KLA (KLAC) 8-K Kla-tencor Reports Fiscal 2008 Second Quarter Results

Exhibit 99.1

News Release

Company Contacts: Jeff Hall Chief Financial Officer (408) 875-6800 jeff.hall@kla-tencor.com   Meggan Powers Sr. Director of Corporate Communications (408) 875-8733 meggan.powers@kla-tencor.com

FOR IMMEDIATE RELEASE

KLA-TENCOR REPORTS FISCAL 2008 SECOND QUARTER RESULTS

SAN JOSE, Calif., January 24, 2008— KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal 2008, which ended on December 31, 2007. The Company reported GAAP net income of $84 million and GAAP earnings per diluted share of $0.45 on revenue of $636 million for the second quarter of fiscal 2008.

“The actions we have taken over the past several quarters to globalize our operations, reduce overhead, and streamline our cost structure are driving efficiencies throughout our business, even in this challenging demand environment.” said Rick Wallace, CEO of KLA-Tencor.

GAAP Results
	Q2 FY 2008		Q1 FY 2008		Q2 FY 2007
Revenues	$	636 million	$	693 million	$	649 million
Net Income	$	84 million	$	88 million	$	90 million
Earnings per Share (diluted)	$	0.45	$	0.46	$	0.44

Non-GAAP Results (includes stock-based compensation)
	Q2 FY 2008		Q1 FY 2008		Q2 FY 2007
Net Income	$	138 million	$	145 million	$	154 million
Earnings per Share (diluted)	$	0.75	$	0.75	$	0.75

A reconciliation between GAAP net income and non-GAAP net income is provided in the tables accompanying this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisition, restatement and restructuring related items.

Financial Highlights for the second quarter of fiscal 2008

• KLA-Tencor reached an agreement in principle for the settlement of a securities class action relating to its historical stock option practices. Under the agreement, KLA-Tencor will be required to make a payment of $65 million to the settlement class. The proposed settlement, which is subject to a final agreement and court approval, will provide a full release of KLA-Tencor and the other named defendants in connection with the allegations raised in the lawsuit.

• The Company declared and paid dividends of $27 million and repurchased $126 million of its common stock.

• KLA-Tencor generated cash flow from operations of $126 million.

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Business Highlights for the second quarter of fiscal 2008

• KLA-Tencor introduced the WaferSight 2^TM, the semiconductor industry’s first metrology system that enables wafer suppliers and chipmakers to measure bare wafer flatness, shape, edge roll-off and nanotopography in a single system with the high precision and tool matching required for 45nm and beyond.

• KLA-Tencor and Nikon Corporation have collaborated to develop a set of fully automated overlay correction control system tools, called Scanner Match Maker (SMM), that chipmakers can use to correct overlay errors common to “mix and match” lithography strategies which use lithography tools of varying capabilities and from different suppliers. The SMM technology is aimed at elevating the performance of all scanners, enabling chipmakers to reduce their dedication of leading-edge scanners to specific layers, thus cutting overall lithography tool costs at more advanced nodes and extending the lifetime of lithography tools.

• KLA-Tencor introduced the Aleris™ family of films metrology systems, beginning with the Aleris 8500, which is the industry’s first system to combine production-worthy composition and multi-layer film thickness metrology.

• KLA-Tencor introduced a unique application for its SensArray™ wafer-level metrology tools, called PlasmaWafer™ Suite,which provides chipmakers and etch equipment suppliers with an easy-to-use measurement capability to help verify plasma etch chamber health and quickly identify problems such as drift, non-uniformity and slight differences in chamber matching.

KLA-Tencor will discuss its fiscal 2008 second quarter results, along with its outlook for the third quarter of fiscal 2008, on a conference call today beginning at 2:00 p.m. Pacific Standard Time. A webcast of the call will be available at:www.kla-tencor.com.

Forward Looking Statements:

Statements in this press release other than historical facts, such as statements regarding the success of collaborations with other companies, the benefit to customers of and demand for KLA-Tencor’s products, and the finalization and approval of the securities class action settlement, 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; 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 and anticipated in forward-looking statements in this release, please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2007, subsequently filed Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein).

About KLA-Tencor:

KLA-Tencor is the world’s leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries. Headquartered in San Jose, Calif., the Company has sales and service offices around the world. An S&P 500 Company, KLA-Tencor is traded on the NASDAQ Global Select Market under the symbol KLAC. Additional information about the Company is available on the Internet athttp://www.kla-tencor.com.

