KLA (KLAC) 8-K Kla-tencor Reports First Quarter of 2006 Earnings Per Share of $0.38 ($0.50 Excluding Equity Based Compensation of $0.12) on Revenue of $484 Million

Exhibit 99.1

News Release

Company Contacts:	John Kispert
	Chief Financial Officer
	(408) 875-6224
	john.kispert@kla-tencor.com
	Cary Halsted (Investment Community)
	Vice President, Investor Relations
	(408) 875-2406
	cary.halsted@kla-tencor.com
	Uma Subramaniam (Media)
	Director, Corporate Communications
	(408) 875-5473
	uma.subramaniam@kla-tencor.com

FOR IMMEDIATE RELEASE

KLA-TENCOR REPORTS FIRST QUARTER OF 2006 EARNINGS PER SHARE OF $0.38
($0.50 EXCLUDING EQUITY BASED COMPENSATION OF $0.12) ON REVENUE OF $484 MILLION

SAN JOSE, Calif., Oct. 27, 2005 — KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal 2006, ended September 30, 2005. The company reported net income of $77 million and earnings per diluted share of $0.38 on revenues of $484 million compared to net income of $105 million or $0.52 per diluted shares on revenue of $492 million in the fourth quarter of fiscal 2005, and net income of $116 million or $0.58 per diluted shares on revenue of $519 million in the first quarter of fiscal 2005. The results include the impact from adoption in the first quarter of fiscal 2006 of SFAS 123 (R). The company included equity based compensation expenses of $24 million or $0.12 per diluted share, after income tax expenses, in its costs and operating expenses during the first quarter of fiscal 2006. Excluding the $24 million of equity based compensation, net income would have been $101 million and earnings per diluted share would have been $0.50 for the first quarter of fiscal 2006.

“We continue to introduce innovative yield management technologies to improve the competitiveness and production success of our customers. As a result of this suite of market-leading products, we delivered another strong quarter with increasing orders and strong earnings,” explained Ken Schroeder, chief executive officer of KLA-Tencor. “Ramping yields of leading-edge processes remains a challenging task and KLA-Tencor is playing a pivotal role in the industry’s efforts to expand production capacity and speed new products to market.”

KLA-Tencor reported ending the quarter with approximately 9 months of product-related shipment and revenue backlog. On a geographic basis, Taiwan and Japan posted strong bookings for the quarter ended

September 30, 2005. Taiwan was 27 percent of orders, above its historical average of 20 percent; Japan was 23 percent of orders, higher than its historical average of 20 percent; U.S. was 25 percent of orders, and consistent with its historical average of 25 percent; Europe was 13 percent of orders, lower than its historical average of 15 percent; and Korea, China and Singapore combined were 12 percent of orders, below their combined historical average of 20 percent.

KLA-Tencor’s financial position remained strong with cash, cash equivalents and marketable securities of $2.2 billion and no long term debt. Inventory increased by $38 million to $396 million as a result of higher shipments to Japanese customers that remain in inventory until customer acceptance, and higher field inventory to support customer service requirements of new products. Accounts receivable decreased by $26 million to $307 million.

Forward Looking Statements:Statements in this press release regarding the benefit to customers of KLA-Tencor’s products and our future financial performance are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations, and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the demand for semiconductors and new and enhanced product offerings by competitors, cancellation of orders by customers and changing customer demands. For other factors that may cause actual results to differ materially from those projected, please refer to the company’s Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the company’s SEC filings.

For comparison purposes, the company makes reference to certain net income and earnings per share results that were consistent with GAAP when presented in prior quarters, but are now inconsistent with GAAP due to changes in accounting standards. These results were reached by excluding non-cash, equity-based compensation expenses. We reference those results to allow a better comparison of results in the current period to those in prior periods. Our reference to these results from prior periods should be considered in addition to results that are prepared under current accounting standards but should not be considered a substitute for results that are presented as consistent with GAAP.

About KLA-Tencor:KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., with operations around the world, KLA-Tencor ranked #6 on S&P’s 2002 index of the top 500 companies in the U.S. KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC. Additional information about the company is available on the Internet at http://www.kla-tencor.com.

KLA-Tencor Corporation
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

	September 30,		June 30,
	2005		2005
(In thousands)
ASSETS
Cash, short-term investments and marketable securities	$	2,182,746	$	2,195,186
Accounts receivable, net		307,194		333,218
Inventories		396,006		358,339
Land, property and equipment, net		382,713		385,222
Other assets		761,939		714,407
Total assets	$	4,030,598	$	3,986,372
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	58,001	$	67,717
Deferred system profit		180,347		209,899
Unearned revenue		75,003		80,122
Other current liabilities		543,039		574,124
Total current liabilities		856,390		931,862
Minority interest in subsidiary		10,086		9,253
Stockholders’ equity:
Common stock and capital in excess of par value		1,015,660		943,322
Retained earnings		2,136,607		2,083,638
Accumulated other comprehensive income		11,855		18,297
Total stockholders’ equity		3,164,122		3,045,257
Total liabilities and stockholders’ equity	$	4,030,598	$	3,986,372

KLA-Tencor Corporation
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

	Three months ended
	September 30,
	2005		2004
(In thousands, except per share data)
Revenues:
Product	$	399,950	$	442,296
Service		83,910		76,477
Total revenues		483,860		518,773
Costs and operating expenses:
Costs of revenues*		214,220		215,469
Engineering, research and development*		96,751		77,147
Selling, general and administrative*		92,051		69,190
Total costs and operating expenses		403,022		361,806
Income from operations		80,838		156,967
Interest income and other, net		14,776		6,985
Income before income taxes and minority interest		95,614		163,952
Provision for income taxes*		19,681		47,547
Income before minority interest		75,933		116,405
Minority interest		745		—
Net income	$	76,678	$	116,405
Net income per share:
Basic	$	0.39	$	0.59
Diluted	$	0.38	$	0.58
Weighted average number of shares:
Basic		197,408		196,110
Diluted		202,715		199,969

*includes the following amounts related to equity awards (in thousands)

	Three months ended
	September 30,
	2005			2004
Costs of revenues	$	6,811		$	—
Engineering, research and development		11,010			—
Selling, general and administrative		17,007			—
Provision for income taxes		(10,656	)		—
Total	$	24,172		$	—