UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrantx   Filed by a Party other than the Registrant¨

Check the appropriate box:

Applied Materials, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Michael R. Splinter CHAIRMAN OF THE BOARD OF DIRECTORS PRESIDENT AND CHIEF EXECUTIVE OFFICER

January 27, 201123, 2012

Dear Applied Materials Stockholder:

We cordially invite you to attend Applied Materials’ 20112012 Annual Meeting of Stockholders, which will be held at our corporateSingapore offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054Eight Upper Changi Road North, Singapore 506906 on Tuesday, March 8, 20116, 2012 at 11:8:00 a.m. Singapore time (Monday, March 5, 2012 at 4:00 p.m. Pacific Standard Time.Time). A live audio webcast of the Annual Meeting will be available on our website atwww.appliedmaterials.comhttp://investors.appliedmaterials.com.

At this year’s Annual Meeting, stockholders will be asked to: elect eleven directors; approve the amended and restated Employee Stock Incentive Plan; approve the amended and restated Senior Executive Bonus Plan; approve, on an advisory vote onbasis, the compensation of our named executive compensation; approve an advisory vote on the frequency of holding an advisory vote on executive compensation;officers; and ratify the appointment of KPMG LLP as Applied Materials’ independent registered public accounting firm for the current fiscal year. Additional information about the Annual Meeting iscan be found in the attached Notice of 20112012 Annual Meeting of Stockholders and Proxy Statement.

We are continuing to provide these proxy materials to stockholders primarily over the Internet rather than in paper form. This method of delivery offers our stockholders expedited and convenient access to the information they need, helps to conserve natural resources, and lowers the costs of printing and delivering proxy materials.materials, and helps to conserve natural resources.

Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. Voting your proxy will ensure your representation at the Annual Meeting. We urge you to review carefully the proxy materials and to vote: FOR each of the director nominees; FOR the approval of the amended and restated Employee Stock Incentive Plan; FOR the approval of the amended and restated Senior Executive Bonus Plan; FOR the approval, on an advisory basis, of the compensation of our named executive officers; FOR the option of once every year as the frequency with which stockholders are provided an advisory vote on executive compensation; and FOR ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the current fiscal year.

Thank you for your attention to these important matters and for your continued support of and interest in Applied Materials.

Sincerely,

Michael R. Splinter

NOTICE OF 20112012 ANNUAL MEETING OF STOCKHOLDERS

Tuesday, March 8, 20116, 2012

at 11:8:00 a.m. Pacific StandardSingapore Time

The 20112012 Annual Meeting of Stockholders of Applied Materials, Inc. will be held on Tuesday, March 8, 20116, 2012 at 11:8:00 a.m. Pacific Standard Timelocal time at our corporateSingapore offices at 3050 Bowers Avenue, Building 1, Santa Clara, California 95054Eight Upper Changi Road North, Singapore 506906 to conduct the following items of business:

Stockholders of record who owned shares of Applied Materials common stock at the close of business on January 12, 201111, 2012 are entitled to receive notice of, attend and vote at the Annual Meeting. A complete list of these stockholders will be available at our corporate offices at 3050 Bowers Avenue, Santa Clara, California 95054 during regular business hours for the ten days prior to the Annual Meeting. This list also will be available during the Annual Meeting at the meeting location.location in our Singapore offices at Eight Upper Changi Road North, Singapore 506906. A stockholder may examine the list for any legally valid purpose related to the Annual Meeting.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. If you received notice of how to access the proxy materials via the Internet, a proxy card was not sent to you and you may vote only by telephone or via the Internet. If you received a proxy card and other proxy materials by mail, you may vote by mailing a completed proxy card, by telephone or over the Internet. Your vote must be received by 11:59 p.m. Eastern Standard Time on Monday,Sunday, March 7, 2011.4, 2012. For specific voting instructions, please refer to the information provided in the following Proxy Statement, together with your proxy card or the voting instructions you receive by e-mail or that are provided via the Internet.

Santa Clara, California

January 27, 201123, 2012

PROXY STATEMENT

TABLE OF CONTENTS

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PROXY STATEMENT

Under rules adopted by the SEC, we are continuing to furnish proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On January 27, 2011, we mailed to our stockholders (other than those who had previously requested electronic or paper delivery) a Notice of Internet Availability containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote over the Internet or by telephone.iii

This process is designed to expedite stockholders’ receipt of proxy materials, help conserve natural resources and lower the cost of the Meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

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PROXY STATEMENT

GENERAL INFORMATION

Your proxy is being solicited on executive compensation; and the ratificationbehalf of the appointmentBoard of KPMG LLPDirectors of Applied Materials, Inc., a Delaware corporation. This proxy is for use at Applied Materials’ 2012 Annual Meeting of Stockholders to be held at 8:00 a.m. Singapore time on Tuesday, March 6, 2012, at our Singapore offices at Eight Upper Changi Road North, Singapore 506906.

This Proxy Statement contains important information regarding Applied Materials’ 2012 Annual Meeting of Stockholders, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and voting procedures. These proxy materials are being provided on or about January 23, 2012 to all stockholders of record of Applied as our independent registered public accounting firmof January 11, 2012, the record date for the current fiscal year, Applied’s Board does not intend to bring any other matters to be voted onAnnual Meeting. Stockholders of record who owned Applied common stock at the Meeting. Appliedclose of business on January 11, 2012 are entitled to receive notice of, attend and its Board are not currently aware of any other matters that may properly be presented by others for actionvote at the Annual Meeting. On the record date, there were 1,294,293,003 shares of Applied common stock outstanding.

		are held in the name of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote at the Annual Meeting, you will need to bring to the Annual Meeting a legal proxy from your broker or other nominee authorizing you to vote those shares. Applied Employee Plan Participants.    If you are a participant in Applied’s Employee Savings and Retirement Plan (the “401(k) Plan”), your proxy represents all shares you own through the 401(k) Plan, assuming that your shares are registered in the same name. Your proxy will serve as a voting instruction for the trustee of the 401(k) Plan. If you own shares through the 401(k) Plan and you do not vote, the 401(k) Plan trustee will vote those shares in the same proportion as other 401(k) Plan participants vote their 401(k) Plan shares. If you own shares purchased through Applied’s Employees’ Stock Purchase Plan or Applied’s Stock Purchase Plan for Offshore Employees that are still held by the plans’ recordkeeper and you do not vote these shares, the shares may be voted in accordance with standard brokerage industry practices only on routine matters, as described below under the section entitled “Abstentions and Broker Non-Votes.”
Revoking Your Proxy		You may revoke your proxy at any time before it is voted at the Annual Meeting. To revoke your proxy, you must: •  enter a new vote by telephone or over the Internet by 11:59 p.m. Eastern Standard Time on March 4, 2012; or •  sign and return another proxy card by 11:59 p.m. Eastern Standard Time on March 4, 2012; or •  provide written notice of the revocation to Applied’s Corporate Secretary at: Applied Materials, Inc., Attention: Joseph J. Sweeney, Corporate Secretary, 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054 by 11:59 p.m. Eastern Standard Time on March 4, 2012; or •  attend the Annual Meeting and vote in person.
Quorum Requirement		A majority of the outstanding shares entitled to vote as of the record date must be present at the Annual Meeting to constitute a quorum and in order to conduct business at the Annual Meeting. Your shares are counted as present if you vote in person at the Annual Meeting, by telephone, over the Internet, or by submitting a properly executed proxy card by mail. Abstentions and broker non-votes are counted as present for the purpose of determining a quorum.
Votes Required for the Proposals		Proposal 1—Election of Directors.    Each share of Applied common stock is entitled to one vote on each of the eleven director nominees. Pursuant to our Bylaws, to be elected, a director nominee must receive a majority of the votes cast, meaning the number of votes “for” a director nominee must exceed the number of votes “against” that nominee. There is no cumulative voting with respect to the election of directors. Proposal 2—Approval of Amended and Restated Employee Stock Incentive Plan.    Approval of the amended and restated Employee Stock Incentive Plan requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting. Proposal 3—Approval of Amended and Restated Senior Executive Bonus Plan.    Approval of the amended and restated Senior Executive Bonus Plan requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting.

		Proposal 4—Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers.    Advisory approval of the compensation of our named executive officers requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting. Proposal 5—Ratification of the Appointment of Independent Registered Public Accounting Firm.    Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the current fiscal year requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting.
Voting Instructions		If you are a stockholder of record and return a proxy card but do not provide specific voting instructions, your shares will be voted on the proposals as follows: • “FOR” each of the eleven named nominees for directors; • “FOR” the approval of the amended and restated Employee Stock Incentive Plan; • “FOR” the approval of the amended and restated Senior Executive Bonus Plan; • “FOR” the approval, on an advisory basis, of the compensation of our named executive officers; and • “FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the current fiscal year. If other matters properly come before the Annual Meeting and you do not provide specific voting instructions, your shares will be voted in the discretion of the persons named as proxies.
Abstentions and Broker Non-Votes		A vote to “abstain” on any of the proposals included in this Proxy Statement, except for Proposal 1—Election of Directors, will have the same effect as a vote against the proposal. Abstentions will not have an effect on the election of any director nominee. If your shares are held in street name and you do not instruct your broker on a timely basis on how to vote your shares, your brokerage firm, in its discretion, may either leave your shares unvoted or vote your shares on routine matters. Only the ratification of KPMG LLP as our independent registered public accounting firm is a routine matter. Without your voting instructions, your brokerage firm cannot vote your shares on any other proposal. These unvoted shares, called “broker non-votes,” refer to shares held by brokers who have not received voting instructions from their clients and who do not have discretionary authority to vote on non-routine matters. Broker non-votes are not considered entitled to vote and will not affect the outcome of the vote on these proposals. Broker non-votes will not have an effect on the election of any director nominee.
Voting Confidentiality		Proxies, ballots and voting tabulations are handled on a confidential basis to protect your voting privacy. This information will not be disclosed, except as required by law.
Voting Results		Votes will be tabulated by an independent inspector of elections appointed for the Annual Meeting. Voting results will be announced at the Annual Meeting and will be posted shortly after the Annual Meeting on our website atwww.appliedmaterials.com and remain available there through April 6, 2012. Voting results will also be reported in a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting. You may access the voting results by: • visiting our website atwww.appliedmaterials.com;

		•  contacting our Investor Relations department, toll-free, at 1-800-882-0373; or •  viewing the Current Report on Form 8-K on the SEC’s website atwww.sec.gov.
Electronic Availability of Proxy Materials for 2012 Annual Meeting of Stockholders		In accordance with SEC rules, we are continuing to furnish proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On January 23, 2012, we mailed to our stockholders (other than those who had previously requested electronic or paper delivery) a Notice of Internet Availability containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice of Internet Availability also instructs you on how to vote over the Internet or by telephone. This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
Householding of Proxy Materials		In a further effort to reduce printing costs and postage fees and conserve natural resources, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our proxy materials, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards. If you share an address with another stockholder and received only one set of proxy materials, and would like to request a separate paper copy of these materials, please: (1) go towww.proxyvote.com and follow the instructions provided; (2) send an e-mail message to investor_relations@amat.com with “Request for Proxy Materials” in the subject line and provide your name, address and the control number; or (3) call our Investor Relations department, toll-free, at 1-800-882-0373.
Proxy Solicitation Costs		Applied will bear the entire cost of proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. We have hired Innisfree M&A Incorporated to assist in the distribution and solicitation of proxies. Such solicitations may be made personally or by mail, facsimile, telephone, messenger, or via the Internet. In addition to the estimated proxy solicitation cost of $20,000 plus reasonable out-of-pocket expenses for this service, we will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding the proxy materials to stockholders.

ITEMPROPOSAL 1—ELECTION OF DIRECTORS

Nominees

Applied’s Board of Directors is elected each year at the Annual Meeting of Stockholders. Applied currently has eleven directors. Upon the recommendation of the Corporate Governance and Nominating Committee of the Board, each of the current directors has been nominated by the Board for election at the Annual Meeting and has decided to stand for election.

The eleven nominees receiving the highest number of votes will be elected at the Meeting. In the event a nominee is unable or declines to serve as a director, the proxies will be voted at the Meeting for any nominee who may be designated by the Board to fill the vacancy. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or will decline to serve as a director. If any of the nominees listed below becomes unable to stand for election at the Annual Meeting, the persons named as proxies may vote for any person designated by the Board to replace the nominee. Each director elected at the Annual Meeting will serve until Applied’s 20122013 Annual Meeting of Stockholders and until he or she is succeeded by another qualified director who has been elected, or, if earlier, until his or her death, resignation or removal.

