters of credit, factored accounts receivable and discounted promissory notes for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Discounted letters of credit
$

 
$
50

 
$

 
$
173

Factored accounts receivable and discounted promissory notes

 
19

 
70

 
55

Total
$

 
$
69

 
$
70

 
$
228

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Balance Sheet Detail (Tables)
6 Months Ended
Apr. 29, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Inventories
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Inventories
 
 
 
Customer service spares
$
306

 
$
328

Raw materials
383

 
407

Work-in-process
338

 
336

Finished goods*
567

 
630

 
$
1,594

 
$
1,701

 _______________
*
Included in finished goods inventory is $186 million at April 29, 2012, and $224 million at October 30, 2011, of newly-introduced systems at customer locations where the sales transaction did not meet Applied’s revenue recognition criteria as set forth in Note 1, Basis of Presentation. Finished goods inventory also includes $195 million and $140 million of evaluation inventory at April 29, 2012 and October 30, 2011, respectively.
Property, plant and equipment, net
 
Useful Life
 
April 29,
2012
 
October 30,
2011
 
(In years)
 
(In millions)
Property, Plant and Equipment, Net
 
 
 
 
 
Land and improvements
 
 
$
169

 
$
163

Buildings and improvements
3-30
 
1,190

 
1,155

Demonstration and manufacturing equipment
3-5
 
753

 
686

Furniture, fixtures and other equipment
3-15
 
735

 
722

Construction in progress
 
 
31

 
12

Gross property, plant and equipment
 
 
2,878

 
2,738

Accumulated depreciation
 
 
(1,939
)
 
(1,872
)
 
 
 
$
939

 
$
866

Accounts payable and accrued expenses
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Accounts Payable and Accrued Expenses
 
 
 
Accounts payable
$
507

 
$
484

Compensation and employee benefits
355

 
455

Warranty
152

 
168

Dividends payable
115

 
104

Other accrued taxes
70

 
81

Interest payable
30

 
31

Restructuring reserve
6

 
11

Other
231

 
186

 
$
1,466

 
$
1,520

Customer deposits and deferred revenue
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Customer Deposits and Deferred Revenue
 
 
 
Customer deposits
$
191

 
$
249

Deferred revenue
922

 
867

 
$
1,113

 
$
1,116

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Business Combination (Tables)
6 Months Ended
Apr. 29, 2012
Business Combinations [Abstract]
Summary of allocation of assets acquired and liabilities assumed
The following table summarizes the preliminary allocation of the assets acquired and liabilities assumed at the acquisition date:
Estimated Fair Values
Acquisition
2012
 
(In millions)
Cash and cash equivalents
$
632

Short-term investments
56

Accounts receivable, net
194

Inventories
250

Deferred income taxes and other current assets
66

Long-term investments
62

Property and equipment, net
104

Goodwill
2,604

Purchased intangible assets
1,365

Other assets
10

Total assets acquired
5,343

Accounts payable and accrued expenses
(134
)
Customer deposits and deferred revenue
(52
)
Income taxes payable
(60
)
Deferred income taxes
(211
)
Other liabilities
(25
)
Total liabilities assumed
(482
)
Purchase price allocated
$
4,861

Purchased Intangible Assets
The following table presents detail of the purchase price allocated to purchased intangible assets of Varian at the acquisition date:
 
Useful
Life
 
Purchased
Intangible  Assets
2012
 
(In years)
 
(In millions)
Developed technology
1-7
 
$
987

Customer relationships
15
 
150

In-process technology
 
 
142

Patents and trademarks
10
 
69

Backlog
1
 
7

Covenant not to compete
2
 
10

Total purchased intangible assets
 
 
$
1,365

Unaudited pro forma consolidated results of operations assumed in the acquisition
The pro forma consolidated results of operations for the three and six months ended May 1, 2011 combine the results of Applied for the three and six months ended May 1, 2011, with the results of Varian for the three and six months ended April 1, 2011.
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Net sales
$
2,541

 
$
3,192

 
$
4,730

 
$
6,161

Net income
$
308

 
$
508

 
$
503

 
$
957

Basic and diluted earnings per share
$
0.24

 
$
0.38

 
$
0.39

 
$
0.72

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Goodwill, Purchased Technology and Other Intangible Assets (Tables)
6 Months Ended
Apr. 29, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Indefinite-lived intangible assets

Details of indefinite-lived intangible assets were as follows:
 
April 29, 2012
 
October 30, 2011
Goodwill
 
Other
Intangible
Assets
 
Total
 
Goodwill
 
Other
Intangible
Assets
 
Total
 
(In millions)
Silicon Systems Group
$
2,151

 
$
142

 
$
2,293

 
$
381

 
$

 
$
381

Applied Global Services
1,027

 

 
1,027

 
193

 

 
193

Display
116

 

 
116

 
116

 

 
116

Energy and Environmental Solutions
645

 

 
645

 
645

 

 
645

Carrying amount
$
3,939

 
$
142

 
$
4,081

 
$
1,335

 
$

 
$
1,335

Amortized intangible assets

Details of finite-lived intangible assets were as follows:
 
April 29, 2012
 
October 30, 2011
Purchased
Technology
 
Other
Intangible
Assets
 
Total
 
Purchased
Technology
 
Other
Intangible
Assets
 
Total
 
(In millions)
Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
Silicon Systems Group
$
1,300

 
$
252

 
$
1,552

 
$
310

 
$
20

 
$
330

Applied Global Services
28

 
44

 
72

 
28

 
40

 
68

Display
110

 
33

 
143

 
110

 
33

 
143

Energy and Environmental Solutions
106

 
232

 
338

 
105

 
232

 
337

Gross carrying amount
$
1,544

 
$
561

 
$
2,105

 
$
553

 
$
325

 
$
878

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
Silicon Systems Group
$
(334
)
 
$
(23
)
 
$
(357
)
 
$
(256
)
 
$
(8
)
 
$
(264
)
Applied Global Services
(21
)
 
(37
)
 
(58
)
 
(20
)
 
(31
)
 
(51
)
Display
(104
)
 
(26
)
 
(130
)
 
(102
)
 
(25
)
 
(127
)
Energy and Environmental Solutions
(54
)
 
(184
)
 
(238
)
 
(48
)
 
(177
)
 
(225
)
Accumulated amortization
$
(513
)
 
$
(270
)
 
$
(783
)
 
$
(426
)
 
$
(241
)
 