Use of Non-GAAP financial information:

The non-GAAP information and supplemental information provided in this press release is a supplement to, and not a substitute for, our financial results presented in accordance with GAAP.

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide non-GAAP financial information, which are adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information are provided to enhance the user’s overall understanding of our operating performance and our prospects in the future. Specifically, we believe the non-GAAP information provide useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among budgeting and planning tools that management uses for future forecasting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Balance Sheets

(In thousands)	December 31, 2007		June 30, 2007
ASSETS
Current assets:
Cash and investments	$	1,297,204	$	1,710,629
Accounts receivable, net		578,595		581,500
Inventories		482,948		535,370
Other current assets		453,563		425,272
Total current assets		2,812,310		3,252,771
Land, property and equipment, net		361,725		382,240
Goodwill		310,209		311,856
Purchased intangibles, net		153,023		175,432
Other assets		516,558		500,950
Total assets	$	4,153,825	$	4,623,249
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	114,691	$	92,165
Deferred system profit		194,680		201,747
Unearned revenue		53,838		52,304
Other current liabilities		577,683		659,346
Total current liabilities		940,892		1,005,562
Non-current liabilities
Income tax payable		84,289		—
Unearned revenue		47,279		46,950
Other non-current liabilities		37,586		20,695
Total Liabilities		1,110,046		1,073,207
Stockholders’ equity:
Common stock and capital in excess of par value		674,703		967,886
Retained earnings		2,340,557		2,570,751
Accumulated other comprehensive income		28,519		11,405
Total stockholders’ equity		3,043,779		3,550,042
Total liabilities and stockholders’ equity	$	4,153,825	$	4,623,249

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements Of Operations

	Three months ended				Six months ended
(In thousands except per share data)	December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
Revenues:
Product	$	513,449	$	544,302	$	1,091,881	$	1,075,229
Service		122,334		104,968		236,922		203,404
Total revenues		635,783		649,270		1,328,803		1,278,633
Costs and operating expenses:
Cost of revenues		285,005		297,772		590,898		567,891
Engineering, research and development		97,513		108,101		196,857		207,394
Selling, general and administrative		159,778		165,038		270,283		270,999
Total costs and operating expenses		542,296		570,911		1,058,038		1,046,284
Income from operations		93,487		78,359		270,765		232,349
Interest income and other, net		13,269		22,657		30,743		45,114
Income before income taxes and minority interest		106,756		101,016		301,508		277,463
Provision for income taxes		22,821		11,637		129,415		53,005
Income before minority interest		83,935		89,379		172,093		224,458
Minority interest		—		670		—		1,513
Net income	$	83,935	$	90,049	$	172,093	$	225,971
Net income per share:
Basic	$	0.46	$	0.45	$	0.93	$	1.13
Diluted	$	0.45	$	0.44	$	0.91	$	1.11
Weighted average number of shares:
Basic		181,241		199,789		184,516		199,603
Diluted		185,199		204,955		189,122		203,826

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

	Three months ended December 31,
(In thousands)	2007			2006
Cash flows from operating activities:
Net income	$	83,935		$	90,049
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,345			29,049
Impairment charges		6,163			56,830
Non-cash, stock-based compensation		23,252			16,068
Tax benefit from employee stock options		(340	)		—
Excess tax benefit from stock-based compensation		(284	)		—
Minority interest		—			(670	)
Net gain on sale of marketable securities and other investments		(409	)		(710	)
Net gain on sale of real estate		(9,042	)		—
Changes in assets and liabilities:
Accounts receivable, net		48,905			(17,055	)
Inventories		17,782			(25,794	)
Other assets		(31,646	)		(16,562	)
Accounts payable		(4,543	)		(10,273	)
Deferred system profit		(13,366	)		14,804
Other liabilities		(22,325	)		13,904
Net cash provided by operating activities		126,427			149,640
Cash flows from investing activities:
Acquisitions of businesses, net of cash received		(3,966	)		(390,162	)
Capital expenditures, net		(22,609	)		(19,493	)
Proceeds from sale of real estate		34,622			—
Purchase of available-for-sale securities		(247,426	)		(877,429	)
Proceeds from sale of available-for-sale securities		262,191			789,089
Proceeds from maturity of available-for-sale securities		6,500			30,397
Net cash provided by (used in) investing activities		29,312			(467,598	)
Cash flows from financing activities:
Issuance of common stock		31,764			—
Common stock repurchases		(126,237	)		—
Payment of dividends to stockholders		(27,151	)		(23,967	)
Excess tax benefit from stock-based compensation		284			—
Net cash used in financing activities		(121,340	)		(23,967	)
Effect of exchange rate changes on cash and cash equivalents		(807	)		5,340
Net increase (decrease) in cash and cash equivalents		33,592			(336,585	)
Cash and cash equivalents at beginning of period		514,051			1,199,969
Cash and cash equivalents at end of period	$	547,643		$	863,384
Supplemental cash flow disclosures:
Income taxes paid, net	$	105,549		$	41,072