Majority Voting Standard

Under Applied’s Bylaws, in order to be elected, a nominee must receive the votes of a majority of the votes cast with respect to such nominee in uncontested elections, which means the number of votes “for” a nominee must exceed the number of votes “against” that nominee. Abstentions are not counted as votes cast. If an incumbent director receives more “against” than “for” votes, he or she is expected to tender his or her resignation in accordance with our Corporate Governance Guidelines. The Corporate Governance and Nominating Committee will consider the offer of resignation and recommend to the Board the action to be taken, and the Board will publicly disclose its decision as to whether to accept or reject the offered resignation. This policy is discussed further under the section entitled “Corporate Governance—Majority Voting and Resignation Policies.”

The nominees for the Board are as follows:

There is no family relationship among any of the nominees, directors and/or any of Applied’s executive officers. Applied’s executive officers serve at the discretion of the Board. Further information about Applied’s directors, including each of the director nominees, is provided below.

The Board unanimously recommends that you vote “FOR” each nominee.

Directors

Michael R. Splinter has been Applied’sPresident and Chief Executive Officer of Applied since April 2003 and Chairman of the Board of Directors since March 2009 and, a director, President and Chief Executive Officer since April 2003. From 19842009. Prior to April 2003,joining Applied, Mr. Splinter was employed byat Intel Corporation, a manufacturer of chips and computer, networking and communications

products, wherefor 20 years. While at Intel, he was lastheld a number of executive positions, including Executive Vice President and Director of the Sales and Marketing Group. Mr. Splinter previously held various executive positions at Intel, includingand Executive Vice President and General Manager of the Technology and Manufacturing Group. Prior to joining Intel, Mr. Splinter worked for 10 years at Rockwell International. Mr. Splinter is a director of The NASDAQ OMX Group, Inc.

Mr. Splinter hasWith over 35 years of experience working in the technology/information sector, andMr. Splinter brings his leadership and extensive global business, operating, marketing and industry experience to the Board. As Applied’s Chief Executive Officer, he also brings to the Board his strategic vision for the Company, proven management experience and management’s experience with andin-depth understanding of complex industry and global challenges and opportunities, creating a vital link that enables the Board to perform its oversight function with the benefit of management’s key perspectives. Mr. Splinter’s service on the board of The NASDAQ OMX Group provides him with a strongsolid understanding of robustthe importance of good corporate governance practices and broad exposure to a wide range of issues facing companies in diverse industries.

Aart J. de Geus is a co-founder of Synopsys, Inc., a provider of electronic design automation (EDA) software and related services for semiconductor design companies, and currently serves as Chairman of its Board of Directors and Chief Executive Officer. Since 1986, Dr. de Geus has served as a director of and held various positions at Synopsys, including President, Senior Vice President of Engineering and Senior Vice President of Marketing. From 1982 to 1986, Dr. de Geus was employed by the General Electric Company, a global infrastructure, finance and media company, where he was the Manager of the Advanced Computer-Aided Engineering Group.

Dr. de Geus has experience growing Synopsys, which he co-founded in 1986, from a start-up to a well-established publicly-traded company. His nearly 25over-25 years of executive and technological leadership provide the Board with important perspectives on navigating a company through various stages of growth, as well as innovation, management development, and global challenges and opportunities.

Stephen R. Forresthas served as Vice President for Research at the University of Michigan since January 2006, where he also holds faculty appointments as Professor of Electrical Engineering and Computer Science in the College of Engineering, and as Professor of Physics in the College of Literature, Science and the Arts. Dr. Forrest leads the University’s Optoelectronics Components and Materials Group. From 1992 to 2005, Dr. Forrest served in a number of positions at Princeton University, including as Chair of the Electrical Engineering Department, Director of the Center for Photonics and Optoelectronic Materials, and as director of the National Center for Integrated Photonic Technology. Prior to Princeton, Dr. Forrest was a faculty member of the Electrical Engineering and Materials Science Departments at the University of Southern California.

As a distinguished academic leader, Dr. Forrest brings to the Board his extensive knowledge of semiconductor and alternative energy technologies and experience with research and development portfolio management, government policy, technology licensing, and product commercialization. He also has unique insights from his experience with cross-functional endeavors on how to achieve economic transformation through technology. Dr. Forrest has worked closely with industry, government, entrepreneurs, and community leaders to develop businesses focused on alternative energy and other technologies to diversify a state’s economy and increase global competitiveness.

Thomas J. Iannotti has served as Senior Vice President and General Manager, Enterprise Services, for Hewlett-Packard Company, a technology solutions provider to consumers, businesses and institutions globally, sincefrom February 2009.2009 until his retirement in October 2011. From 2002 to January 2009, Mr. Iannotti held various executive positions at Hewlett-Packard, including most recently as Senior Vice President and Managing Director, Enterprise Business Group, Americas. From 1978 to 2002, Mr. Iannotti worked at Digital Equipment Corporation, a vendor of computer systems and software, and at Compaq Computer Corporation, a supplier of personal computing systems, after its acquisition of Digital Equipment Corporation.

Mr. Iannotti has broad and deep industry and technology knowledge, leadership skills and broad-based expertise from his various executive positions at several publicly-traded technology companies for over 30 years,

including in his currentrecent senior management role at Hewlett-Packard. Mr. Iannotti’s experience with service management on a global, regional, and country level, including in Asia and Europe, provides a valuable perspective to Applied’sthe Board.

Susan M. Jamesserved as a partner at Ernst & Young LLP, a global leader in assurance, tax, transaction and advisory services, from 1987 to 2006. Ms. James joined Ernst & Young in 1975 and, following her retirement in 2006, served as a consultant to the firm until December 2009. She also served on the Ernst & Young Americas Executive Board of Directors from January 2002 to June 2006. Ms. James is a certified public accountant (inactive) and a member of the American Institute of Certified Public Accountants. Ms. James currently serves as a member of the boards of directors of Coherent, Inc. and Yahoo! Inc.

Ms. James’ qualificationsJames brings to serve on the Board include her extensive financial and accounting expertise, demonstrated leadership capability and broad experience with global technology companies duringfrom her 35-year career at Ernst & Young. Ms. James’ experience as an independent auditor has provided her with a deep understanding of accounting principles, financial reporting rules and regulations, and knowledge of audit procedures. In addition, as the current Chair of the audit committees of Coherent and Yahoo!, Ms. James brings leadership experience and a valuable perspective to her service as a member of Applied’s Audit Committee.

Alexander A. Karsnerhas served as Chief Executive Officer of Manifest Energy LLC, a clean energy infrastructure development and finance company, since July 2009. From March 2006 to August 2008, he served as Assistant Secretary for Energy Efficiency and Renewable Energy at the U.S. Department of Energy. From April 2002 to March 2006, Mr. Karsner was Managing Director of Enercorp LLC, a private company involved in international project development, management and financing of renewable energy infrastructure. Mr. Karsner has also worked with Tondu Energy Systems of Texas, Wartsila Power Development of Finland and other multi-national energy firms and developers. Mr. Karsner currently serves as a member of the board of directors of Codexis, Inc.

Mr. Karsner brings to the Board experience in, and knowledge of, the energy industry and related public policies. Specifically, Mr. Karsner’s leadership in renewable energy policy, technologies and commercialization, and his expertise in domestic and international energy markets, have enhanced the Board’s perspectives on innovation, strategy, and market diversification. His service on the board of directors of Codexis has further increased Mr. Karsner’s understanding of issues related to clean energy and alternative technologies.

Gerhard H. Parker served as Executive Vice President, New Business Group, of Intel Corporation a manufacturer of chips and computer, networking and communications products, from 1998 until his retirement in May 2001. From 1988 to 1998, Dr. Parker was Senior Vice President of Intel’s Technology and Manufacturing Group. Dr. Parker currently serves as a member of the boards of directors of FEI Company and Lattice Semiconductor Corporation.

Dr. Parker brings to the Board extensive manufacturing, engineering, operational, and strategic experience. In addition, Dr. Parker’s long experience as a senior executive who managed new businesses, worldwide manufacturing, and technology development at Intel contributes to the Board’s ability to oversee these areas.areas at Applied. Dr. Parker’s service on the boards of FEI and Lattice Semiconductor, including his position as Chairman of the Board of FEI, brings to the Board additional expertise on strategy, global challenges and opportunities, and board leadership.

Dennis D. Powell served as an Executive Advisor at Cisco Systems, Inc., a provider of networking products and services, from February 2008 to September 2010. He served as Cisco’s Chief Financial Officer from May 2003 to February 2008. In2008, and in addition, to that position, Mr. Powell also served as an Executive Vice President since Augustfrom 2007 to 2008 and a Senior Vice President since May 2003.from 2003 to 2007. Since joining Cisco in 1997, Mr. Powell also served as Senior Vice President, Corporate Finance and Vice President, Corporate Controller. Before joining Cisco, Mr. Powell was employed by Coopers & Lybrand LLP, an accounting firm, for 26 years, where he was last a senior partner. Mr. Powell currently serves as a member of the board of directors of Intuit, Inc. and VMware, Inc.

Mr. Powell brings to the Board substantial financial and accounting expertise and executive management experience acquired in the course of managing the financial strategy and operations as the Chief Financial Officer of Cisco, and working as an independent auditor at Coopers & Lybrand for 26 years. Mr. Powell’s current service as a director and member of the audit committees of Intuit and VMware broadens his insights on corporate governance and enhances his perspective as Chair of Applied’s Audit Committee.

Willem P. Roelandts served as Chairman of the Board of Directors of Xilinx, Inc., a supplier of programmable logic solutions, from July 2003 to February 2009, and as a director from January 1996 to August 2009. Mr. Roelandts served as President and Chief Executive Officer of Xilinx from January 1996 to January 2008. Prior to joining Xilinx, Mr. Roelandts held various executive positions during a 29-year career at Hewlett-Packard Company, where he last served as Senior Vice President and General Manager of Computer Systems Organizations. Mr. Roelandts currently serves as a director of Aruba Networks, Inc. He is also a member of the Advisory Board of the Center for Science, Technology and Society at Santa Clara University.

Mr. Roelandts has significant expertise with strategic and line management, engineering innovation, market diversification, and executive development, having been the President, Chief Executive Officer and on the boarda director of directors at Xilinx for 13 years, and serving in various executive positions at Hewlett-Packard for almost 30 years. This extensive executive management and operational experience on a global basis has given him a deep understanding of what produces success at companies that are driven by innovation, research, and development, which provides a valuable perspective to our Board. His current service as a director and member of the compensation committee of Aruba Networks further enhances his perspective.

James E. Rogershas served as Chairman since 2007, and President, Chief Executive Officer and a member of the Board of Directors since 2006, of Duke Energy Corporation, an electric power company that supplies and delivers electricity and natural gas service. Mr. Rogers was Chairman and Chief Executive Officer of Cinergy Corp., a provider of electric and gas service, from 1994 until its merger with Duke Energy in 2006. He was Chairman, President and Chief Executive Officer of PSI Energy, Inc., a provider of electric and gas service, from 1988 until 1994. Mr. Rogers served as a director of Fifth Third Bancorp from 1995 to 2009 and currently serves as a director of CIGNA Corporation.

Mr. Rogers brings to the Board his substantial global and leadership experience, as well as broad knowledge and experience in the energy field, from his more than 20 years as the chief executive officer of utility companies, including as the current Chairman, President and Chief Executive Officer of Duke Energy, which operates in the highly-regulated energy industry. In addition, Mr. Rogers’ current service as Chair of the compensation committee of Cigna,CIGNA, as well as his past service on other companies’ compensation committees, contributes to his role as a member of Applied’s Human Resources and Compensation Committee.

Robert H. Swanhas served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc., a provider of online marketplaces and payment services, since March 2006. From 2003 to March 2006, Mr. Swan was Chief Financial Officer and Executive Vice President of Electronic Data Systems Corporation.Corporation, a technology services company. Mr. Swan also served as Executive Vice President and Chief Financial Officer of TRW, Inc., a global manufacturing and service company, from 2001 to 2002 and held various executive positions at Webvan Group, Inc., an online grocery delivery service, from 1999 to 2001. Mr. Swan spent the first 15 years of his career at the General Electric Company in various roles.