$
(667
)
Carrying amount
$
1,031

 
$
291

 
$
1,322

 
$
127

 
$
84

 
$
211

Summary of amortization expense
Details of amortization expense were as follows:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Silicon Systems Group
$
45

 
$
3

 
$
93

 
$
7

Applied Global Services
2

 
2

 
7

 
4

Display
2

 
2

 
3

 
4

Energy and Environmental Solutions
6

 
6

 
13

 
12

Total
$
55

 
$
13

 
$
116

 
$
27

Schedule of categories amortization expense was charged to

For the three and six months ended April 29, 2012 and May 1, 2011, amortization expense was charged to the following categories:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Cost of products sold
$
45

 
$
9

 
$
97

 
$
18

Research, development and engineering
1

 

 
1

 

Selling, general and administrative
9

 
4

 
18

 
9

Total amortization expense
$
55

 
$
13

 
$
116

 
$
27

Future estimated amortization expense

As of April 29, 2012, future estimated amortization expense is expected to be as follows:
 
Amortization Expense
 
(In millions)
2012
$
109

2013
209

2014
199

2015
183

2016
174

Thereafter
448

 
$
1,322

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Borrowing Facilities and Long-Term Debt (Tables)
6 Months Ended
Apr. 29, 2012
Debt Disclosure [Abstract]
Long Term Debt Outstanding
Long-term debt outstanding was as follows:
 
Principal Amount
 
 
 
 
 
 
Due Date
April 29, 2012
 
October 30, 2011
 
Stated
Interest Rate
 
Effective
Interest Rate
 
Interest Payment Dates
 
(In millions)
 
 
 
 
 
 
June 15, 2016
$
400

 
$
400

 
2.650%
 
2.666%
 
June 15, December 15
October 15, 2017
200

 
200

 
7.125%
 
7.190%
 
April 15, October 15
June 15, 2021
750

 
750

 
4.300%
 
4.326%
 
June 15, December 15
June 15, 2041
600

 
600

 
5.850%
 
5.879%
 
June 15, December 15
Other debt

 
1

 
 
 
 
 
 
 
1,950

 
1,951

 
 
 
 
 
 
Total unamortized discount
(4
)
 
(4
)
 
 
 
 
 
 
Total long-term debt
$
1,946

 
$
1,947

 
 
 
 
 
 
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Tables)
6 Months Ended
Apr. 29, 2012
Equity [Abstract]
Components of accumulated other comprehensive loss, after-tax basis
Components of accumulated other comprehensive income, on an after-tax basis where applicable, were as follows:
 
April 29,
2012
 
October 30,
2011
 
(In millions)
Pension liability
$
(25
)
 
$
(25
)
Unrealized gain on investments, net
20

 
17

Cumulative translation adjustments
12

 
14

 
$
7

 
$
6

Summary of stock repurchases
The following table summarizes Applied’s stock repurchases for the three and six months ended April 29, 2012 and May 1, 2011:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions, except per share amounts)
Shares of common stock repurchased
16

 
8

 
34

 
19

Cost of stock repurchased
$
200

 
$
118

 
$
400

 
$
268

Average price paid per share
$
12.33

 
$
15.54

 
$
11.60

 
$
14.48

Dividends declared
The following table summarizes the dividends declared by Applied's Board of Directors during fiscal 2012:
Date Declared
Record Date
Payable Date
Amount per Share
Aggregate Amount
(In millions)
December 6, 2011
February 23, 2012
March 15, 2012
$0.08
$103
March 5, 2012
May 24, 2012
June 14, 2012
$0.09
$115
Share-based compensation and related tax benefits
Total share-based compensation and related tax benefits were as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Share-based compensation
$
43

 
$
38

 
$
96

 
$
72

Tax benefit recognized
$
12

 
$
11

 
$
27

 
$
21

Effect of share-based compensation on the results of operations
The effect of share-based compensation on the results of operations for the three and six months ended April 29, 2012 and May 1, 2011 was as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Cost of products sold
$
14

 
$
13

 
$
27

 
$
24

Research, development, and engineering
13

 
12

 
26

 
22

Selling, general and administrative
16

 
13

 
43

 
26

Total share-based compensation
$
43

 
$
38

 
$
96

 
$
72

Stock option activity
Stock option activity for the six months ended April 29, 2012 was as follows:
 
Shares
 
Weighted
Average
Exercise
Price
 
(In millions, except per share amounts)
Outstanding at October 30, 2011
30

 
$
13.05

Assumed in Varian acquisition
5

 
$
4.85

Exercised
(2
)
 
$
6.72

Canceled and forfeited
(8
)
 
$
16.70

Outstanding at April 29, 2012
25

 
$
10.78

Exercisable at April 29, 2012
23

 
$
11.13

Restricted stock unit, restricted stock and performance unit activity
Restricted stock unit, restricted stock and performance unit activity for the six months ended April 29, 2012 was as follows:
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Weighted
Average
Remaining
Contractual Term
 
(In millions, except per share amounts)
Non-vested restricted stock units, restricted stock and performance units at October 30, 2011
28

 
$
12.64

 
2.8
 Years
Granted
15

 
$
10.69

 
 
Vested
(7
)
 
$
12.86

 
 
Canceled
(1
)
 
$
12.89

 
 
Non-vested restricted stock units, restricted stock and performance units at April 29, 2012
35

 
$
11.76

 
2.9
 Years
ESPP valuation assumptions
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
ESPP:
 
 
 
 
 
 
 
Dividend yield
2.94%
 
1.98%
 
2.94%
 
1.98%
Expected volatility
33%
 
27%
 
33%
 
27%
Risk-free interest rate
0.12%
 
0.17%
 
0.12%
 
0.17%
Expected life (in years)
0.5
 
0.5
 
0.5
 
0.5
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Employee Benefit Plans (Tables)
6 Months Ended
Apr. 29, 2012
Compensation and Retirement Disclosure [Abstract]
Components of net periodic benefit costs of defined and postretirement benefit plans
A summary of the components of net periodic benefit costs of these defined and postretirement benefit plans for the three and six months ended April 29, 2012 and May 1, 2011 is presented below:
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Service cost
$
4

 
$
4

 
$
8

 
$
8

Interest cost
3

 
3

 
7

 
7

Expected return on plan assets
(3
)
 
(3
)
 
(6
)
 
