APPLIED MATERIALS INC /DEAMAT
APPLIED MATERIALS INC /DE Goodwill & Intangibles Disclosure
Goodwill and Intangible Assets
As of October 29, 2023, our reporting units include Semiconductor Products Group and Imaging and Process Control Group, which combine to form the Semiconductor Systems reporting segment, Applied Global Services, Display and Adjacent Markets and other reporting units recorded under Corporate and Other.
Our methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the purchase price over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. We assign assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process.
Goodwill
In the fourth quarter of fiscal 2023, we performed a qualitative assessment to test goodwill for all of our reporting units for impairment. We determined that it was more likely than not that each of our reporting units’ fair values exceeded their respective carrying values and that it was not necessary to perform the quantitative goodwill impairment test for any of our reporting units. The evaluation of goodwill and intangible assets for impairment requires the exercise of significant judgment. In the event of future changes in business conditions, we will be required to reassess and update our forecasts and estimates used in future impairment analyses. If the results of these future analyses are lower than current estimates, a material impairment charge may result at that time.
Details of goodwill as of October 29, 2023 and October 30, 2022 were as follows:
| October 29, 2023 | October 30, 2022 | ||||||||||
| (In millions) | |||||||||||
| Goodwill by reportable segment | |||||||||||
| Semiconductor Systems | $ | 2,460 | $ | 2,428 | |||||||
| Applied Global Services | 1,032 | 1,032 | |||||||||
| Display and Adjacent Markets | 199 | 199 | |||||||||
| Corporate and Other | 41 | 41 | |||||||||
| $ | 3,732 | $ | 3,700 | ||||||||
From time to time, we acquire companies related to our existing or new markets. During fiscal 2023, goodwill increased primarily due to the preliminary purchase accounting for acquisitions, net of adjustments, which were not material to our results of operations or to our balance sheet.
Intangible Assets
Details of intangible assets other than goodwill were as follows:
| October 29, 2023 | October 30, 2022 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Intangible assets with finite lives: | |||||||||||||||||||||||||||||||||||
| Semiconductor Systems Group | $ | 2,001 | $ | (1,714) | $ | 287 | $ | 1,985 | $ | (1,675) | $ | 310 | |||||||||||||||||||||||
| Applied Global Services | 79 | (78) | 1 | 79 | (77) | 2 | |||||||||||||||||||||||||||||
| Display and Adjacent Markets | 194 | (194) | — | 194 | (194) | — | |||||||||||||||||||||||||||||
| Corporate & Other | 36 | (30) | 6 | 36 | (26) | 10 | |||||||||||||||||||||||||||||
| Total intangible assets with finite lives | $ | 2,310 | $ | (2,016) | $ | 294 | $ | 2,294 | $ | (1,972) | $ | 322 | |||||||||||||||||||||||
| Intangible assets with infinite lives: | |||||||||||||||||||||||||||||||||||
| Semiconductor Systems Group | $ | — | $ | — | $ | — | $ | 16 | $ | — | $ | 16 | |||||||||||||||||||||||
| Corporate & Other | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||
| Total intangible assets with infinite lives | $ | — | $ | — | $ | — | $ | 17 | $ | — | $ | 17 | |||||||||||||||||||||||
| Total intangible assets | $ | 2,310 | $ | (2,016) | $ | 294 | $ | 2,311 | $ | (1,972) | $ | 339 | |||||||||||||||||||||||
The increase in intangible assets with finite lives during fiscal 2023 was primarily due to the preliminary purchase accounting for acquisitions during fiscal 2023, which were not material to our results of operations.
Amortization expense of intangible assets was $44 million, $40 million and $49 million during fiscal 2023, 2022 and 2021, respectively.
As of October 29, 2023, future estimated amortization expense of intangible assets with finite lives is expected to be as follows:
| Amortization Expense | |||||
| (In millions) | |||||
| 2024 | $ | 43 | |||
| 2025 | 41 | ||||
| 2026 | 39 | ||||
| 2027 | 26 | ||||
| 2028 | 23 | ||||
| Thereafter | 122 | ||||
| Total | $ | 294 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Dec 15, 2023 | Showing above |
| 2022 | Dec 16, 2022 | |
| 2021 | Dec 17, 2021 | |
| 2020 | Dec 11, 2020 | |
| 2019 | Dec 13, 2019 | |
| 2018 | Dec 13, 2018 | |
| 2017 | Dec 15, 2017 | |
| 2016 | Dec 15, 2016 | |
| 2015 | Dec 9, 2015 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.