Mr. Swan has significant financial expertise and global financial management experience from his many years of managing finance organizations as the current Chief Financial Officer of eBay and in his prior positions at large, global public companies. In addition, Mr. Swan has substantial management and leadership skills in his role at eBay, where he is responsible for all aspects of eBay’s finance function, including controllership, financial planning and analysis, tax, treasury, audit, mergers and acquisitions, and investor relations. His financial expertise and management and leadership skills are valuable to the Board and to the Audit Committee.

Chairman Emeritus

James C. Morgan has served as Applied’s Chairman Emeritus since March 2009. Mr. Morgan spent more than 31 years as a director and employee of Applied, including over 20 years as Chairman of the Board. Mr. Morgan first joined Applied in 1976 and served as Chief Executive Officer from 1977 to 2003. As Chairman Emeritus, Mr. Morgan is invited to attend Board and committee meetings, but he does not have voting rights and does not receive any retainer or meeting fees.

Corporate Governance

Corporate Governance Guidelines.    Applied has adoptedApplied’s Corporate Governance Guidelines that describe, among other matters, the role and functions of the Board, the responsibilities of various Board committees, and the procedures for reporting concerns to the Board. These guidelines are available on our website, along with other important corporate governance materials, atwww.appliedmaterials.com/investors/corporate_governance.htmlcorporate-governance.

The Corporate Governance Guidelines provide, among other things, that:

As the operation of the Board is a dynamic process, the Board regularly reviews changing legal and regulatory requirements, evolving best practices and other developments and may modify the Corporate Governance Guidelines from time to time as it deems appropriate.

Director Nominations.    The Corporate Governance and Nominating Committee of the Board considers candidates for director nominees. This committee may retain recruiting professionals to assist in identifying and evaluating candidates for director nominees. As set forth in the Corporate Governance Guidelines, the Corporate Governance and Nominating Committee strives for a mix of skills and diverse (functional, cultural and geographic) perspectives that is effective for the Board. Every effort is made to complement and supplement the skills of the existing Board and strengthen any identified areas for improvement. Based on the Corporate Governance and Nominating Committee’s recommendation, the Board selects director nominees and recommends them for election by Applied’s stockholders, and also fills any vacancies that may arise between Annual Meetings of Stockholders. Directors added to the Board to fill vacancies are generally recommended for

election at the next Annual Meeting of Stockholders. The Board also may consider recommendations of director candidates from other sources. In selecting the director nominees, the Board assesses the independence, character and acumen of candidates and endeavors to establish a diversity of background and experience in a number of areas of core competency, includingincluding: business judgment; management; accounting and finance; knowledge of the industries (including technologies and markets) in which the Company operates; understanding of manufacturing and services; leadership; strategic vision; knowledge of international markets; marketing; crisis/risk management; research and development; government; and other areas relevant to the Company’s business.

Additional criteria include a candidate’s personal and professional ethics, integrity and values; willingness to devote sufficient time to prepare for and attend meetings and participate effectively on the Board; and commitment to representing the long-term interests of Applied’s stockholders.

The Corporate Governance and Nominating Committee, or a screening committee of the Board, evaluates and interviews potential Board candidates. All members of the Board may interview the final candidate(s). The Corporate Governance and Nominating Committee also will consider potential director candidates recommended by stockholders. The same identification and evaluation procedures apply to all candidates for director nomination, including candidates submitted by stockholders.

If you would like the Corporate Governance and Nominating Committee to consider a prospective candidate, in accordance with our Bylaws, please submit the candidate’s name and qualifications to: Joseph J. Sweeney, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054.

Majority Voting Policy.and Resignation Policies.    Under Applied’s Bylaws, in order to be elected, a director nominee must receive the votes of a majority of the votes cast with respect to such nominee in uncontested elections, meaning the number of votes “for” a director nominee must exceed the number of votes “against” that nominee. The Corporate Governance Guidelines include a majority votingresignation policy for the election of directors. This policydirectors that states that in the event that a nominee foran incumbent director in an uncontested election receives more “withhold”“against” than “for” votes, forhe or she is expected to tender his or her election than “for” votes, the director must promptly submit his or her offer to resign to the Boardresignation after certification of the stockholder vote. The Board’s Corporate Governance and Nominating Committee, composed entirely of independent directors, will evaluateconsider the offer of resignation, taking into consideration all factors it deems relevant, and make a recommendationrecommend to the Board with respectthe action to the proffered resignation.be taken. The Board must take action on the recommendation within 90 days following certification of the stockholder vote. No director who offers to resigntenders an offer of resignation under this policy may participate in the vote on the Corporate Governance and Nominating Committee’s recommendation or the Board’s considerationdetermination of whether to accept the matter.resignation offer. Applied will publicly disclose the Board’s decision including, asif applicable, the reasons for rejecting an offer to resign.

The Corporate Governance Guidelines also include a policy that upon a change in a director’s principal occupation or retirement, he or she is expected to offer to resign. The Corporate Governance and Nominating Committee will review the appropriateness of the director’s continued Board membership and recommend to the Board the action to be taken. In accordance with this policy, following his retirement from his position as Senior Vice President and General Manager, Enterprise Services at Hewlett-Packard Company, Mr. Iannotti offered to resign from the Board. The Corporate Governance and Nominating Committee reviewed the appropriateness of Mr. Iannotti’s continued service on the Board and recommended to the Board that Mr. Iannotti continue to serve on the Board of Directors. The Board requested that Mr. Iannotti remain on the Board, and he agreed.

Standards of Business Conduct.    For many years, Applied has had Standards of Business Conduct whichthat embody our commitment to ethical and legal business practices. The Board expects Applied’s directors, officers and all other members of its workforce to act ethically at all times and to acknowledge their commitment to Applied’s Standards of Business Conduct. The Standards of Business Conduct are available on our website atwww.appliedmaterials.com/investors/corporate-governance/standards.

Stock Ownership Guidelines.    The Board has adopted stock ownership guidelines to more closely align the interests of our directors and named executive officers with those of our stockholders. The guidelines provide

that non-employee directors should each maintain an investment in Applied stock with a value of at least $300,000.$325,000. Applied’s Chief Executive Officer and Chairman of the Board should maintain an investment in Applied stock that is equal to at least five times his or her annual base salary. Our named executive officers other than the Chief Executive Officer should each maintain an investment in Applied stock that is equal to at least three times his or her annual base salary. In determining whether the required investment levels have been met, shares are valued using the closing price of Applied stock on the date(s) acquired. In each case and unless an exception is made by the Board’s Human Resources and Compensation Committee, such investment levels should be achieved no later than five years following a director’s or officer’s initial election or appointment.

Stockholder Communications.    Any stockholder wishing to communicate with any of our directors regarding Applied may write to the director, c/o Joseph J. Sweeney, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054. The Corporate Secretary will forward these communications directly to the director(s). The independent directors of the Board review and approve the stockholder communication process periodically in an effort to enable an effective method by which stockholders can communicate with the Board.

Director Independence

Applied has adopted standards for director independence that correspond to Nasdaq listing standards and SEC rules. An “independent director” means a person who is not an officer or employee of Applied or its

subsidiaries, or any other individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To be considered independent, the Board must affirmatively determine that neither the director, nor any member of his or her immediate family, has had any direct or indirect material relationship with Applied within the previous three years. In addition, to be considered “independent” under SEC rules, each member of the Audit Committee may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from Applied, other than compensation for his or her services as a director.

The Board considered relationships, transactions and/or arrangements with each of the directors and concluded that none of the non-employee directors, or any of his or her immediate family members, has any relationship with Applied that would impair his or her independence. The Board has determined that each member of the Board, other than Mr. Splinter, is an independent director under applicable Nasdaq listing standards and SEC rules. Mr. Splinter does not meet the independence standards because he is an employee of Applied.

In addition, the Board has also determined that:

Board Leadership Structure

Under our Corporate Governance Guidelines, the roles of Chairman and Chief Executive Officer may be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon the needs of the Company and the Board’s assessment of its leadership from time to time. The Board believes that, at this time, it is in the best interests of Applied and its stockholders for Mr. Splinter to serve as the Chairman and Chief Executive Officer, and for Mr. Roelandts, an independent director, to serve as Lead Independent Director. Mr. Splinter does not serve on any committees of the Board.

Combining the roles of Chairman and Chief Executive Officer promotes unified leadership and direction for Applied, allowing for operational effectiveness and efficiencies that ensurefacilitate the implementation of strategic initiatives and business plans to optimize stockholder value. Mr. Splinter’s industry and management experience enables him to understand the priorities and perspectiveperspectives of Applied’s customers, suppliers and workforce, as well as the competitive landscape. In addition, Mr. Splinter has a strategic vision for Applied and an understanding of the complex industry and global challenges and opportunities, creating a vital link that enables the Board to perform its oversight function with the benefit of management’s key perspectives.

The Board believes the combined role of Chairman and Chief Executive Officer, together with the role of the Lead Independent Director, provide an appropriate balance in Applied’s leadership. The Lead Independent Director helps ensure a strong, independent and active Board. The Lead Independent Director presides over executive sessions of independent directors without the presence of the non-independent directors or members of Applied’s management at least twice per year during regularly scheduled Board meetings and otherwise from time to time as deemed necessary or appropriate. The Lead Independent Director regularly communicates with other directors between scheduled Board meetings. The Lead Independent Director also has the authority to call meetings of the independent directors and is available for consultation or direct communication. The Board, including each of its committees, also has complete and open access to any member of management and the authority to retain independent advisors as the Board or such committees deem appropriate. In addition, theall members of the Audit Committee, the Corporate Governance and Nominating Committee, and the Human Resources and Compensation Committee are independent directors, and the committee chairs have authority to hold executive sessions without management and non-independent directors present.

Board’s Role in Risk Oversight

Applied is subject to a variety of risks, which generally include any undesired event, circumstance or outcome that could affect Applied’s ability to achieve its objectives or adversely impact Applied’s business, operations or financial condition. Some risks can be readily perceived and even quantified, while others are unexpected or unforeseeable. Risks can be external, such as those arising from the macroeconomic or industry environment, government policies or regulations, competitors’ activities, and natural disasters. Alternatively, risks can arise as a result of the Company’s business and financial activities, operations or financial activities.strategies.

Applied’s management has day-to-day responsibility for identifying risks including implementing suitable mitigating processes and controls; assessing risksthem in relation to Company strategies and objectives; implementing suitable risk mitigation plans, processes and controls; and appropriately managing risks in a manner that serves the best interests of Applied, its stockholders, and other stakeholders. Applied’s management is currently developing an enterprise risk management program to enhance its existing systems and processes and to further strengthen its ability to identify, assess, and mitigate risks on a Company-wide basis.

In addition to its general oversight of management, Applied’sOur Board of Directors is responsible for overseeing major risks facing the Company and reviewing management plans for their mitigation. Generally, various committees of Applied’s Board of Directors oversee risks associated with their respective areas of responsibility and expertise. For example, in carrying out its oversight of risks related to financial matters, our Audit Committee oversees, reviews and discusses with management, the Internal Auditor and the independent accountants, Applied’s major risk exposures and the steps management has taken to monitor and mitigate those exposures. Our Human Resources and Compensation Committee oversees risks associated with Applied’s compensation policies, plans and practices. Our Corporate Governance and Nominating Committee oversees the management of risks associated withrelated to corporate governance matters, including director independence and board composition and organization.

Applied has implemented an enterprise risk management program for the purpose of providing an enterprise-wide perspective on the Company’s compliance, financial, operational, and strategic risks, with the objective of identifying and mitigating key risks. Our Audit Committee, which is responsible for overseeing this enterprise risk management program, reviews quarterly with management the activities under such program, including the identification of the major risks facing the Company. These identified risks are then reported to the Board, which in turn delegates oversight responsibility for them to the respective Board committee(s) in whose area of responsibility and expertise the risk falls.

Senior management and other employees report to the Board and relevant committees from time to time on risk-related issues. Our Chief Executive Officer and Chief Financial Officer report on certain risks and exposures relating to all or part of the Company; heads of our principal business units and other members of senior management report on the risks and exposures associated with their respective areas of responsibility; and the General Counsel reviews risks related to legal, compliance and regulatory matters. The full Board receives a comprehensive report prepared annually by the finance and legal organizations that identifies risk exposures and associated business processes to manage those risks.Applied’s management and other employees with responsibilities in a particular area review and contribute to sections of this report that relate to the risks and risk controls associated with that area. The Audit Committee reviews and discusses matters covered in this report.