(6
)
Amortization of actuarial loss
1

 
1

 
1

 
1

Net periodic benefit cost
$
5

 
$
5

 
$
10

 
$
10

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Warranty, Guarantees And Contingencies (Tables)
6 Months Ended
Apr. 29, 2012
Commitments and Contingencies Disclosure [Abstract]
Changes in the warranty reserves
Changes in the warranty reserves during the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
 
Three Months Ended
 
Six Months Ended
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
(In millions)
Beginning balance
$
161

 
$
173

 
$
168

 
$
155

Provisions for warranty
33

 
48

 
62

 
99

Consumption of reserves
(42
)
 
(37
)
 
(78
)
 
(70
)
Ending balance
$
152

 
$
184

 
$
152

 
$
184

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Industry Segment Operations (Tables)
6 Months Ended
Apr. 29, 2012
Segment Reporting [Abstract]
Net sales and operating income (loss) for each reportable segment
Net sales and operating income (loss) for each reportable segment for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
 
Net Sales
 
Operating
Income  (loss)
 
Net Sales
 
Operating
Income  (loss)
 
(In millions)
April 29, 2012:
 
 
 
 
 
 
 
Silicon Systems Group
$
1,777

 
$
504

 
$
3,121

 
$
775

Applied Global Services
551

 
109

 
1,085

 
216

Display
134

 
7

 
238

 
12

Energy and Environmental Solutions
79

 
(63
)
 
286

 
(86
)
Total Segment
$
2,541

 
$
557

 
$
4,730

 
$
917

May 1, 2011:
 
 
 
 
 
 
 
Silicon Systems Group
$
1,453

 
$
491

 
$
2,950

 
$
1,034

Applied Global Services
614

 
91

 
1,181

 
176

Display
158

 
31

 
305

 
58

Energy and Environmental Solutions
637

 
170

 
1,113

 
313

Total Segment
$
2,862

 
$
783

 
$
5,549

 
$
1,581

Reconciliations of total segment operating income to Applied's consolidated operating income
Reconciliations of total segment operating income to Applied’s consolidated operating income for the three and six months ended April 29, 2012 and May 1, 2011 were as follows:
 
Three Months Ended
 
Six Months Ended
 
April 29,
2012
 
May 1,
2011
 
April 29,
2012
 
May 1,
2011
 
(In millions)
Total segment operating income
$
557

 
$
783

 
$
917

 
$
1,581

Corporate and unallocated costs
(148
)
 
(126
)
 
(329
)
 
(251
)
Restructuring and asset impairment benefit, net

 
20

 

 
21

Income from operations
$
409

 
$
677

 
$
588

 
$
1,351

Companies accounted for at least 10 percent of Applied's net sales
The following companies accounted for at least 10 percent of Applied’s net sales for the six months ended April 29, 2012, which were for products in multiple reportable segments.
 
