SANTA CLARA, Calif. -- It's virtually a slamdunk for Applied Materials Inc. to hit its five-year-old revenue goal of $10 billion in 2000. So now, the world's largest supplier of chip production equipment is pushing forward to hit the next major milestone: $20 billion in annual sales within the next three-to-five years, said James C. Morgan, chairman and CEO of Applied.

"We have set the bar another notch higher as we complete our first fiscal year of the 21st century," Morgan told financial analysts last week after Applied posted record sales of $2.92 billion and earnings of $664 million in the fiscal fourth quarter, ended Oct. 29 (see Nov. 15 story). Applied Material ended its 2000 fiscal year in October just shy of the $10 billion goal at $9.56 billion, but the company's revenue run rate will more than push it over the top of its sales target, which was set back in 1995.

Moving forward, Applied now aims to quickly double its size again by not only expanding market share in next-generation wafer-processing equipment, but the company says it also expects major dividends in its bundling of process technologies, metrology capabilities, and "total" services with tools.

Within the next several years, Morgan said he expects Applied Materials to draw $3-to-$5 billion in revenues from the company's 18-month-old "Total Services Solutions" business, which provides outsourced tool maintenance, guaranteed wafer-processing operating results, and spare-parts management in wafer fabs. When the program was first introduced, at the 1999 Semicon West trade show, Applied said early indications showed the total services package could save 15-30% in equipment operation costs and about $35 in spare-part inventory costs for every $100 in the cost of parts (see July 13, 1999, story).

Currently, the "total services" business is already pulling in about $1 billion in revenue a year, according to Joseph R. Bronson, senior vice president and chief financial officer at Applied. During last week's conference call with analysts, Applied top managers indicated that there's plenty of room for Total Services Solutions to grow since most of the top tier integrated device manufacturers (IDMs) had not yet embraced the concept of outsourcing a significant portion of their tool maintenance and spare-parts inventories.

"It is migrating across the world with some places taken on the service faster than others," responded chief executive Morgan, answering questions from analysts. Soon, Morgan said, "more and more customers of all categories will be participating."

Another huge but still largely untapped potential for Applied Materials is its much publicized--and sometimes controversial--process module program, which bundles advanced technologies and metrology with complete tool sets for wafer fab applications, such as copper interconnects and low-k dielectrics. Applied Materials began talking about the process module strategy more than a year ago and it geared up to introduce the first products this year (see April 5 story), but the company is running slightly behind in delivering fully integrated inspection and measurement capability for tools and process modules, said CFO Bronson.

"We still haven't released a product in this space integrated, or in-situ metrology," said Bronson in response to a question about Applied's four-year effort to leverage measurement and inspection capabilities with wafer-processing tools.

Santa Clara-based Applied made a major step into the metrology business in 1996, when it announced its acquisitions of two Israeli companies--Opal Inc. and Orbot Instruments Ltd.--to form a Process Diagnostics and Control Business Group in 1997 (see April 1997 story). The acquisitions sent shock waves through the equipment industry, causing KLA Instruments Inc. and Tencor Instruments Inc. to merge into a $1 billion metrology supplier--called KLA-Tencor Corp.--to fend off the threat of Applied entering the segment.

Applied's stand-alone metrology systems business continues to do well and grow, said chief executive Morgan, but the overall strategy to integrate those systems with wafer-processing tools is still an on-going process that will be "rolled out as we see opportunities."

The company has sold some bundled metrology tools and demonstrated capability "but we have yet to sell a full suite of products," said Bronson, referring to the guaranteed process modules that include integrated systems. "This is still a product development process. Introduction is a little behind schedule on some of our earlier modules, but I would say that it is still relatively early," he added while fielding questions from Wall Street analysts on Wednesday.

"We have sold some of these modules without guarantees, which means the customers are really just building tools, but we really have to complete the product development effort, and it is a little early to call," Bronson added.

But now, Applied Materials expects to ship its first integrated metrology systems and guaranteed process models for revenue in "the February-April timeframe," Bronson said.

And even when Applied begins rolling out its integrated metrology and process modules, the company plans to continue its series of partnerships with third-party inspection and measurement systems suppliers, said CEO Morgan, attempting to dispel concerns that the equipment giant will eventually terminate those partnerships with smaller, more specialized suppliers.

"We have a series of partnerships with inspection organizations, and we will continue to expand on that," Morgan promised. "What we are trying to do is provide a capability or solution to the customers. We do that with a series of partnerships, and for specialized applications, where we think we have some unique technology, we will produce our own product to support the integrated tool," added Applied's chairman.