Risk Assessment of Compensation Programs

Applied has determined that its compensation policies, plans and practices are appropriately balanced and do not create risks that are reasonably likely to have a material adverse effect on the Company. To make this determination, Applied’s management reviewed the compensation policies, plans and practices for its executive officers, as well as for all other employees. Applied identified its global policies, plans and practices that: covered the Company’s executive officers as well as the global employee population; were structured differently from those of other business units; or represented a significant portion of the Company’s compensation expense. The Company thenNext, management assessed the following features of these policies, plans and practices: design, payment methodology, potential payment volatility, relationship to the Company’s financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Management then reviewed with the Human Resources and Compensation Committee the findings of this assessment.

Based on this review, the Company believes that its compensation policies, plans and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Moreover, Applied has in place various controls that mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and a clawback policy that enables the recovery of certain incentive compensation payments in certain circumstances.

Board and Committee Meetings

The Board met sevensix times in fiscal 2011, during fiscal 2010. Eachwhich each director attended at least 75% of all Board and applicable committee meetings held during his or her term as a member of the Board during fiscal 2010.Board. Applied’s policy is to strongly encourage its Board members to attend the Annual Meeting of Stockholders, and all who were serving as Board members at that time, except for Mr. Iannotti, attended Applied’s 20102011 Annual Meeting of Stockholders.

The Board has standing Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees. In addition, members of the Board also serve on one or more of the Strategy, Investment, and Stockholder Rights and Strategy Committees, which are described in Applied’s Corporate Governance Guidelines.

Each of the Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees has a written charter approved by the Board that is reviewed regularly by the respective committees, which may recommend appropriate changes for approval by the Board. Copies of the current amended and restated charters for the Audit, Human Resources and Compensation, and Corporate Governance and Nominating Committees can be found on our website atwww.appliedmaterials.com/investors/corporate-governance. The primary functions of each of these committees are described in the tables below.

Human Resources and Compensation Committee		Primary Functions		Number of Meetings Held in Fiscal 20102011
Members:   Aart J. de Geus Thomas J. Iannotti Alexander A. Karsner* Willem P. Roelandts+ James E. Rogers		•    oversee human resources programs, compensation and benefits matters •    evaluate and oversee Applied���sApplied’s primary strategies for employee and executive development •    review matters relating to management succession and executive organization development •    determine compensation policies applicable to Applied’s executive officers and all other employees •    determine the compensation of the Chief Executive Officer and Applied’s other executive officers •    administer the Senior Executive Bonus Plan •    oversee significant employee benefits programs, policies and plans relating to Applied’s employees and executives •   oversee human resources programs, compensation and benefits matters •    adopt, amend and oversee the administration of all equity-related incentive plans, senior executive bonus plans and major retirement and deferred compensation programs •    review and approve any employment, severance and/or change-in-control arrangements for Applied’s executive officers •    review and consider compensation policies and/or practices as they relate to risk management practices and/or risk-taking incentives •    review matters relating to management succession and executive organization development •   approve the compensation of the members of the Board •    review and consult with Applied’s management regarding the Compensation Discussion and Analysis section, and recommend to the Board to approve the inclusion of such section in Applied’s proxy statement for each Annual Meeting of Stockholders •    prepare the Human Resources and Compensation Committee Report that is included in Applied’s proxy statement for each Annual Meeting of Stockholders •    in conjunction with the Corporate Governance and Nominating Committee, review the stock holdings of non-employee directors and executive officers relative to the Company’s stock ownership guidelines •    review annually the Human Resources and Compensation Committee Charter			5	4

Corporate Governance and Nominating Committee		Primary Functions		Number of Meetings Held in Fiscal 20102011
Members:   Thomas J. Iannotti Susan M. James Dennis D. Powell Willem P. Roelandts+		•     oversee the composition, structure and evaluation of the Board and its committees, including overseeing an annual self-evaluation process of the Board, its committees, and individual directors •     identify qualified candidates for election to the Board •     establish procedures for director candidate nomination and evaluation •     monitor the independence of the Board •     develop, maintain and oversee implementation of Applied’s Corporate Governance Guidelines •     conduct a periodic review of Applied’s succession planning process and assist the Board in evaluating this process •     review any proposals submitted by stockholders for action at the Annual Meeting of Stockholders and make recommendations to the Board regarding action to be taken in response to each such proposal •     review Applied’s corporate governance policies and recommend to the Board modifications to the policies as appropriate •     consider director resignations and recommend appropriate action to the Board in accordance with Applied’s majority voting policy •     in conjunction with the Human Resources and Compensation Committee, review the stock holdings of non-employee directors and executive officers relative to the Company’s stock ownership guidelines •     review annually the Corporate Governance and Nominating Committee Charter			4

Compensation of Directors

Retainer and Meeting Fees

Directors who are employees of Applied do not receive any additional compensation for their service as directors. During fiscal 2010,2011, Applied’s non-employee directors each received an annual retainer of $65,000, which was paid in quarterly installments, and $2,000 per meeting for attendance at Board committee meetings (but not for meetings of the full Board). Each non-employee director who serves for less than the full fiscal year receives a pro-rated amount of the annual retainer based on the portion of the fiscal year the director served. ChairpersonsThe Chair of the Audit Committee received an additional $20,000 per year. Chairs of the Corporate Governance and Nominating Committee and the Strategy Committee each received an additional $10,000 per year, and the Chairpersonyear. The Chair of the Human Resources and Compensation Committee and the Lead Independent Director each received an additional $15,000 per year. The Chairperson of the Audit Committee received an additional $20,000 per year. IfIn fiscal 2011, if a non-employee director holdsheld more than one committee chair position, or iswas the Lead Independent Director and a chair of a committee, he or she will receivereceived only the annual retainer for the single, highest-paying position held. Board compensation levels have not changedBeginning with fiscal 2012, a non-employee director will receive retainers for fiscal 2011.all committee chair and Lead Independent Director positions held by him or her, rather than receiving a retainer for only the single, highest-paying position.

Cash compensation for non-employee directors for fiscal 20102011 is set forth in the table below.

In addition to the retainer and meeting fees described above, non-employee directors are reimbursed for travel and other reasonable out-of-pocket expenses related to attendance at Board and committee meetings, business events on behalf of Applied, and seminars and programs on subjects related to their responsibilities.

Charitable Matching Contributions

In December 2010, the Human Resources and Compensation Committee approved the participation of non-employeeNon-employee directors are eligible to participate in theThe Applied Materials Foundation Matching Gift Program, under which the Foundation annually will match up to $2,000 of a non-employee directors’ contributionsdirector’s donations to eligible non-profit and educational organizations of up to $2,000 annually per director.organizations. Non-employee directors are subject to the same maximum matching amount and other terms as those for Applied’s employees.

Equity Compensation

Non-Employee Director Share Purchase Plan. Under the Non-Employee Director Share Purchase Plan, Applied’s non-employee directors annually may elect to receive shares of Applied common stock in lieu of the retainers and/or meeting fees that otherwise would be payable to them in cash for their service on the Board. If directors make this election, quarterly retainers otherwise payable in cash are converted into whole shares of Applied common stock based on 100% of the fair market value of a share on the day of the regularly-scheduled meeting of the Board (or on the final day of a meeting that takes place over multiple days). Meeting fees otherwise payable in cash are converted into whole shares of Applied common stock based on 100% of the fair market value of a share on the day of the committee meeting (or on the final day of a meeting that takes place over multiple days). The balance of any foregone retainer and/or meeting fees not payable in whole shares is paid in cash. Shares issued to participating directors under this plan are fully vested and taxable, and Applied does not discount the purchase price of the shares.

Performance Shares.Shares and Restricted Stock Units. Non-employee directors participate in one equity compensation plan, the Employee Stock Incentive Plan, which provides for the following automatic, non-discretionary grants of performance shares (also called “restricted stock units”) to each of Applied’s non-employee directors:directors. During fiscal 2011, these grants were made in the form of performance shares. If the amended and restated Employee Stock Incentive Plan is approved by our stockholders at the Annual Meeting, these grants will be made in the form of restricted stock units (which for all material purposes essentially are identical to performance shares under the existing plan). The automatic, non-discretionary grants to each of Applied’s non-employee directors consist of:

Annual Meeting) (rounded down to the nearest whole share) equal to $200,000, divided by 100% of the fair market value of a share of Applied common stock on the date of grant (“Annual Grant”); and

share) equals $200,000, divided by 100% of the fair market value of a share of Applied common stock on the date of grant, pro-rated to reflect the period starting with the day of initial appointment or election and ending on the day of the next Annual Meeting of Stockholders. A non-employee director who is initially appointed or elected to the Board on the day of an Annual Meeting of Stockholders will not receive an Initial Grant, but instead will receive the Annual Grant described above.

Grants of performance shares made to non-employee directors during fiscal 20102011 were as follows:

The BoardHuman Resources and theCompensation Committee of our Board may change the number of performance shares (restricted stock units if the amended and restated Employee Stock Incentive Plan is approved at the Annual Meeting) granted to non-employee directors under the Employee Stock Incentive Plan in the future. PerformanceUnder the current plan, performance shares granted to non-employee directors before fiscal 2009 and Initial Grants made in fiscal 2009 or later are scheduled to vest in four equal, annual installments beginning one year after the date of grant, generally subject toonly if the non-employee directors’ continued servicedirector remains on the Board.Board through the scheduled vesting date. Annual Grants of performance shares made in fiscal 2009 or later are scheduled to vest in four equal, annual installments beginning on March 1 of the year following the year of grant, generally subject toonly if the non-employee director’s continued servicedirector remains on the Board.Board through the scheduled vesting date.

The vesting of performance shares granted before fiscal 2009 will be accelerated in full upon a non-employee director’s death. The vesting of performance shares granted in fiscal 2009 or later will be continued or accelerated upon a non-employee director’s termination of service on the Board due to eligible retirement, disability or death. In addition, in order to encourage long-term ownership of Applied’s common stock, with respect to performance share grants made in fiscal 2009 or later, non-employee directors may elect, in advance, to defer the receipt of shares of Applied common stock they would otherwise receive upon vesting of the performance shares until their termination of service.service on the Board. Messrs. Rogers and Swan and Ms. James made such election to defer the receipt of the shares of Applied common stock they would otherwise receive upon vesting of the performance shares granted in fiscal 2010.2011.

If the amended and restated Employee Stock Incentive Plan is approved by our stockholders at the Annual Meeting, future Initial and Annual Grants, including those made on the date of the Annual Meeting, will be scheduled to vest in full on the earlier of: March 1 of the year following the year of grant or the date of the next annual meeting of stockholders, generally only if the non-employee director remains on the Board through the scheduled vesting date. The vesting of these future Initial Grants and Annual Grants will be accelerated in full upon a non-employee director’s termination of service on the Board due to disability or death. In addition, upon a change of control of Applied, the vesting of each outstanding award held by a non-employee director that was granted on or after the date of the Annual Meeting will accelerate in full if the director ceases to be a non-employee director (and does not become a member of the board of directors of any successor corporation or its parent). The accelerated vesting described in the prior sentence will not apply if the applicable award agreement specifically states that it will not apply or if the non-employee director’s service on the Board is terminated due to his or her death or disability. Proposed changes to the vesting schedule of Initial and Annual Grants are described in more detail in “Proposal 2—Approval of Amended and Restated Employee Stock Incentive Plan.” The ability to defer receipt of the shares of Applied common stock that non-employee directors would otherwise receive upon vesting of the restricted stock units will remain in place under the amended and restated Employee Stock Incentive Plan.

The following table shows compensation information for Applied’s current and former non-employee directors for fiscal 2010.2011.

Director Compensation

For Fiscal 20102011

Applied’s Chairman of the Board, Mr. Splinter, is also Applied’s President and Chief Executive Officer, and therefore he did not receive theany retainer or meeting fees, paid, or any performance shares automatically granted to non-employee directors, in fiscal 2010.2011. Fiscal 20102011 compensation information for Mr. Splinter can be found in the Summary Compensation Table.Table on page 66.