April 29, 2012
Samsung Electronics Co., Ltd .
30
%
Taiwan Semiconductor Manufacturing Company Limited
13
%
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Basis of Presentation (Details)
6 Months Ended 12 Months Ended
Apr. 29, 2012
May 01, 2011
Oct. 28, 2012
Oct. 30, 2011
Accounting Policies [Abstract]
Operating cycle (in weeks) P26W P26W P52W P52W
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Earnings Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Numerator:
Net income $ 289 $ 489 $ 406 $ 995
Denominator:
Weighted average common shares outstanding (in shares) 1,289 1,320 1,294 1,322
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares (in shares) 12 13 11 11
Denominator for diluted earnings per share (in shares) 1,301 1,333 1,305 1,333
Basic and diluted earnings per share (in dollars per share) $ 0.22 $ 0.37 $ 0.31 $ 0.75
Potentially dilutive securities (in shares) 8 18 13 18
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Cash, Cash Equivalents and Investments (Details) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost $ 3,209 $ 7,148
Cash, Cash Equivalents and Investments Gross Unrealized Gains 39 28
Cash, Cash Equivalents and Investments Gross Unrealized Losses 7 2
Cash, Cash Equivalents and Investments Estimated Fair Value 3,241 7,174
Total cash and cash equivalents [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 1,761 5,960
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 1,761 5,960
Cash [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 620 297
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 620 297
Cash equivalents [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 1,141 5,663
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 1,141 5,663
Cash equivalents [Member] | Money market funds [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 1,141 5,663
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 1,141 5,663
Short-term and long-term investments [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 1,448 1,188
Cash, Cash Equivalents and Investments Gross Unrealized Gains 39 28
Cash, Cash Equivalents and Investments Gross Unrealized Losses 7 2
Cash, Cash Equivalents and Investments Estimated Fair Value 1,480 1,214
Short-term and long-term investments [Member] | U S Treasury and agency securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 302 184
Cash, Cash Equivalents and Investments Gross Unrealized Gains 1 1
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 303 185
Short-term and long-term investments [Member] | Non-U.S. government securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 22 [1] 40
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 [1] 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 [1] 0
Cash, Cash Equivalents and Investments Estimated Fair Value 22 [1] 40
Short-term and long-term investments [Member] | Municipal securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 395 371
Cash, Cash Equivalents and Investments Gross Unrealized Gains 2 2
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value 397 373
Short-term and long-term investments [Member] | Commercial paper, corporate bonds and medium-term notes [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 314 216
Cash, Cash Equivalents and Investments Gross Unrealized Gains 3 3
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 1
Cash, Cash Equivalents and Investments Estimated Fair Value 317 218
Short-term and long-term investments [Member] | Asset-backed and mortgage-backed securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 301 307
Cash, Cash Equivalents and Investments Gross Unrealized Gains 3 3
Cash, Cash Equivalents and Investments Gross Unrealized Losses 1 1
Cash, Cash Equivalents and Investments Estimated Fair Value 303 309
Short-term and long-term investments [Member] | Total fixed income securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 1,334 1,118
Cash, Cash Equivalents and Investments Gross Unrealized Gains 9 9
Cash, Cash Equivalents and Investments Gross Unrealized Losses 1 2
Cash, Cash Equivalents and Investments Estimated Fair Value 1,342 1,125
Short-term and long-term investments [Member] | Publicly traded equity securities [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 45 8
Cash, Cash Equivalents and Investments Gross Unrealized Gains 30 19
Cash, Cash Equivalents and Investments Gross Unrealized Losses 6 0
Cash, Cash Equivalents and Investments Estimated Fair Value 69 27
Short-term and long-term investments [Member] | Equity investments in privately-held companies [Member]
Summary of Cash, Cash Equivalents and Investments
Cash, Cash Equivalents and Investments Cost 69 62
Cash, Cash Equivalents and Investments Gross Unrealized Gains 0 0
Cash, Cash Equivalents and Investments Gross Unrealized Losses 0 0
Cash, Cash Equivalents and Investments Estimated Fair Value $ 69 $ 62
[1] Includes agency and corporate debt securities guaranteed by non-U.S. governments, which consist of Canada, Australia, and Germany.
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Cash, Cash Equivalents and Investments (Details 1) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Contractual maturities of investments
Due in one year or less, Cost $ 365
Due in one year or less, Estimated Fair value 365
Due after one through five years, Cost 667
Due after one through five years, Estimated Fair Value 672
Due after five years, Cost 1
Due after five years, Estimated Fair Value 2
No single maturity date, Cost 415 [1]
No single maturity date, Estimated Fair Value 441 [1]
Investments maturities amortized cost 1,448
Investments maturities fair value $ 1,480
[1] Securities with no single maturity date include publicly-traded and privately-held equity securities, and asset-backed and mortgage-backed securities.
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Cash, Cash Equivalents and Investments (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Gains and Losses on Investments
Gross realized gains $ 1 $ 8 $ 2 $ 13
Gross realized losses $ 1 $ 1 $ 2 $ 1
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Cash, Cash Equivalents and Investments (Details 3) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Gross Unrealized Losses and the Fair Market Value of Investments
In Loss Position for Less Than 12 Months, Fair Value $ 61 $ 109
In Loss Position for Less Than 12 Months, Gross Unrealized Losses 7 2
Total, Fair Value 61 109
Total, Gross Unrealized Losses 7 2
Asset-backed and mortgage-backed securities [Member]
Gross Unrealized Losses and the Fair Market Value of Investments
In Loss Position for Less Than 12 Months, Fair Value 42 77
In Loss Position for Less Than 12 Months, Gross Unrealized Losses 1 1
Total, Fair Value 42 77
Total, Gross Unrealized Losses 1 1
Publicly traded equity securities [Member]
Gross Unrealized Losses and the Fair Market Value of Investments
In Loss Position for Less Than 12 Months, Fair Value 19
In Loss Position for Less Than 12 Months, Gross Unrealized Losses 6
Total, Fair Value 19
Total, Gross Unrealized Losses 6
Commercial paper, corporate bonds and medium-term notes [Member]
Gross Unrealized Losses and the Fair Market Value of Investments
In Loss Position for Less Than 12 Months, Fair Value 32
In Loss Position for Less Than 12 Months, Gross Unrealized Losses 1
Total, Fair Value 32
Total, Gross Unrealized Losses $ 1
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Cash, Cash Equivalents and Investments (Details Textual) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Cash and Cash Equivalents [Abstract]
Gross unrealized loss due to a decrease in the fair value of certain fixed income securities $ 1 $ 1
Impairments of investments $ 3 $ 0 $ 3 $ 0