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands except per share data)

Reconciliation of GAAP Net Income to Non-GAAP Net Income

		Three months ended									Six months ended
		December 31, 2007			September 30, 2007			December 31, 2006			December 31, 2007			December 31, 2006
GAAP Net income		$	83,935		$	88,158		$	90,049		$	172,093		$	225,971
Adjustments to reconcile GAAP net income to non-GAAP net income
Acquisition-related charges	a		21,904			12,366			18,074			34,270			18,892
Restructuring, severance and others	b		(5,986	)		2,279			67,180			(3,707	)		67,180
Restatement-related charges	c		67,000			2,111			15,357			69,111			17,860
Income tax effect of non-GAAP adjustments	d		(28,747	)		(6,320	)		(36,330	)		(35,067	)		(37,582	)
Non recurring tax item	e		—			46,613			—			46,613			—
Non-GAAP net income		$	138,106		$	145,207		$	154,330		$	283,313		$	292,321
GAAP Net income per diluted share		$	0.45		$	0.46		$	0.44		$	0.91		$	1.11
Non-GAAP net income per diluted share		$	0.75		$	0.75		$	0.75		$	1.50		$	1.43
Shares used in diluted shares calculation			185,199			193,043			204,955			189,122			203,826

Impact of items included in Condensed Statements of Operations:

	Acquisition- Related Charges			Restructuring, Severance and Other			Restatement- Related Charges			Total Pre-tax GAAP to Non-GAAP Adjustment
Cost of revenues	$	15,261		$	1,243		$	0		$	16,504
Engineering, research and development		4,172			388			0			4,560
Sales, general and administrative		2,471			(7,617	)		67,000			61,854
Total in Q2 FY 2008	$	21,904		$	(5,986	)	$	67,000		$	82,918
Total in Q1 FY 2008	$	12,366		$	2,279		$	2,111		$	16,756
Total in Q2 FY 2007	$	18,074		$	67,180		$	15,357		$	100,611
	Q2 FY 2008			Q1 FY 2008			Q2 FY 2007
Stock-based compensation
Cost of revenues		4,700			6,253			8,002
Engineering, research and development		7,109			8,592			11,243
Sales, general and administrative		11,443			13,238			(3,177	)
Provision for income taxes		(8,038	)		(8,475	)		(4,858	)
Total		15,214			19,608			11,210

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide non-GAAP financial information, which are adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information are provided to enhance the user’s overall understanding of our operating performance and our prospects in the future. Specifically, we believe the non-GAAP information provide useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating

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results. The non-GAAP information is among budgeting and planning tools that management uses for future forecasting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.

a Acquisition-related charges include impairment and amortization of intangibles, inventory fair value adjustments, in-process research and development associated with acquisitions, as well as asset impairment from discontinuing acquired products. Management believes that the expense associated with the impairment and amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held business. Management believes that it is appropriate to exclude asset impairment from discontinuing acquired products as it is not indicative of ongoing operating results or limits comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

b Restructuring, severance and other includes costs associated with facilities divestment program, worldwide reduction in force, and gains from sale of facilities. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results or limit comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

c Restatement-related charges include compensation related to reimbursement of non-executive employees for penalty taxes under section 409A of the Internal Revenue Code, legal and other expenses related to the stock option investigation, shareholder litigation and related matters. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results or limit comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

d Income tax effect on non-GAAP adjustments. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure on non-GAAP net income.

e Non recurring tax item includes the U.S. tax impact associated with the implementation of our global manufacturing strategy. Management believes that it is appropriate to exclude this item as it limits comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

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