ITEM 2—PROPOSAL 2—APPROVAL OF AMENDED AND RESTATED

EMPLOYEE STOCK INCENTIVE PLAN

Reason for the Amendment and Restatement

We are asking stockholders to approve the amended and restated Employee Stock Incentive Plan (the “Stock Plan”) so that we may continue to achieve our goals of attracting, motivating and retaining our employees through grants of equity awards, as well as receive a federal income tax deduction for any compensation paid under the Stock Plan that constitutes “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code (“Section 162(m)”). The Human Resources and Compensation Committee (the “Committee”) of our Board of Directors has approved the amended and restated Stock Plan, subject to the approval of our stockholders at the Annual Meeting.

We strongly believe that the approval of the amended and restated Stock Plan is essential to our continued success. We use equity awards to motivate high levels of performance, and to align the interests of our employees and stockholders by giving employees the perspective of an owner with an equity stake in the Company. We believe that equity awards are a competitive necessity in the high-technology industry, and are essential to recruiting and retaining the highly qualified technical and other key employees who help the Company meet its goals, as well as rewarding and encouraging current employees. We believe that the ability to grant equity awards is important to Applied’s future success.

The Stock Plan is also designed to allow Applied to take a full federal income tax deduction for the compensation paid to our executive officers in connection with certain awards granted under the plan.

Changes in the Amended and Restated Stock Plan

The Stock Plan last was approved by stockholders at our 2007 Annual Meeting of Stockholders. The following is a summary of the material changes that are contained in the amended and restated Stock Plan as compared to the existing Stock Plan. Please also read the summary of the principal features of the amended and restated Stock Plan below.

Required Vote

Approval of the amended and restated Stock Plan requires the affirmative vote of the holders of a majority of shares present, in person or by proxy, and entitled to vote at the Annual Meeting. If stockholders approve the amended and restated Stock Plan, it will replace the existing Stock Plan.

Key Corporate Governance Practices in the Stock Plan

The amended and restated Stock Plan includes a number of provisions that we believe promote good corporate governance practices and reinforce the alignment between our equity compensation arrangements and the interests of our stockholders, including:

•

Minimum Vesting Requirements.    All equity awards, except for awards of stock options and/or stock appreciation rights and the automatic, non-discretionary awards to our non-employee directors, made under the amended and restated Stock Plan are required to meet minimum vesting requirements. Awards that are not performance-based and awards that are performance-based must have vesting periods of at least three years and one year, respectively, subject to certain limited exceptions. A small percentage of awards also may be excepted from these requirements, as discussed below.

Key Information

If stockholders approve the amended and restated Stock Plan, the total number of shares available for issuance will be approximately 200,000,000, which pool will be reduced by two (2) shares for every full value award granted after the Annual Meeting and one (1) share for every stock option or stock appreciation right granted. Specifically, if we grant only full value awards under the amended and restated Stock Plan, only approximately 100,000,000 shares can be issued from the initial share reserve, not the approximately 200,000,000 shares described above. If stockholders do not approve the amended and restated Stock Plan, we may not have an adequate number of shares available for future equity awards and may not be able to effectively recruit new employees, motivate current employees or operate our equity compensation program.

The following table shows the number of outstanding and available shares, by plan, before and after stockholder approval (assuming a total of 200,000,000 shares are available for issuance after approval) and the total overhang as of January 15, 2012:

The following table includes information regarding outstanding equity awards and shares available for future awards under all of our equity compensation plans as of January 15, 2012 (and without giving effect to any approval of the amended and restated Stock Plan under this proposal):

As shown in the following table, our three-year average annual burn rate has been 2.20%, which is well below the Institutional Shareholder Services (“ISS”) burn rate cap of 5.83% that applies to our industry for 2012.

Description of the Amended and Restated Stock Plan

The following is a summary of the principal features of the amended and restated Stock Plan, as approved by the Committee and subject to stockholder approval at the Annual Meeting. However, this summary is not a complete description of all of the provisions of the amended and restated Stock Plan, and is qualified in its entirety by reference to the terms of the amended and restated Stock Plan, which has been filed with the SEC as Appendix A to this Proxy Statement, and a copy of which is available upon request to the Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054.

Background and Purpose of the Stock Plan

The amended and restated Stock Plan permits the grant of the following types of incentive awards: (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) performance units, (5) performance shares, and (6) restricted stock units (each, an “Award”). The Stock Plan is intended to attract, motivate, and retain (a) employees of Applied and its subsidiaries, (b) consultants who provide significant services to Applied and its subsidiaries, and (c) directors of Applied who are employees of neither Applied nor any subsidiary. The Stock Plan also is designed to encourage stock ownership by employees, directors, and consultants, thereby aligning their interests with those of Applied’s stockholders, and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m).

Administration of the Stock Plan

The Stock Plan is administered by the Committee, which is appointed by the Board. The Stock Plan requires that the Committee be comprised of at least two directors who qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934, and as “outside directors” under Section 162(m) (so that Applied may be entitled to a federal tax deduction for certain compensation paid under the plan).

Subject to the terms of the Stock Plan, the Committee has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards, and interpret the provisions of the plan and outstanding Awards. The Committee may delegate any part of its authority and powers under the plan to one or more directors and/or officers of Applied; provided, however, that the Committee may not delegate its authority and powers with respect to Awards (a) intended to qualify as “performance-based compensation” under Section 162(m) if the delegation would cause the Awards to fail to so qualify or (b) granted to our executive officers and members of the Board.

Number of Shares of Common Stock Available Under the Stock Plan

If stockholders approve adding 125,000,000 shares to the amended and restated Stock Plan, the total number of shares available for issuance under the amended and restated Stock Plan (that is, for Awards granted on or after the date of the Annual Meeting) will be approximately 200,000,000. The maximum number of shares reserved for issuance under the amended and restated Stock Plan will be reduced by two (2) shares for every one (1) full value award granted after the Annual Meeting. If an Award granted after the Annual Meeting is settled in cash, is cancelled, terminates, expires, or lapses for any reason without having been fully exercised or vested, the unvested or cancelled shares generally will be returned to the available pool of shares reserved for issuance under the Stock Plan in the same proportion. For example, two (2) shares will be returned to the available pool for every one (1) such full value award that is cancelled, terminated, expired or lapsed, and one (1) share will be returned to the available pool for every one (1) stock option or stock appreciation right that is cancelled, terminated, expired or lapsed. As of January 15, 2012, 73,473,915 shares remained available for grant under the existing Stock Plan and of this total, approximately 18,541,047 shares could be granted as Awards other than options or stock appreciation rights. As of the same date, Awards covering 55,365,131 shares were outstanding under the existing Stock Plan. Any shares that return to the Stock Plan from Awards granted prior to the Annual Meeting that are canceled or forfeited after the Annual Meeting, also will be subject to the fungible share design,

but will return to the share reserve on only a 1 for 1 basis, regardless of whether such awards were full value awards, options or stock appreciation rights. Any new grants of full value awards from these returned shares will reduce the Stock Plan’s share reserve on a 2 for 1 basis.

If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to full value awards, is forfeited to or repurchased by the Company, the unpurchased (or forfeited or repurchased, as applicable) shares that were subject to the Award will become available for future grant or sale under the Stock Plan in the same proportion as the Award reduced the share reserve when the Award was granted. Upon exercise of a stock appreciation right settled in shares, the gross number of shares covered by the portion of the Award that is exercised will cease to be available under the Stock Plan. Shares that actually have been issued under the Stock Plan under any Award will not be returned to or become available for future distribution under the plan; provided, however, that if unvested shares of any full value awards are repurchased by the Company or are forfeited, those shares will become available for future grant under the plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the plan. To the extent an Award is paid out in cash rather than shares, such cash payments will not reduce the number of shares available for issuance under the plan. Shares actually issued pursuant to Awards transferred under any exchange program to reprice options or stock appreciation rights will not become available for grant under the Stock Plan.

In the event of a payment of a stock dividend (other than any regular, ongoing dividend), reorganization, or other change in capital structure, the Committee will, in such manner as it determines is equitable, adjust the number and class of shares available for issuance under the Stock Plan (including to take account of Awards granted under the Stock Plan prior to the date of the Annual Meeting), the outstanding Awards, and the per-person limits on Awards, as appropriate to reflect the stock dividend or other change.

No Repricing

The amended and restated Stock Plan prohibits the repricing of Awards and the exchanging of Awards for cash or for another Award, unless we obtain stockholder approval.

Eligibility to Receive Awards

The Committee selects the employees, consultants, and directors who will be granted Awards under the Stock Plan. The actual number of individuals who will receive Awards cannot be determined in advance because the Committee has the discretion to select the participants. As of January 15, 2012, approximately 14,700 of our employees, directors and consultants were eligible to participate in the Stock Plan.

Stock Options

A stock option is the right to acquire shares at a fixed exercise price for a fixed period of time. Under the Stock Plan, the Committee may grant nonqualified stock options and/or incentive stock options (which entitle employees, but not Applied, to more favorable tax treatment). The Committee will determine the number of shares of Applied common stock covered by each option, but during any fiscal year, no participant may be granted options (and/or stock appreciation rights) covering more than 4,500,000 shares. Notwithstanding the foregoing, during the fiscal year in which the participant first becomes an employee of Applied or its affiliate, he or she may be granted options (and/or stock appreciation rights) covering up to an additional 4,500,000 shares.

The exercise price of the shares subject to each option is set by the Committee but cannot be less than 100% of the fair market value (on the date of grant) of the shares covered by the option. An exception may be made for any options that the Committee grants in substitution for options held by employees of companies that Applied acquires (in which case the exercise price may preserve the economic value of the employee’s cancelled option from his or her former employer). In addition, the exercise price of an incentive stock option must be at least

110% of fair market value if (on the grant date) the participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of Applied or any of its subsidiaries. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options that first become exercisable by any participant during any calendar year also may not exceed $100,000. The exercise price of each option must be paid in full in cash (or cash equivalent) at the time of exercise. The Committee also may permit payment through the tender of shares that are already owned by the participant, or by any other means that the Committee determines to be consistent with the purpose of the Stock Plan.

Options become exercisable at the times and on the terms established by the Committee. The Committee also establishes the time at which options expire, but the expiration may not be later than seven years after the grant date (except that upon the death of a participant, the Committee may, in its discretion, provide that such participant’s unexpired options may remain exercisable for three years after the date of death). In addition, a participant who owns stock possessing more than 10% of the total combined voting power of all classes of stock of Applied or any of its subsidiaries may not be granted an option that is exercisable for more than five years after the option’s grant date.

Without further stockholder approval, no incentive stock options may be granted under the Stock Plan after January 19, 2022.

Stock Appreciation Rights

Stock appreciation rights (“SARs”) are Awards that grant the participant the right to receive an amount (in the form of cash, shares of equal value, or a combination thereof, as determined by the Committee) equal to (1) the number of shares exercised, times (2) the amount by which Applied’s stock price exceeds the exercise price. Applied may pay the appreciation in cash, in shares or in a combination of both. The exercise price is set by the Committee but cannot be less than 100% of the fair market value of the covered shares on the grant date. An SAR may be exercised only if it has vested based on the vesting schedule established by the Committee. SARs expire under the same rules that apply to options, meaning that the expiration may not be later than seven years after the grant date (except that upon the death of a participant, the Committee may, in its discretion, provide that such participant’s unexpired SARs may remain exercisable for three years after the date of death). SARs also are subject to the same per-person limits as for stock options (4,500,000 covered shares for SARs and/or options in any fiscal year plus an additional 4,500,000 shares for SARs and/or options in the fiscal year in which the participant first becomes an employee of Applied or its affiliate.)

Restricted Stock

Awards of restricted stock are shares of Applied common stock that vest in accordance with the terms and conditions established by the Committee. The Committee determines the number of shares of restricted stock granted to any participant, but during any fiscal year of Applied, no participant may be granted more than: (a) 1,500,000 shares of restricted stock (and/or performance shares and/or restricted stock units) and (b) an additional 1,500,000 shares of restricted stock (and/or performance shares and/or restricted stock units) in the fiscal year in which a participant first becomes an employee of Applied or its affiliate.