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Fair Value Measurements (Details) (Fair Value, Measurements, Recurring [Member], USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Assets:
Total $ 2,552 $ 6,815
Liabilities
Deferred compensation 7 0
Total 7 0
Money market funds [Member]
Assets:
Investment securities 1,141 5,663
U.S. Treasury and agency securities [Member]
Assets:
Investment securities 303 185
Non-U.S. government securities [Member]
Assets:
Investment securities 22 40
Municipal securities [Member]
Assets:
Investment securities 397 373
Commercial paper, corporate bonds and medium-term notes [Member]
Assets:
Investment securities 317 218
Asset-backed and mortgage-backed securities [Member]
Assets:
Investment securities 303 309
Publicly traded equity securities [Member]
Assets:
Investment securities 69 27
Level 1 [Member]
Assets:
Total 1,303 5,799
Liabilities
Deferred compensation 7 0
Total 7 0
Level 1 [Member] | Money market funds [Member]
Assets:
Investment securities 1,141 5,663
Level 1 [Member] | U.S. Treasury and agency securities [Member]
Assets:
Investment securities 93 109
Level 1 [Member] | Non-U.S. government securities [Member]
Assets:
Investment securities 0 0
Level 1 [Member] | Municipal securities [Member]
Assets:
Investment securities 0 0
Level 1 [Member] | Commercial paper, corporate bonds and medium-term notes [Member]
Assets:
Investment securities 0 0
Level 1 [Member] | Asset-backed and mortgage-backed securities [Member]
Assets:
Investment securities 0 0
Level 1 [Member] | Publicly traded equity securities [Member]
Assets:
Investment securities 69 27
Level 2 [Member]
Assets:
Total 1,249 1,016
Liabilities
Deferred compensation 0 0
Total 0 0
Level 2 [Member] | Money market funds [Member]
Assets:
Investment securities 0 0
Level 2 [Member] | U.S. Treasury and agency securities [Member]
Assets:
Investment securities 210 76
Level 2 [Member] | Non-U.S. government securities [Member]
Assets:
Investment securities 22 40
Level 2 [Member] | Municipal securities [Member]
Assets:
Investment securities 397 373
Level 2 [Member] | Commercial paper, corporate bonds and medium-term notes [Member]
Assets:
Investment securities 317 218
Level 2 [Member] | Asset-backed and mortgage-backed securities [Member]
Assets:
Investment securities 303 309
Level 2 [Member] | Publicly traded equity securities [Member]
Assets:
Investment securities $ 0 $ 0
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Fair Value Measurements (Details Textual) (USD $)
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Oct. 30, 2011
Fair Value Measurements (Textual) [Abstract]
Maturity period for classification as short-term investment 12 months or less 12 months or less
Maturity period for classification as long-term investment more than 12 months more than 12 months
Fair value of Level 1 and Level 2 transfers amount $ 0 $ 0 $ 0 $ 0
Equity investments in privately-held companies 69,000,000 69,000,000 62,000,000
Investments accounted for under cost method of accounting 52,000,000 52,000,000 40,000,000
Impairments of investments 3,000,000 0 3,000,000 0
Long-term debt at carrying value 1,900,000,000 1,900,000,000
Estimated fair value of long-term debt 2,200,000,000 2,200,000,000
Fair Value, Measurements, Nonrecurring [Member]
Fair Value Measurements (Textual) [Abstract]
Fair value of Level 3 to Level 1 transfers amount 5,000,000 5,000,000
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member]
Fair Value Measurements (Textual) [Abstract]
Equity investments in privately-held companies measured at fair value on a non-recurring basis 17,000,000 17,000,000 22,000,000
Impairments of investments $ 3,000,000 $ 3,000,000
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Derivative Instruments and Hedging Activities (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Effect of derivative instruments on the Consolidated Statement of Operations
Gain or (Loss) Recognized in AOCI, Effective Portion $ 6 $ 8 $ 5 $ 12
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion 5 3 4 8
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing (1) (2) (1) (4)
Foreign exchange contracts [Member] | Cost of products sold [Member]
Effect of derivative instruments on the Consolidated Statement of Operations
Gain or (Loss) Recognized in AOCI, Effective Portion 6 8 5 12
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion 4 1 6 5
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing (1) (1) 0 (3)
Foreign exchange contracts [Member] | General and administrative [Member]
Effect of derivative instruments on the Consolidated Statement of Operations
Gain or (Loss) Recognized in AOCI, Effective Portion 0 0 0 0
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion 1 2 (2) 3
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing $ 0 $ (1) $ (1) $ (1)
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Derivative Instruments and Hedging Activities (Details 1) (Derivatives Not Designated as Hedging Instruments [Member], USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income $ 8 $ 1 $ 14 $ 3
Foreign exchange contracts [Member] | General and administrative [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income $ 8 $ 1 $ 14 $ 3
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Derivative Instruments and Hedging Activities (Details Textual)
6 Months Ended
Apr. 29, 2012
Derivative Instruments and Hedging Activities (Textual) [Abstract]
Time period for hedging of foreign currency transactions 24 months
Time period over which majority of after tax gain loss related to derivatives to be reclassified into earnings 12 months
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Accounts Receivable, Net (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Oct. 30, 2011
Sale and Discounting of Accounts Receivable
Discounted letters of credit $ 0 $ 50 $ 0 $ 173
Factored accounts receivable and discounted promissory notes 0 19 70 55
Total 0 69 70 228
Accounts Receivable, Net (Textual) [Abstract]
Allowance for doubtful accounts $ 82 $ 82 $ 73
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Balance Sheet Detail (Details) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Inventories
Customer service spares $ 306 $ 328
Raw materials 383 407
Work-in-process 338 336
Finished goods 567 [1] 630 [1]
Total Inventories 1,594 [2] 1,701 [2]
Inventory at customer locations included in finished goods 186 224
Evaluation inventory $ 195 $ 140
[1] Included in finished goods inventory is $186 million at April 29, 2012, and $224 million at October 30, 2011, of newly-introduced systems at customer locations where the sales transaction did not meet Applied’s revenue recognition criteria as set forth in Note 1, Basis of Presentation. Finished goods inventory also includes $195 million and $140 million of evaluation inventory at April 29, 2012 and October 30, 2011, respectively.
[2] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Balance Sheet Detail (Details 1) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Property, Plant and Equipment, Net
Land and improvements $ 169 $ 163
Buildings and improvements 1,190 1,155
Demonstration and manufacturing equipment 753 686
Furniture, fixtures and other equipment 735 722
Construction in progress 31 12
Gross property, plant and equipment 2,878 2,738
Accumulated depreciation (1,939) (1,872)
Net property, plant and equipment $ 939 [1] $ 866 [1]
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Balance Sheet Detail (Details 2) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Accounts Payable and Accrued Expenses
Accounts payable $ 507 $ 484
Compensation and employee benefits 355 455
Warranty 152 168
Dividends payable 115 104
Other accrued taxes 70 81
Interest payable 30 31
Restructuring reserve 6 11
Other 231 186
Total Accounts Payable and Accrued Expenses $ 1,466 [1] $ 1,520 [1]
