Applied Materials (AMAT) is in a highly competitive market. For this assignment,

Question

Applied Materials (AMAT) is in a highly competitive market. For this assignment, you will need to access their latest Form 10-k for the fiscal year end (FYE) 2016. You can access from their “Investor Relations” link found on their website http://www.appliedmaterials.com/ (Links to an external site.)Links to an external site..

After you have the latest Form 10-k you will need to address the following:

1.With respect to their strategic marketing, AMAT states the following in their Form 10-k.“Because of the highly technical nature of its products, Applied markets and sells products worldwide almost entirely through a direct sales force.” Briefly discuss what does this mean with respect to their strategic marketing as discussed in the 10-k?

2.Research & Development (R&D) is extremely important to any organization and especially in a high tech industry. How much has AMAT spent on R&D for each of the last three years? Has R&D expense increased, decreased, or stayed about the same and what do you think?

3.How many shares of Preferred Stock and Common Stock were issued and outstanding at the end of FYE 2016? What impact has the Treasury Stock had on their outstanding stock?

4.How much was the Basic EPS and how was it computed? How much was EBIT for each of the last three years? Has EBIT increased, decreased, or stayed about the same and what do you think?

Explanation / Answer

1. According to the 10-k report, the “strategic marketing’ can be affected by global and regional economic conditions. The customer demand depends on the market demand and pricing for semiconductors, display technology, and other electronic goods. In addition, the demand depends on factory utilization, capital resources, financing, and government policies. Finally, the end demand for mobile products also affects demand which is affected by seasonality. 10-k reports that because of the technical nature of its products, AMAT sells its products worldwide through a direct sales force.

2. The Research & Development for the last three years are $1.5 billion in 2016, $1.5 billion in 2015, and $1.4 billion in 2014. Even though the total R&D has increased from $1.4 billion in 2014 to $1.5 billion in 2016, in terms of percentage of net sales the R&D has declined. It was 16 percent of net sales in 2014 and has declined to 14 percent in 2016. My opinion is that R&D as a percent has declined.

3. There were no shares of Preferred Stock issued and outstanding at the end of FYE 2016. There were 1,078 million shares issued and outstanding at the end of FYE 2016. The treasury stock at the end of FYE 2016 was 889 million. The treasury stock has reduced the number of common stock issued and outstanding. Please note that treasury stock is those shares that are kept by AMAT, they could have been repurchased or simply not issued.

4. The basic EPS is $1.56. The earnings available to common shareholders were divided by the number of outstanding shares shown on the balance sheet. EBIT for 2016 was $2,152 million, for 2015 was $1,693 million, and for 2014 was $1,520 million. The EBIT has increased during the last three years. I also think that the EBIT has increased during the last three years because during the period the gross profit has increased and so have the sales revenues.

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