In determining whether an Award of restricted stock should be made, and/or the vesting schedule for any such Award, the Committee may impose whatever conditions to vesting it determines to be appropriate. Notwithstanding the foregoing, if the Committee desires that the Award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

A holder of restricted stock will have full voting rights, unless determined otherwise by the Committee. A holder of restricted stock also generally may be entitled to receive all dividends and other distributions paid with respect to shares, as determined by the Committee. For example, dividends and distributions may be made subject to the same vesting criteria and transferability restrictions as the shares upon which the dividend or distribution was paid.

Performance Units and Performance Shares

Performance units and performance shares are Awards that result in a payment to a participant (in the form of cash, shares of equal value, or a combination thereof, as determined by the Committee) only if performance goals and/or other vesting criteria established by the Committee are achieved or the Awards otherwise vest. The applicable performance goals (which may consist solely of continued employment) will be determined by the Committee, and may be applied based on company-wide, business unit or individual goals, applicable federal or securities laws, or any other basis determined by the Committee in its discretion. However, if the Committee desires that the Award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

During any fiscal year of Applied, no participant may receive performance units having an initial value greater than $15,000,000. The Committee establishes the initial value of each performance unit on the date of grant. Additionally, grants of performance shares are subject to the same per-person limits as restricted stock and restricted stock units (1,500,000 shares in any fiscal year, plus an additional 1,500,000 shares in the fiscal year in which the participant first becomes an employee of Applied or its affiliate).

Restricted Stock Units

Restricted stock units represent a right to receive shares at a future date determined in accordance with the participant’s award agreement, although they also may be paid in the form of cash, or a combination of cash and shares, as determined by the Committee. Restricted stock units are not available for grant under the existing Stock Plan, but performance shares, which essentially are identical for all material purposes, are available for grant under the existing Stock Plan. The amended and restated Stock Plan permits the granting of both restricted stock units and performance shares. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the Award, the consideration for which is furnished in the form of the participant’s service to Applied. In determining whether an Award of restricted stock units should be made, and/or the vesting schedule for any such Award, the Committee may impose whatever conditions to vesting it has determined to be appropriate.

The initial value of each restricted stock unit on the date of grant will be equal to the fair market value of a share of Applied common stock on such date. Grants of restricted stock units are subject to the same per-person limits as restricted stock and performance shares (1,500,000 shares in any fiscal year, plus an additional 1,500,000 shares in the fiscal year in which the participant first becomes an employee of Applied or its affiliate).

Non-Employee Director Awards

Each non-employee director receives automatic, non-discretionary Awards of restricted stock units under the Stock Plan. Under the existing Stock Plan, the automatic, non-discretionary awards granted to non-employee directors are in the form of performance shares. Both types of awards essentially are identical for all material purposes. On the date of each Annual Meeting of Stockholders, beginning with the 2012 Annual Meeting, each individual who is re-elected to serve as a non-employee director of Applied automatically is granted an Award of restricted stock units (an “Annual Grant”). The number of restricted stock units granted will equal $200,000, divided by the fair market value of a share of Applied common stock on the grant date. Each non-employee director of Applied who is first appointed or elected to the Board on or after the Annual Meeting automatically receives, as of the date of such appointment or election, an Award of a number of restricted stock units equal to $200,000, divided by the fair market value of a share of Applied common stock on the grant date, prorated to reflect the time remaining until the next Annual Meeting of Stockholders (an “Initial Grant”). Each Initial Grant and Annual Grant will vest in full on the earlier of: March 1 of the year following the year of grant, or the date immediately before the date of the next annual meeting, generally only if the non-employee director remains on the Board through the scheduled vesting date. The Awards may vest sooner if the director terminates service as a

non-employee director in connection with a change of control of Applied, or due to his or her death or disability (as defined in the Stock Plan), but will no longer continue to vest upon a non-employee director’s termination of service on the Board due to retirement (as defined in the Stock Plan). The Committee may change the terms of non-employee director grants scheduled to be made in the future, including the number of restricted stock units subject to Initial and Annual Grants, and also may also grant Awards to non-employee directors outside of the automatic, non-discretionary Award program.

Performance Goals

The Committee (in its discretion) may make performance goals applicable to a participant with respect to any Award granted in its discretion. If the Committee desires that an Award qualify as “performance-based compensation” under Section 162(m) (discussed below), then at the Committee’s discretion, one or more of the performance goals may apply. The amended and restated Stock Plan provides for the following performance goals: (1) cash flow, (2) customer satisfaction, (3) earnings per share, (4) margin, (5) market share, (6) operating profit, (7) product development and quality, (8) profit, (9) return on capital, (10) return on equity, (11) revenue, and/or (12) total shareholder return.

Each of these goals is defined in the Stock Plan. Any performance criteria used under the Stock Plan may be measured, as applicable, (1) in absolute terms, (2) in combination with one or more performance goal(s), (3) in relative terms (including, but not limited to, comparison of Applied’s results for other periods of time, and/or against another company, companies or an index or indices), (4) on a per-share or per-capita basis, (5) against the performance of Applied as a whole or a specific business unit(s), business segment(s) or product(s) of Applied, and/or (6) on a pre-tax or after-tax basis. Pursuant to the terms of the Stock Plan, the Committee may determine whether any element(s) or item(s) will be included in or excluded from the calculation of any performance goal with respect to any participants. The Committee may choose a performance period that is a fiscal year (or period of four consecutive fiscal quarters) or longer.

By granting awards that vest upon achievement of performance goals, the Committee may be able to preserve Applied’s deduction for certain compensation in excess of $1,000,000. Section 162(m) limits Applied’s ability to deduct annual compensation paid to Applied’s Chief Executive Officer or our three other most highly compensated named executive officers (other than our Chief Executive Officer and Chief Financial Officer), to $1,000,000 per individual. However, Applied can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. The performance goals listed above, as well as the per-person limits on shares covered by Awards, permit the Committee to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting Applied to receive a federal income tax deduction in connection with such Awards.

Minimum Vesting Period

The Stock Plan contains minimum vesting periods for Awards of restricted stock, performance shares, restricted stock units and performance units. If the vesting period is based solely on continued employment or service, the total vesting period must be at least three years (for example, but not by way of limitation, the shares could be scheduled to vest as to one-third of the shares on each of the first three anniversaries of the grant date of the Award). If the vesting period requires the achievement of performance goals, the total vesting period must be at least one year. If so determined by the Committee, these minimum vesting periods do not apply if the participant terminates employment or service due to death, disability, retirement or if there is a major capital change affecting Applied. The minimum vesting periods also do not apply to the automatic, non-discretionary Awards granted to non-employee directors (as described above) nor, if determined by the Committee, to Awards of options or stock appreciation rights, and/or Awards other than options and stock appreciation rights covering, in the aggregate, no more than five percent of the shares reserved for issuance under the Stock Plan.

Limited Transferability of Awards

Awards granted under the Stock Plan generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution. Notwithstanding the foregoing, the Committee may permit an individual to transfer an Award to an individual or entity other than Applied for certain limited purposes. Any transfer will be made in accordance with procedures established by the Committee.

Double-Trigger Vesting

The vesting of Awards granted under the amended and restated Stock Plan on or after the date of the Annual Meeting, including any such Awards held by our executive officers, will be accelerated in full upon a change of control of Applied if the successor corporation (or its parent or subsidiary) does not assume or substitute for the outstanding Awards. Also, Awards granted under the amended and restated Stock Plan to participants, including our executive officers, on or after the date of the Annual Meeting but before a change of control of Applied, will be entitled to 100% vesting acceleration if the participant is terminated without cause or resigns employment with Applied for good reason (as such terms are defined in the Stock Plan), in each case, within the 12-month period following a change of control of Applied. The vesting of Awards granted to non-employee directors under the amended and restated Stock Plan on or after the date of the Annual Meeting also will be accelerated in full if a non-employee director ceases to serve as a non-employee director as of the date of a change of control of Applied (and he or she does not become a member of the board of directors of the successor corporation or its parent). The accelerated vesting described in the prior two sentences will not apply if the applicable award agreement specifically states that it will not apply or if the participant’s employment or service on the Board is terminated due to his or her death or disability.

Amendment and Termination of the Stock Plan

The Board generally may amend or terminate the Stock Plan at any time and for any reason. However, no amendment, suspension, or termination may impair the rights of any participant without his or her consent.

Summary of U.S. Federal Income Tax Consequences

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and Applied of Awards granted under the Stock Plan. Tax consequences for any particular individual may be different.

Nonqualified Stock Options.    No taxable income is reportable when a nonqualified stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by an employee of Applied is subject to tax withholding by Applied. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Incentive Stock Options.    No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonqualified stock options). If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

Stock Appreciation Rights.    No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares.    A participant generally will not have taxable income at the time an Award of restricted stock, restricted stock units, performance shares or performance units are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (1) freely transferable, or (2) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock Award may elect to recognize income at the time he or she receives the Award in an amount equal to the fair market value of the shares underlying the Award (less any cash paid for the shares) on the date the Award is granted.

Tax Effect for Applied.    Applied generally will be entitled to a tax deduction in connection with an Award under the Stock Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our Chief Executive Officer and to our three other most highly compensated named executive officers (other than our Chief Executive Officer and our Chief Financial Officer). Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include stockholder approval of the Stock Plan, setting limits on the number of Awards that any individual may receive and for Awards other than certain stock options, establishing performance criteria that must be met before the Award actually will vest or be paid. The Stock Plan has been designed to permit the Committee to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such Awards.

Section 409A.    Section 409A of the Internal Revenue Code (“Section 409A”) provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the Stock Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.

Participation in the Stock Plan

The grant of Awards (if any) that any individual may receive under the Stock Plan is in the discretion of the Committee and therefore cannot be determined in advance. Our executive officers and non-employee directors have an interest in this proposal because they are eligible to receive discretionary Awards under the Stock Plan. Our non-employee directors also receive automatic, non-discretionary Awards under the Stock Plan. The following table sets forth information regarding Awards that were granted under the prior version of the Stock Plan to the executive officers named in the Summary Compensation Table, to all current executive officers as a group, to all non-employee directors as a group and to all other employees as a group during fiscal 2011, our last completed fiscal year:

In fiscal 2012, the Committee granted performance-based Awards (performance shares, performance-based restricted stock and performance units) to our named executive officers. The applicable performance goals continue to require the achievement of positive and relative annual adjusted operating profit margin compared to a peer group very similar to the fiscal 2011 peer group. In order for any shares to become eligible under a four-year time-based vesting schedule, Applied must achieve annual adjusted operating profit margins within a peer group in the same manner as for fiscal 2011. In addition, in order to focus the NEOs even more sharply on creating long-term stockholder value, the performance goals include a target for total shareholder return relative to a peer group consisting of members of the Standard & Poor’s 500 Technology Sector. Please see the Compensation Discussion and Analysis section of this Proxy Statement for more information.

We believe strongly that the approval of the amended and restated Stock Plan is essential to our continued success. Awards such as those provided under the amended and restated Stock Plan constitute an important incentive and help us to attract, motivate and retain people whose skills and performance are critical to our success. Our employees and directors are our most important asset. The amended and restated Stock Plan is vital to our ability to attract, motivate and retain outstanding and highly skilled individuals to work for the Company and to serve on our Board.

The Board unanimously recommends that you vote “FOR” the approval of the amended and restated Employee Stock Incentive Plan.

PROPOSAL 3—APPROVAL OF AMENDED AND RESTATED

SENIOR EXECUTIVE BONUS PLAN

We are asking stockholders to approve the amended and restated Senior Executive Bonus Plan (the “Bonus Plan”) so that we may continue to use the Bonus Plan to achieve our business objectives and also to continue receiving a federal income tax deduction for certain compensation paid under the Bonus Plan. The Bonus Plan last was approved by the stockholders at our 2007 Annual Meeting of Stockholders. The Human Resources and Compensation Committee of our Board of Directors (the “Committee”) has approved an amended and restated Bonus Plan, subject to approval of our stockholders at the Annual Meeting. The Bonus Plan has not been changed in any material way since stockholders last approved the Bonus Plan, except that the set of performance goals that may be used under the plan (and which must be achieved prior to any participant earning a bonus award) has been modified slightly as compared to the existing Bonus Plan.

If stockholders approve the amended and restated Bonus Plan, it will replace the existing Bonus Plan. If stockholders do not approve the amended and restated Bonus Plan, we expect to provide for performance-based bonuses under another arrangement, but we may not receive a federal income tax deduction for some or all of the compensation paid under such an arrangement.