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Balance Sheet Detail (Details 3) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Customer Deposits and Deferred Revenue
Customer deposits $ 191 $ 249
Deferred revenue 922 867
Total Customer Deposits and Deferred Revenue $ 1,113 [1] $ 1,116 [1]
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Balance Sheet Detail (Details Textual) (USD $)
In Millions, unless otherwise specified
6 Months Ended 3 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
Building improvements [Member]
Y
Apr. 29, 2012
Demonstration and manufacturing equipment [Member]
Y
Apr. 29, 2012
Furniture, fixtures and other equipment [Member]
Y
Jan. 30, 2011
North America [Member]
Balance Sheet Detail (Textual) [Abstract]
Useful Life, minimum (in years) 3 3 3
Useful Life, maximum (in years) 30 5 15
Proceeds from sale of property $ 0 $ 39 $ 39
Loss incurred on sale of property 1
Untendered shares obligation $ 16
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Business Combination (Details) (USD $)
In Millions, unless otherwise specified
Nov. 10, 2011
Purchase prices for the acquisitions
Cash and cash equivalents $ 632
Short-term investments 56
Accounts receivable, net 194
Inventories 250
Deferred income taxes and other current assets 66
Long-term investments 62
Property and equipment, net 104
Goodwill 2,604
Purchased intangible assets 1,365
Other assets 10
Total assets acquired 5,343
Accounts payable and accrued expenses (134)
Customer deposits and deferred revenue (52)
Income taxes payable (60)
Deferred income taxes (211)
Other liabilities (25)
Total liabilities assumed (482)
Purchase price allocated $ 4,861
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Business Combination (Details 1) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Apr. 29, 2012
Y
Nov. 10, 2011
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 $ 1,365
Intangible assets, useful life, minimum (in years) 1
Intangible assets, useful life, maximum (in years) 15
Developed technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 987
Intangible assets, useful life, minimum (in years) 1
Intangible assets, useful life, maximum (in years) 7
Customer relationships [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 150
Intangible assets, useful life (in years) 15
In-process technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 142
Patents and trademarks [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 69
Intangible assets, useful life (in years) 10
Backlog [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 7
Intangible assets, useful life (in years) 1
Covenant not to compete [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchased Intangible Assets 2012 $ 10
Intangible assets, useful life (in years) 2
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Business Combination (Details 2) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Unaudited pro forma consolidated results of operations assumed in the acquisition
Net sales $ 2,541 $ 3,192 $ 4,730 $ 6,161
Net income $ 308 $ 508 $ 503 $ 957
Basic and diluted earnings per share (in dollars per share) $ 0.24 $ 0.38 $ 0.39 $ 0.72
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Business Combination (Details Textual) (USD $)
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Nov. 10, 2011
Business Combination (Textual) [Abstract]
Assumed earned equity awards $ 27,000,000
Goodwill 2,604,000,000
Net sales 2,541,000,000 2,862,000,000 4,730,000,000 5,549,000,000
Operating Income (loss) 409,000,000 677,000,000 588,000,000 1,351,000,000
Business acquisition charges 69,000,000 222,000,000
Business acquisition costs not allocated to a segment 1,000,000 37,000,000
Proforma results of nonrecurring adjustments 15,000,000 117,000,000
Varian Semiconductor Equipment Associates Inc [Member]
Business Combination (Textual) [Abstract]
Acquisition date November 10, 2011
Total purchase price for acquired entity, net of cash 4,200,000,000
Net sales 333,000,000 535,000,000
Operating Income (loss) (1,000,000) (131,000,000)
Silicon Systems Group [Member]
Business Combination (Textual) [Abstract]
Goodwill $ 1,800,000,000
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Goodwill, Purchased Technology and Other Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Indefinite-lived intangible assets
Goodwill $ 3,939 [1] $ 1,335 [1]
Other Intangible Assets 142 0
Total 4,081 1,335
Silicon Systems Group [Member]
Indefinite-lived intangible assets
Goodwill 2,151 381
Other Intangible Assets 142 0
Total 2,293 381
Applied Global Services [Member]
Indefinite-lived intangible assets
Goodwill 1,027 193
Other Intangible Assets 0 0
Total 1,027 193
Display [Member]
Indefinite-lived intangible assets
Goodwill 116 116
Other Intangible Assets 0 0
Total 116 116
Energy and Environmental Solutions [Member]
Indefinite-lived intangible assets
Goodwill 645 645
Other Intangible Assets 0 0
Total $ 645 $ 645
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Goodwill, Purchased Technology and Other Intangible Assets (Details 1) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Amortized intangible assets
Gross carrying amount $ 2,105 $ 878
Accumulated amortization (783) (667)
Carrying amount 1,322 211
Silicon Systems Group [Member]
Amortized intangible assets
Gross carrying amount 1,552 330
Accumulated amortization (357) (264)
Applied Global Services [Member]
Amortized intangible assets
Gross carrying amount 72 68
Accumulated amortization (58) (51)
Display [Member]
Amortized intangible assets
Gross carrying amount 143 143
Accumulated amortization (130) (127)
Energy and Environmental Solutions [Member]
Amortized intangible assets
Gross carrying amount 338 337
Accumulated amortization (238) (225)
Purchased Technology [Member]
Amortized intangible assets
Gross carrying amount 1,544 553
Accumulated amortization (513) (426)
Carrying amount 1,031 127
Purchased Technology [Member] | Silicon Systems Group [Member]
Amortized intangible assets
Gross carrying amount 1,300 310
Accumulated amortization (334) (256)
Purchased Technology [Member] | Applied Global Services [Member]
Amortized intangible assets
Gross carrying amount 28 28
Accumulated amortization (21) (20)
Purchased Technology [Member] | Display [Member]
Amortized intangible assets
Gross carrying amount 110 110
Accumulated amortization (104) (102)
Purchased Technology [Member] | Energy and Environmental Solutions [Member]
Amortized intangible assets
Gross carrying amount 106 105
Accumulated amortization (54) (48)
Other [Member]
Amortized intangible assets
Gross carrying amount 561 325
Accumulated amortization (270) (241)
Carrying amount 291 84
Other [Member] | Silicon Systems Group [Member]
Amortized intangible assets
Gross carrying amount 252 20
Accumulated amortization (23) (8)
Other [Member] | Applied Global Services [Member]
Amortized intangible assets
Gross carrying amount 44 40
Accumulated amortization (37) (31)
Other [Member] | Display [Member]
Amortized intangible assets
Gross carrying amount 33 33
Accumulated amortization (26) (25)
Other [Member] | Energy and Environmental Solutions [Member]
Amortized intangible assets
Gross carrying amount 232 232
Accumulated amortization $ (184) $ (177)
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Goodwill, Purchased Technology and Other Intangible Assets (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Indefinite-lived Intangible Assets by Segment [Line Items]
Amortization expense $ 55 $ 13 $ 116 $ 27
Silicon Systems Group [Member]
Indefinite-lived Intangible Assets by Segment [Line Items]
Amortization expense 45 3 93 7
Applied Global Services [Member]
Indefinite-lived Intangible Assets by Segment [Line Items]
Amortization expense 2 2 7 4
Display [Member]
Indefinite-lived Intangible Assets by Segment [Line Items]
Amortization expense 2 2 3 4
Energy and Environmental Solutions [Member]
Indefinite-lived Intangible Assets by Segment [Line Items]
Amortization expense $ 6 $ 6 $ 13 $ 12
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Goodwill, Purchased Technology and Other Intangible Assets (Details 3) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Indefinite Lived Intangible Assets By Category [Abstract]
Amortization expense $ 55 $ 13 $ 116 $ 27
Cost of products sold [Member]
Indefinite Lived Intangible Assets By Category [Abstract]
Amortization expense 45 9 97 18
Research, development and engineering [Member]
Indefinite Lived Intangible Assets By Category [Abstract]
Amortization expense 1 0 1 0
Selling, general and administrative [Member]
Indefinite Lived Intangible Assets By Category [Abstract]
Amortization expense $ 9 $ 4 $ 18 $ 9
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Goodwill, Purchased Technology and Other Intangible Assets (Details 4) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Apr. 29, 2012
Future estimated amortization expense
Future estimated amortization expense, 2012 $ 109
Future estimated amortization expense, 2013 209
Future estimated amortization expense, 2014 199
Future estimated amortization expense, 2015 183
Future estimated amortization expense, 2016 174
Future estimated amortization expense, Thereafter 448
Total $ 1,322
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Goodwill, Purchased Technology and Other Intangible Assets (Details Textual) (USD $)
3 Months Ended 6 Months Ended 3 Months Ended 3 Months Ended
Apr. 29, 2012
Apr. 29, 2012
Y
May 01, 2011
Trade Names [Member]
May 01, 2011
Purchased Technology [Member]
Apr. 01, 2012
Energy and Environmental Solutions [Member]
Apr. 01, 2012
Display [Member]
Apr. 29, 2012
Silicon Systems Group [Member]
Goodwill, Purchased Technology and Other Intangible Assets (Textual) [Abstract]
Impairment charges of intangible assets $ 18,000,000 $ 6,000,000
Estimated fair value in excess of carrying value 700,000,000
Percent fair value exceeds carrying value 73.00% 100.00%
Increase in goodwill and other indefinite-lived intangible assets 2,700,000,000
Increase in goodwill 64,000,000 44,000,000
Intangible assets, useful life, minimum (in years) 1
Intangible assets, useful life, maximum (in years) 15
Change in gross carrying amount of the amortized intangible assets $ 1,200,000,000
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Borrowing Facilities and Long-Term Debt (Details) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Schedule of Long term debt
Principal amount $ 1,950 $ 1,951
Less unamortized discount (4) (4)
Total long-term debt 1,946 [1] 1,947 [1]
2.650% Unsecured Senior Notes Due 2016, Interest Payable June 15 and December 15 [Member]
Schedule of Long term debt
Principal amount 400 400
Debt, interest rate, stated percentage 2.65% 2.65%
Debt, interest rate, effective percentage 2.67% 2.67%
Interest Pay Date --06-15 --06-15
Interest Pay Date --12-15 --12-15
7.125% Unsecured Senior Notes Due 2017, Interest Payable April 15 and October 15 [Member]
Schedule of Long term debt
Principal amount 200 200
Debt, interest rate, stated percentage 7.13% 7.13%
Debt, interest rate, effective percentage 7.19% 7.19%
Interest Pay Date --04-15 --04-15
Interest Pay Date --10-15 --10-15
4.300% Unsecured Senior Notes Due 2021, Interest Payable June 15 and December 15 [Member]
Schedule of Long term debt
Principal amount 750 750
Debt, interest rate, stated percentage 4.30% 4.30%
Debt, interest rate, effective percentage 4.33% 4.33%
Interest Pay Date --06-15 --06-15
Interest Pay Date --12-15 --12-15
5.850% Unsecured Senior Notes Due 2041, Interest Payable June 15 and December 15 [Member]
Schedule of Long term debt
Principal amount 600 600
Debt, interest rate, stated percentage 5.85% 5.85%
Debt, interest rate, effective percentage 5.88% 5.88%
Interest Pay Date --06-15 --06-15
Interest Pay Date --12-15 --12-15
Other Long Term Debt [Member]
Schedule of Long term debt
Principal amount $ 0 $ 1
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Borrowing Facilities and Long-Term Debt (Details Textual) (USD $)
Apr. 29, 2012
Oct. 30, 2011
Apr. 29, 2012
Revolving Credit [Member]
Line of Credit Facility [Line Items]
Available revolving credit agreement $ 1,600,000,000 $ 1,500,000,000
Borrowing Facilities and Long Term Debt (Textual) [Abstract]
Revolving credit period 4 years
Expiration of revolving credit period May 2015
Other credit facilities 99,000,000
Outstanding credit facilities $ 0 $ 0
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details) (USD $)
In Millions, unless otherwise specified
Apr. 29, 2012
Oct. 30, 2011
Components of accumulated other comprehensive loss, after-tax basis
Pension liability $ (25) $ (25)
Unrealized gain on investments, net 20 17
Cumulative translation adjustments 12 14
Accumulated other comprehensive income $ 7 [1] $ 6 [1]
[1] Amounts as of April 29, 2012 are unaudited. Amounts as of October 30, 2011 are derived from the October 30, 2011 audited consolidated financial statements.
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 1) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Summary of stock repurchases
Shares of common stock repurchased (in shares) 16 8 34 19
Cost of stock repurchased $ 200 $ 118 $ 400 $ 268
Average price paid per share (in dollars per share) $ 12.33 $ 15.54 $ 11.6 $ 14.48
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 2) (USD $)
In Millions, except Per Share data, unless otherwise specified
0 Months Ended
Mar. 05, 2012
Dec. 06, 2011
Equity [Abstract]
Cash dividend declared (in dollars per share) $ 0.09 $ 0.08
Aggregate cash dividends declared $ 115 $ 103
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 3) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Total share-based compensation and related tax benefits
Share-based compensation $ 43 $ 38 $ 96 $ 72
Tax benefit recognized $ 12 $ 11 $ 27 $ 21
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 4) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation $ 43 $ 38 $ 96 $ 72
Cost of products sold [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation 14 13 27 24
Research, development and engineering [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation 13 12 26 22
Selling, general and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share-based compensation $ 16 $ 13 $ 43 $ 26
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 5) (USD $)
In Millions, except Per Share data, unless otherwise specified
6 Months Ended
Apr. 29, 2012
Stock options
Beginning Balance (in shares) 30
Assumed in Varian acquisition (in shares) 5
Exercised (in shares) (2)
Canceled and forfeited (in shares) (8)
Ending Balance (in shares) 25
Exercisable (in shares) 23
Stock option weighted average exercise price
Beginning Balance (in dollars per share) $ 13.05
Assumed in Varian acquisition (in dollars per share) $ 4.85
Exercised (in dollars per share) $ 6.72
Canceled and forfeited (in dollars per share) $ 16.7
Ending Balance (in dollars per share) $ 10.78
Exercisable (in dollars per share) $ 11.13
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 6) (USD $)
In Millions, except Per Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Apr. 29, 2012
Y
Oct. 30, 2011
Y
Restricted stock units, restricted stock and performance unit activity, Shares
Beginning Balance (in shares) 28
Granted (in shares) 15
Vested (in shares) (7)
Canceled (in shares) (1)
Ending Balance (in shares) 35 28
Weighted Average Grant Date Fair Value
Beginning of Period (in dollars per share) $ 12.64
Granted (in dollars per share) $ 10.69
Vested (in dollars per share) $ 12.86
Canceled (in dollars per share) $ 12.89
Ending Balance (in dollars per share) $ 11.76 $ 12.64
Weighted Average Remaining Contractual Term
Weighted average remaining contractual term (in years) 2.9 2.8
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details 7) (Employee Stock [Member])
3 Months Ended 6 Months Ended
Apr. 29, 2012
Y
May 01, 2011
Y
Apr. 29, 2012
Y
May 01, 2011
Y
Employee Stock [Member]
ESPP:
Dividend yield 2.94% 1.98% 2.94% 1.98%
Expected volatility 33.00% 27.00% 33.00% 27.00%
Risk-free interest rate 0.12% 0.17% 0.12% 0.17%
Expected life (in years) 0.5 0.5 0.5 0.5
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details Textual) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
Y
employee_stock_purchase_plans
May 01, 2011
Mar. 06, 2012
Mar. 05, 2012
Oct. 30, 2011
Stockholders' Equity Comprehensive Income and Share-Based Compensation (Textual) [Abstract]
Amount authorized by Board of directors to repurchase shares $ 3,000,000,000
Period of stock repurchase program 3 years
Number of employee stock purchase plans (in employee stock purchase plans) 2
Total unrecognized compensation expense $ 289,000,000 $ 289,000,000
Weighted average period for unrecognized compensation expense to be recognized (in years) 2.7
Increase in number of shares available for grant (in shares) 125
Number of shares made unavailable for grant (in shares) 76
Number of shares available for grant (in shares) 199 199
Number of shares available for grant under ESPP (in shares) 51 51
Stock options vesting period, minimum (in years) P3Y
Stock options vesting period, maximum (in years) P4Y
Stock options expiration period (in years) 7 years
Stock options granted (in shares) 0 0
Additional performance-based awards to be earned, upon certain levels of achievment (in shares) 1 1
Purchase price in percent of the lower of the fair market value of Applied common stock 85.00% 85.00%
Purchase period for ESPP (in months) 6 months
Weighted average estimated fair value of purchase rights (in dollars per share) $ 11.76 $ 11.76 $ 12.64
Number of shares issued under the ESPP (in shares) 3 3 3 3
Performance-Based Awards Granted in Fiscal 2011 [Member]
Stockholders' Equity Comprehensive Income and Share-Based Compensation (Textual) [Abstract]
Percentage of earned performance-based awards, granted 100.00%
Performance-Based Awards Granted in Fiscal 2010 [Member]
Stockholders' Equity Comprehensive Income and Share-Based Compensation (Textual) [Abstract]
Percentage of earned performance-based awards, granted 82.00%
Percentage of awards that may still be earned 18.00% 18.00%
Employee Stock [Member]
Stockholders' Equity Comprehensive Income and Share-Based Compensation (Textual) [Abstract]
Weighted average estimated fair value of purchase rights (in dollars per share) $ 2.89 3.61 $ 2.89 3.61
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Employee Benefit Plans (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Components of net periodic benefit costs of defined and postretirement benefit plans
Service cost $ 4 $ 4 $ 8 $ 8
Interest cost 3 3 7 7
Expected return on plan assets (3) (3) (6) (6)
Amortization of actuarial loss 1 1 1 1
Net periodic benefit cost $ 5 $ 5 $ 10 $ 10
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Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Income Taxes (Textual) [Abstract]
Effective income tax rate 25.30% 28.70% 25.60% 27.20%
Decrease in unrecognized tax benefits in the next 12 months $ 9 $ 9
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Warranty, Guarantees and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Changes in the warranty reserves
Beginning balance $ 161 $ 173 $ 168 $ 155
Provisions for warranty 33 48 62 99
Consumption of reserves (42) (37) (78) (70)
Ending balance $ 152 $ 184 $ 152 $ 184
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Warranty, Guarantees and Contingencies (Details Textual) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Apr. 29, 2012
Warranty Guarantees And Contingencies (Textual) [Abstract]
Warranty period following installation (in months) 12 months
Maximum potential amount of future payments for letters of credit or other guarantee instruments $ 49
Liability in connection with guarantee arrangements 0
Parent guarantees to banks 188
Applied's environmental liability 9
Insurance receivable for environmental-related expenditures 2
Other Long-term Liabilities [Member]
Warranty Guarantees And Contingencies (Textual) [Abstract]
Applied's environmental liability $ 8
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Industry Segment Operations (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Net sales and operating income (loss) for each reportable segment
Net Sales $ 2,541 $ 2,862 $ 4,730 $ 5,549
Operating Income (loss) 409 677 588 1,351
Silicon Systems Group [Member]
Net sales and operating income (loss) for each reportable segment
Net Sales 1,777 1,453 3,121 2,950
Operating Income (loss) 504 491 775 1,034
Applied Global Services [Member]
Net sales and operating income (loss) for each reportable segment
Net Sales 551 614 1,085 1,181
Operating Income (loss) 109 91 216 176
Display [Member]
Net sales and operating income (loss) for each reportable segment
Net Sales 134 158 238 305
Operating Income (loss) 7 31 12 58
Energy and Environmental Solutions [Member]
Net sales and operating income (loss) for each reportable segment
Net Sales 79 637 286 1,113
Operating Income (loss) (63) 170 (86) 313
Operating Segments [Member]
Net sales and operating income (loss) for each reportable segment
Net Sales 2,541 2,862 4,730 5,549
Operating Income (loss) $ 557 $ 783 $ 917 $ 1,581
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Industry Segment Operations (Detail 1) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Apr. 29, 2012
May 01, 2011
Apr. 29, 2012
May 01, 2011
Reconciliations of total segment operating income to Applied's consolidated operating income (loss)
Corporate and unallocated costs $ (148) $ (126) $ (329) $ (251)
Restructuring charges and asset impairments 0 20 0 21
Income from operations 409 677 588 1,351
Operating Segments [Member]
Reconciliations of total segment operating income to Applied's consolidated operating income (loss)
Income from operations $ 557 $ 783 $ 917 $ 1,581
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Industry Segment Operations (Details 2)
3 Months Ended
Apr. 29, 2012
Samsung Electronics Co., Ltd. [Member]
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]
Accounted net sales in percent 30.00%
Taiwan Semiconductor Manufacturing Company Limited [Member]
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]
Accounted net sales in percent 13.00%
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Industry Segment Operations (Details Textual) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Apr. 29, 2012
Apr. 29, 2012
reportable_segments
May 01, 2011
Energy and Environmental Solutions [Member]
May 01, 2011
Energy and Environmental Solutions [Member]
May 01, 2011
Applied Global Services [Member]
May 01, 2011
Applied Global Services [Member]
Segment Reporting Information [Line Items]
Favorable Adjustment as a result of Global Workforce Reduction $ 8 $ 36
Impairment charges 24 24
Industry Segment Operations (Textual) [Abstract]
Number of reportable segments (in reportable segments) 4
Business acquisition costs not allocated to a segment $ 1 $ 37
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Subsequent Event (Details) (Restructuring Plan [Member], USD $)
In Millions, unless otherwise specified
3 Months Ended
Jul. 29, 2012
May 10, 2012
Minimum [Member]
Subsequent Event [Line Items]
Length of time to implement restructuring plan 12 months
Estimated pre-tax cost of implementing the Restructuring Plan $ 70
Maximum [Member]
Subsequent Event [Line Items]
Number of positions to be impacted 250
Length of time to implement restructuring plan 18 months
Estimated pre-tax cost of implementing the Restructuring Plan $ 100
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