The following paragraphs provide a summary of the principal features of the amended and restated Bonus Plan. This summary is qualified in its entirety by reference to the terms of the amended and restated Bonus Plan, which has been filed with the SEC as Appendix B to this Proxy Statement, and a copy of which is available upon request to the Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1241, P.O. Box 58039, Santa Clara, CA 95054.

Purpose

The purpose of the Bonus Plan is to increase stockholder value by motivating key executives to achieve Applied’s strategic and financial goals and to perform to the best of their abilities. The Bonus Plan accomplishes this by paying awards to our key executives only after they achieve specified performance goals.

Eligibility to Participate

The Committee selects the officers of Applied and/or its affiliates who will be eligible to receive awards under the Bonus Plan. The actual number of officers who will be eligible to receive an award during any particular year cannot be determined in advance because the Committee has discretion to select the participants. We currently expect that approximately seven to ten executives will participate in the Bonus Plan at any given time.

Target Awards and Performance Goals

Under the Bonus Plan, the Committee assigns each participant a target award and performance goal(s) for a performance period set by the Committee. The specified performance goal(s) must be achieved before an award actually will be paid to the participant. The participant’s target award typically will be expressed as a dollar amount or as a percentage of his or her base salary earned during the applicable performance period. The performance goals set by the Committee may require the achievement of objectives for one or more of: (1) cash flow, (2) customer satisfaction, (3) earnings per share, (4) margin, (5) market share, (6) operating profit, (7) product development and quality, (8) profit, (9) return on capital, (10) return on equity, (11) revenue, and/or (12) total shareholder return. Each of these goals is defined in the Bonus Plan.

The Committee may choose to measure performance goals, as applicable: (1) in absolute terms, (2) in combination with one or more performance goal(s), (3) in relative terms (including, but not limited to, comparison of Applied’s results for other periods of time, and/or against another company, companies or an index or indices), (4) on a per-share or per-capita basis, (5) against the performance of Applied as a whole or a

specific business unit(s), business segment(s) or product(s) of Applied, and/or (6) on a pre-tax or after-tax basis. Performance goals may differ from participant to participant, from performance period to performance period, and from award to award. The Committee also will determine whether any element(s) (for example, the effect of mergers or acquisitions) will be included in or excluded from the calculations (whether or not such determinations result in any performance goal being measured on a basis other than generally accepted accounting principles). Each performance period may last from one fiscal year (or a period of four consecutive fiscal quarters) to three fiscal years (or a period of 12 consecutive fiscal quarters), although we currently do not intend to use multi-year performance periods under the Bonus Plan. No individual may participate in more than four performance periods at any one time.

Actual Awards

After the performance period ends, the Committee certifies in writing the extent to which the pre-established performance goals actually were achieved or exceeded. The actual award that is payable to a participant is determined using a formula that increases or decreases the participant’s target award based on the level of actual performance attained. However, the Bonus Plan limits actual awards to a maximum of $5,000,000 per person for or in any fiscal year.

The Committee has discretion to reduce or eliminate (but not to increase) the actual award of any participant. If a participant terminates employment with Applied or its affiliate before the end of a performance period for a reason other than death or a retirement or disability (as defined in the Bonus Plan), he or she will not be entitled to any bonus for that period. Pursuant to Applied’s “clawback” policy, the Board also has the discretion to require a participant who was an officer for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, during the applicable performance period to forfeit, return or reimburse to Applied all or any portion of an award paid under the Bonus Plan in the event that the participant’s wrongdoing is determined to be the primary cause of a material negative restatement of Applied’s financial results.

Actual awards generally are paid in cash no later than two and a half months after the performance period ends. However, the Committee reserves the right instead to pay some or all of any award in shares of Applied common stock having a fair market value equal to the cash amount foregone. Any such shares would be issued under our stockholder-approved Employee Stock Incentive Plan and will vest over a period of not more than four years, as determined by the Committee, subject to acceleration for termination of employment due to death, retirement or disability. The Committee also may choose to pay bonuses to Bonus Plan participants outside of the Bonus Plan for the accomplishment of other strategic or individual goals.

Administration

The Committee administers the Bonus Plan. Members of the Committee must qualify as outside directors under Section 162(m) of the Internal Revenue Code. Subject to the terms of the Bonus Plan, the Committee has sole discretion to:

Performance Based Compensation

The Bonus Plan is designed to qualify as “performance based” compensation under Section 162(m) of the Internal Revenue Code. Under Section 162(m), Applied may not receive a federal income tax deduction for compensation paid to our Chief Executive Officer or our three other most highly compensated named executive officers (other than our Chief Executive Officer and Chief Financial Officer) to the extent that any of these persons receives more than $1,000,000 in any one year. However, if Applied pays compensation that is “performance based” under Section 162(m), we still will be able to receive a federal income tax deduction for the compensation even if it is more than $1,000,000 during a single year. The Bonus Plan allows us to pay incentive compensation that is performance based and therefore fully tax deductible on our federal income tax return (subject to future changes in tax laws and other compensation arrangements).

Amendment and Termination of the Bonus Plan

The Board generally may amend or terminate the Bonus Plan at any time and for any reason.

Bonuses Paid to Certain Individuals and Groups

Awards (if any) under the Bonus Plan are determined based on actual future performance. As a result, future actual awards cannot now be determined. The Committee has established a performance period under the Bonus Plan for our 2012 fiscal year. The following table sets forth the projected full (target) bonus for the fiscal year 2012 performance period for the persons and groups shown below, based on each participant’s current base salary and assuming exactly one hundred percent (100%) achievement of the applicable performance goals. There is no guarantee that the amounts shown actually will be paid nor that any amounts will be paid for fiscal 2012. Actual awards (if any) under the Bonus Plan for fiscal 2012 will be calculated based on each participant’s base salary and may be higher or lower than the target award set forth below, depending on the level of actual performance attained. In addition, the Committee has discretion to decrease (but not increase) the award otherwise indicated under the pre-established formula. For the 2012 performance period, the Committee selected the achievement of company-wide operating profit as the primary performance goal. As our executive officers are eligible to receive awards under the Bonus Plan, they have an interest in this proposal.

The Board unanimously recommends that you vote “FOR” the approval of the amended and restated Senior Executive Bonus Plan.

PROPOSAL 4—APPROVAL, ON AN ADVISORY VOTE ONBASIS, OF THE COMPENSATION

OF OUR NAMED EXECUTIVE COMPENSATIONOFFICERS

Pursuant to Section 14A of the Dodd-Frank Wall Street Reform and Consumer ProtectionSecurities Exchange Act (“Dodd-Frank Act”),of 1934, we are asking our stockholders to vote,approve, on ana non-binding, advisory basis, on the compensation of our named executive officers, as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers.

Compensation Program and Philosophy

Our executive compensation program is designed to attract, motivate, reward, and retain key employees, including our named executive officers, who are critical to our success. Under this program, our named executive officers are rewarded for the achievement of specific short-term and long-term goals that enhance stockholder value. The following highlights our approach to executive pay:

Pay for Performance:.    We seek to pay for performance, and our record for the past five years shows that we have accomplished this goal. Specifically, the compensation paid to our Chief Executive Officer during the last five fiscal years directly correlates to our annual revenuenet sales and net income financial performance for those years.

Significant Majority of Executive Officer Pay Tied to Performance:Performance.    While our compensation program has three primary elements (base salary, annual performance-based cash incentives, and performance-based equity incentives), the performance-based incentives constitute by far the largest portion of potential compensation for our named executive officers. In fiscal 2010,2011, for example, approximately 88% of our Chief Executive Officer’s potential compensation (and approximately 90% of his actual compensation) was performance-based. Similarly, except for a single, time-based, new-hire equity grant, approximately 65%87% of our other named executive officers’ potential compensation (and over 68%approximately 84% of their actual compensation) was performance-based.

Limited all other Compensation:All Other Compensation.    In line with our pay for performance philosophy, we have limited all other forms of compensation to our named executive officers.

Fiscal 20102011 Compensation

As a result of Applied’s strong financial performance in fiscal 20102011 and to align with our executive compensation philosophy, the following compensation actions were approved by the Human Resources and Compensation Committee of our Board of Directors for fiscal 2010:2011:

Limited AdjustmentsNo Increases to Base SalarySalaries:    base salaries of our named executive officers were restored to the levels in effect before the aggregate 20% reductions that were appliednot increased in fiscal 2009 and earlier. Other than this re-establishment of previous pay levels, salaries for named executive officers were increased only to recognize promotions.2011.

Performance-based Cash BonusBonus:    :    performance-based cash incentives were paid in fiscal 20102011 as a result of the achievement of high levels of adjusted operating profit, (adjusted to exclude the items set forth in footnote 1 on page 40), strongadjusted earnings per share, and other performance goals set by the Human Resources and Compensation Committee for fiscal 2010.2011.

Performance-based Equity:    equity awards to our named executive officers (other than a single, time-based, new-hire award) granted in fiscal 20102011 were solely performance-based equity awards that become eligible to vest only if Applied achieves positive adjusted operating profit (adjusted to exclude the items set forth in footnote 1 on page 40)margin that compares favorably with our peer group.

Even with Applied’s strong financial results in fiscal 2010, only 40% of the performance-based equity awards that were granted in fiscal 2010 became eligible to vest, due to the challenging nature of the performance goals. Moreover, these awards are subject to additional time-based vesting requirements after the performance goals are achieved.

Clawback Policy:    a clawback policy was adopted under which named executive officers may be required to return incentive compensation payments to Applied if our financial statements are restated.

In addition to the above summary, stockholders are urged to read the “Compensation Discussion and Analysis” section of this Proxy Statement for greatermore detail about our executive compensation programs,program, including information about the fiscal year 20102011 compensation of our named executive officers.

Recommendation

For the above reasons, weWe are asking our stockholders to indicate their support forapprove the compensation of our named executive officers as described in this Proxy Statement by voting in favor of the following resolution:

“RESOLVED, that the stockholders approve, inon a non-binding, vote,advisory basis, the compensation ofpaid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section, the tabular disclosure regarding suchSummary Compensation Table, other compensation tables, narrative discussion and the accompanying narrative disclosure set forth in the Proxy Statement relating to the Company’s 2011 Annual Meeting of Stockholders.related disclosure.”

Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, the Human Resources and Compensation Committee and the Board value the opinions of our stockholders. Accordingly, tostockholders, and will consider the extent there is a significantoutcome of the vote against thewhen making future compensation of ourdecisions for named executive officers, we will consider our stockholders’ concerns and the Human Resources and Compensation Committee will evaluate what actions may be necessary or appropriate to address those concerns.officers.

The Board unanimously recommends athat you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement.

ITEM 3—ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE

ON EXECUTIVE COMPENSATION

Pursuant to the Dodd-Frank Act, we also are asking our stockholders to provide their input with regard to the frequency of future stockholder advisory votes on our executive compensation programs, such as the proposal contained in Item 2 above of this Proxy Statement. In particular, we are asking whether the advisory vote on executive compensation should occur once every year, every two years or every three years.

After considering this agenda item, our Board has determined that an annual advisory vote on executive compensation is the most appropriate alternative for Applied. The Board’s determination was influenced by the fact that the compensation of our named executive officers is evaluated, adjusted and approved on an annual basis. As part of the annual review process, the Board believes that stockholder sentiment should be a factor that is taken into consideration by the Board and the Human Resources and Compensation Committee in making decisions with respect to executive compensation. By providing an advisory vote on executive compensation on an annual basis, our stockholders will be able to provide us with direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. We understand that our stockholders may have different views as to what is the best approach for Applied, and we look forward to hearing from our stockholders on this agenda item every year. Accordingly, our Board recommends that the advisory vote on executive compensation be held every year.

You may cast your vote by choosing the option of one year, two years, three years, or abstain from voting in response to the resolution set forth below:

“RESOLVED, that the option of once every year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which the Company is to hold an advisory vote by stockholders to approve the compensation of the named executive officers, as disclosed in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure.”

The option of one year, two years or three years that receives the highest number of votes cast will be the frequency of the vote on the compensation of our named executive officers that has been approved by stockholders on an advisory basis. Even though your vote is advisory and therefore will not be binding on the Company, the Board and the Human Resources and Compensation Committee value the opinions of our stockholders and will consider our stockholders’ vote. Nonetheless, the Board may decide that it is in the best interests of our stockholders and Applied to hold an advisory vote on executive compensation more or less frequently than the option voted by our stockholders.

The Board unanimously recommends a vote “FOR” the option of once every year as the frequency with which stockholders are provided an advisory vote on executive compensation.

ITEM 4—PROPOSAL 5—RATIFICATION OF THE APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We are asking stockholders to ratify the appointment of KPMG LLP (“KPMG”) as ourApplied’s independent registered public accounting firm for our current fiscal year. Our 2011 fiscal year2012, which began on November 1, 2010October 31, 2011 and is scheduled towill end on October 30, 2011.28, 2012. Although ratification is not legally required, Applied is submitting the appointment of KPMG to our stockholders for ratification in the interest of good corporate governance. In the event that this appointment is not ratified, the Audit Committee of the Board will reconsider the appointment.

The Audit Committee appoints the independent registered public accounting firm annually. Before appointing KPMG as our independent registered public accounting firm for fiscal 2011,2012, the Audit Committee carefully considered the firm’s qualifications and performance during fiscal 20092010 and 2010.2011. In addition, the Audit Committee reviewed and pre-approved audit and permissible non-audit services performed by KPMG in fiscal 20092010 and 2010,2011, as well as the fees paid to KPMG for such services. In its review of non-audit service fees and its appointment of KPMG as Applied’s independent registered public accounting firm, the Audit Committee considered whether the provision of such services was compatible with maintaining KPMG’s independence.

Representatives of KPMG will be present at the Annual Meeting. They will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Fees Paid to KPMG LLP

The following table presentsshows fees paid by Applied for professional services rendered by KPMG for fiscal 20092010 and 2010,2011, which ended on October 25, 200931, 2010 and October 31, 2010,30, 2011, respectively. All of the fees shown in the following table were approved by the Audit Committee in conformity with its pre-approval process.

Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Applied’s consolidated financial statements, (b) review of the interim consolidated financial statements included in quarterly reports, and (c) services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

Audit-Related Fees for fiscal 2010 consisted of fees for assurance and related services that were reasonably related to the performance of the audit or review of Applied’s consolidated financial statements and are not reported under “Audit Fees.” Certain audit-related fees were incurred in fiscal 2011 in connection with compliance with government-funded grant requirements.

Tax Fees consisted of fees for professional services for tax compliance and review, which consisted of federal, state and international tax compliance, assistance with tax audits and appeals, and assistance with customs and duties audits.

The Audit Committee has concluded that the provision of the non-audit services listeddescribed above was compatible with maintaining the independence of KPMG.

Policy on Audit Committee’s Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee reviews and, as appropriate, pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services and tax services, as well as specifically designated non-audit services which, in the opinion of the Audit Committee, will not impair the independence of the independent registered public accounting firm. Pre-approval generally is provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and generally is subject to a specific budget. The independent registered public accounting firm and Applied’s management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, including the fees for the services performed to date. In addition, the Audit Committee also may pre-approve particular services on a case-by-case basis, as necessary or appropriate.

The Board unanimously recommends that you vote “FOR” the ratification of the appointment of KPMG as Applied’s independent registered public accounting firm for the current fiscal year.

Audit Committee Report

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.

Composition.    The Audit Committee of the Board is composed of the directors named below. Each member of the Audit Committee meets the independence and financial experience requirements under applicable SEC rules and Nasdaq listing standards. In addition, the Board has determined that Susan M. James, Dennis D. Powell and Robert H. Swan are “audit committee financial experts”experts,” as defined by SEC rules.

Responsibilities.The Audit Committee operates under a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate. The Audit Committee is responsible for general oversight of Applied’s auditing, accounting and financial reporting processes, system of internal control over financial reporting, and tax, legal, regulatory and ethical compliance. Applied’s management is responsible for: (a) maintaining Applied’s books of account and preparing periodic financial statements based thereon; and (b) maintaining the system of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing Applied’s annual consolidated financial statements.

Review with Management and Independent Registered Public Accounting Firm.    In this context, theThe Audit Committee hereby reports as follows:

Based on the review and discussions referred to in paragraphs 1-3 above, the Audit Committee recommended to the Board, and the Board has approved, that the audited consolidated financial statements be included in Applied’s Annual Report on Form 10-K for fiscal 20102011 for filing with the SEC.

The Audit Committee appointed KPMG as Applied’s independent registered public accounting firm for fiscal 20112012 and recommends to stockholders that they ratify the appointment of KPMG as Applied’s independent registered public accounting firm for fiscal 2011.2012.

This report is submitted by the Audit Committee.

Dennis D. Powell (Chair)

Susan M. James

Gerhard H. Parker

Robert H. Swan

PRINCIPAL STOCKHOLDERS

The following table shows the number of shares of Applied common stock beneficially owned as of December 31, 20102011 by: (1) each person known by Applied to own 5% or more of Applied common stock, (2) each of the directors and director nominees, (3) the principal executive officer, the principal financial officer and each of the next three most highly-compensated executive officers and a former executive officer as required under SEC rules (collectively, the “named executive officers”), and (4) the current directors and executive officers as a group. In general, “beneficial ownership” refers to shares that an entity or individual had the power to vote or the power to dispose of, and shares that such entity or individual had the right to acquire within 60 days after December 31, 2010.2011.

(4)	Includes or consists of 9,491 performance shares that are scheduled to vest within 60 days after December 31, 2010.

(5)	Includes (a) 9,491 performance shares that are scheduled to vest within 60 days after December 31, 2010, and (b) options to purchase 70,000 shares that are exercisable within 60 days after December 31, 2010.2011.

(6)

Includes (a) 9,4914,068 performance shares that are scheduledhave vested and which, pursuant to vest within 60 days after December 31, 2010, (b)Ms. James’ election to defer, will be converted to shares of Applied common stock and paid to her on the date of her termination of service from the Applied Board.

(7)	Includes (a) options to purchase 75,00050,000 shares that are exercisable within 60 days after December 31, 20102011, and (c)(b) 484 shares held in a family foundation, which is a charitable trust. Dr. Parker disclaims beneficial ownership of the 484 shares held in the family foundation.

(7)(8)

Includes 10,845 performance shares that have vested and which, pursuant to Mr. Powell’s election to defer, will be converted to shares of Applied common stock and paid to him on the date of his termination of service from the Applied Board.

(9)

Includes (a) options to purchase 50,000 shares that are exercisable within 60 days after December 31, 2011, and (b) 10,845 performance shares that have vested and which, pursuant to Mr. Roelandts’ election to defer, will be converted to shares of Applied common stock and paid to him on the date of his termination of service from the Applied Board.

(10)	Includes 14,913 performance shares that have vested and which, pursuant to Mr. Rogers’ election to defer, will be converted to shares of Applied common stock and paid to him on the date of his termination of service from the Applied Board.

(11)

Includes (a) 4,068 performance shares that have vested and which, pursuant to Mr. Swan’s election to defer, will be converted to shares of Applied common stock and paid to him on the date of his termination of service from the Applied Board, and (b) 15,422 shares pledged as collateral by Mr. Swan for a personal loan facility with a financial institution.

(12)	Includes (a) 454,000 shares of unvested restricted stock, (b) options to purchase 2,700,000 shares that are exercisable within 60 days after December 31, 2011, and (c) 300,000 shares held in a family trust.

(13)	Includes (a) 220 shares held in a family trust, (b) options to purchase 260,000 shares that are exercisable within 60 days after December 31, 2011, and (c) 25,500 shares of unvested restricted stock.

(14)	Includes (a) options to purchase 281,000 shares that are exercisable within 60 days after December 31, 2011, and (b) 25,500 shares of unvested restricted stock.

(15)	Includes (a) options to purchase 250,000 shares that are exercisable within 60 days after December 31, 2011, and (b) 25,500 shares of unvested restricted stock.

(16)	Includes (a) options to purchase 5,028,026 shares that are exercisable within 60 days after December 31, 2011, (b) 63,500 performance shares that are scheduled to vest within 60 days after December 31, 2010.

(8)

Includes (a) 4,0682011, (c) 530,500 shares of unvested restricted stock, and (d) 44,739 performance shares that are scheduledhave vested and which, pursuant to vest within 60 days after December 31, 2010, and (b) optionseach director’s election to purchase 95,000 shares that are exercisable within 60 days after December 31, 2010.

(9)	Includes 5,423 performance shares that are scheduleddefer, will be converted to vest within 60 days after December 31, 2010.

(10)	Includes (a) 186,875 shares of restrictedApplied common stock (b) optionsand paid to purchase 3,105,000 shares that are exercisable within 60 days after December 31, 2010, and (c) 300,000 shares held in a family trust.

(11)	Includes (a) 220 shares held in a family trust, and (b) options to purchase 385,000 shares that are exercisable within 60 days after December 31, 2010.

(12)	Includes options to purchase 806,000 shares that are exercisable within 60 days after December 31, 2010.

(13)	Includes options to purchase 200,000 shares that are exercisable within 60 days after December 31, 2010.

(14)	Consistshim or her on the date of 43,750 performance shares that are scheduled to vest within 60 days after December 31, 2010.

(15)	Includes options to purchase 510,000 shares that are exercisable within 60 days after December 31, 2010.

(16)	Includes (a) options to purchase 5,620,166 shares that are exercisable within 60 days after December 31, 2010, and (b) 124,764 performance shares that are scheduled to vest within 60 days after December 31, 2010.his or her termination of service from the Applied Board.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis (“CD&A”) describes the principles of our executive compensation program, how we applied those principles in compensating our most senior officers for fiscal year 2010,2011, and how we use our compensation program to drive performance.

In the CD&A, we first provide an Executive Summary of our executive compensation decisions for fiscal 2010.2011. We then describe the main principles and objectives of our executive compensation program, and how the Human Resources and Compensation Committee (the “Committee”) of our Board oversees our compensation program. We discuss the respective roles of the Committee’s independent compensation consultant and management in the compensation process and describe how we determine each elementthe types of compensation that is paid.to pay. The CD&A extensively discusses how we set the challenging performance goals that applymust be achieved in order to earn the largest elements of compensation—annual incentive bonuses and equity incentives. We believe that our actions in fiscal 20102011 and in prior years show that we have closelyeffectively linked pay to performance.

Executive Summary

Overview

The following highlight Applied’shighlights our approach to executive pay:

•

Significant Majority of Executive Officer Pay Tied to Performance:    Our compensation program has three primary elements: base salary, annual performance-based incentives (typically cash bonuses), and performance-based equity incentives. The performance-based incentives constitute by far the largest portion of potential compensation for the officers named in the Summary Compensation Table in this Proxy Statement (our “named executive officers” or “NEOs”):

The percentages above were calculated using base salary, annual incentive bonus, grant date fair value of equity awards (not cash actually received), and all other compensation as reported in the Summary Compensation Table.

Fiscal 20102011 Highlights

During fiscal 2010, Applied’s new orders more than doubled to $10.2 billion, from $4.1 billionFiscal 2011 was an exciting year for fiscal 2009. Net sales increased to $9.5 billion – the third highest level in Company history – compared to $5.0 billion in fiscal 2009, driven byApplied. We achieved a recovery in semiconductornumber of milestones while navigating through a challenging macroeconomic environment and display equipment, continued growthrapidly-changing industry conditions, particularly in solar and market share gains. Operating profit was $1.4 billion, and net income was $938 million or $0.70 per share. Duringflat panel display. Our fiscal 2011 results were driven by strength across our markets during the first half of the year, Applied generated $1.7 billionalthough these markets came under pressure from deteriorating global economic conditions in the second half of the year. We achieved record net sales, record earnings per share, and record operating cash flow in fiscal 2011, while new orders declined from operations, investedlast year. These results were primarily due to robust revenue levels in our semiconductor equipment business, as well as our highest-ever revenue in the solar equipment and global services businesses.

Shortly after the close of fiscal 2011, we completed our acquisition of Varian Semiconductor Equipment Associates, Inc., the technology leader in ion implantation, a critical step in integrated circuit manufacturing. The combination of the two companies creates the industry leader in transistor technologies and enhances our ability to partner with customers to find innovative solutions for smaller, faster, more than $1.1 billion in research and development, bought back $350 million in shares through its stock repurchase program, increased the quarterly dividend rate by 17 percent, and ended the year with $3.9 billion in cash and investments.power-efficient semiconductor devices.

Applied has four reportable segments:The following table presents certain significant measurements for Applied’s past two fiscal years: