Event Brief of Q4 2008 KLA-Tencor Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

PARTICIPANTS

. Rick Wallace, KLA-Tencor, CEO . John Kispert, KLA-Tencor, President & COO . Jay Deahna, JPMorgan Chase & Co., Analyst . Brett Hodess, Merrill Lynch, Analyst . Atif Malik, Morgan Stanley, Analyst . Timothy Arcuri, Citigroup, Analyst . C.J. Muse, Lehman Brothers, Analyst . Satya Kumar, Credit Suisse, Analyst . Kate Kotlarsky, Goldman Sachs, Analyst . Mahesh Sanganeria, RBC Capital Markets, Analyst . Gary Hsueh, Oppenheimer & Co., Analyst . Jenny Yuen, JPMorgan Chase & Co., Analyst . Bill Ong, American Technology Research, Inc., Analyst . Chris Hankar, Banc of America Securities, Analyst

. Edward Lockwood, KLA-Tencor, Investor Relations . Peter Kim, Deutsche Bank, Analyst . Benedict Pang, Caris & Company, Analyst

. Stephen Chin, UBS, Analyst . Patrick Ho, Stifel Nicolaus, Analyst

. Gavin Duffy, Broadpoint Capital, Inc., Analyst

OVERVIEW

KLAC reported FY08 revenue of $2.5b and net income including share-based comp but excluding one-time and deal-related costs of $512m or $2.78 per diluted share. 4Q08 revenue was $591m and non-GAAP net income was $107m or $0.60 per diluted share. Co. expects 1Q09 revenue of $510-525m and EPS including stock based compensation and excluding one-time charges of $0.32-0.36.

FINANCIAL DATA

A. Key Data From Call 1. FY08 revenue = $2.5b. 2. 4Q08 revenue = $591m. 3. FY08 net income (including share-based comp but excluding

one-time and deal-related costs)= $512m. 4. 4Q08 non-GAAP net income = $107m. 5. FY08 diluted EPS (including share-based comp but excluding one-time and deal-related costs) = $2.78. 6. 4Q08 fully diluted GAAP EPS = $0.43. 7. 4Q08 non-GAAP diluted EPS = $0.60.

8. 4Q08 non-GAAP GM = 56.6%. 9. 4Q08 non-GAAP Opex = $193m. 10. 4Q08 Capex = $10m. 11. 4Q08-end cash and investments = roughly $1.6b.

12. 1Q09 revenue guidance = $510-525m. 13. 1Q09 EPS guidance (including stock based compensation and excluding one-time charges)= $0.32-0.36.

PRESENTATION SUMMARY

S1. Business Review (R.W.) 1. FY08 Highlights: 1. Executed growth strategy, organically and through M&A. 2. Improved cost structure.

3. Generated strong cash flow. 4. Returned value to shareholders.

5. Revenue was $2.5b, down 8% YoverY. 6. Net income including share-based comp but excluding one-time and deal-related costs was $512m or $2.78 per diluted share. 7. Generated approx. $668m cash flow from operations. 1. Was active in returning value to shareholders in the year repurchasing just over $1.1b in common stock.

2. Paying cash dividends of approx. $109m. 2. Strategic Objective:

1. Customer Focus. 2. Growth. 3. Operating excellence.

4. Talent. 1. At KLAC, solves mission critical production problems for customers. 2. Co. does that by delivering a portfolio of differentiated solutions utilizing inspection and metrology.

3. Tools help customers increase ROI and keep pace with the increasing complexity of node requirements in advance technology nodes. 3. Customer Focus: 1. KLAC is market leaders in 20 of 22 markets that it serves. 1. Does that due to high-level investment in innovation and close collaboration with customers. 1. This enables to anticipate their future needs and develop appropriately bringing technology when it's needed. 2. Goal is to leverage leadership and financial resources to deliver long-term growth of at least 5% faster than the industry. 1. Although revenue was down in FY08, relative performance exceeded this 5% goal. 2. Well positioned to continue to outpace industry growth through a comprehensive product portfolio and product roadmap, which will address future challenges customer's face at 45 nanometers (nm) and beyond. 4. Growth: 1. Increase in complexity of advanced design rules is fueling

growth in core inspection and metrology markets. 1. This is based on the fact that the new processes require more complicated and difficult inspection. 2. Modeling an increased potential of 30% in the revenue opportunity as Co. transition from 45nm to 32nm nodes. 1. Looking back vs. 65nm to 45nm transition. 3. 4Q08 orders about 75% of those were 45nm pilot lines and development. 4. In June, completed the acquisition of ICOS Vision Systems furthering Co.'s expansion into new markets in back end package inspection, solar and high brightness LED. 5. On 07/30/08, Co. announced the intent to acquire the microelectronics inspection equipment business of Vistec Semiconductor Systems.

1. This business is product leadership in mask registration and

mask CD metrology. 1. Complements Co.'s leadership in mask inspection and strengthens product roadmap to address future market opportunities particularly in double-patterning lithography. 2. Business has a highly regarded legacy for developing precision inspection in metrology equipment that will complement and enhance KLAC own core competencies. 3. Co. is in process of securing regulatory approval for this acquisition. 1. Subject to these approvals, Co. expects to close within the next few months. 6. Continues to execute M&A strategy as a key component of long-term growth objectives. 7. Continuously focusing on improving Co.'s business model. 5. 4Q08 Results: 1. In general, Co. continues to operate in a difficult demand environment and visibility remains poor.

1. Market leaders continue to invest in technology development

and to drive design rules down. 2. Business is down in all major markets and across all product lines as semiconductor industry works to resolve an excess capacity condition while facing increased headwinds from poor macroeconomic conditions and diminished end user

demand. 2. Despite these weak conditions, continued to execute well financially in the period with: 1. Revenue coming in above the range of guidance of $591m. 2. Net income excluding some one-time charges was at the top of the range of $0.60 per share.

3. Cash flow was also strong. 1. Generated approx. $188m in cash from operations. 4. Bookings came in at $469m, down 15% from March. 5. Saw order timing pushing out late in the qtr. with order volumes trending at bottom end of the range of guidance.

1. In final weeks of the qtr., experienced a further slow down

with orders that Co. is originally expecting to see in June pushing out to Dec.-qtr. and beyond. 6. In logic demand, customers continued to drive investment in 45nm build out and 32nm development.

1. Logic was 46% of bookings. 2. Foundries grew sequentially and was 35% of orders. 1. Foundries continued to build out 45nm capacity.

3. Memory was approx. 19% of orders, well below recent results,

due to push outs from NAND customers and continued restrained in DRAM spending. 1. NAND was 29% of memory orders. 7. Looking ahead in 2H of calendar 2008, the outlook for near-term recover in orders is muted. 1. Although Co. expects some pockets of strength among large customers as they invest in development of advanced design

rules, global economic weakness continues to dampen end user demand for high-tech products. 1. Remains cautious in expectations for a broad-based recovery from in 2H. 6. Key Factors: 1. Focusing on customer experience. 2. Maintaining a high level of investment and innovation. 3. Improving cost structure to drive a better business model performance and deliver high returns to shareholders.

1. All these efforts positions Co. well to capitalize on growth

when the cycle conditions improve. 7. Defect Inspection: 1. Technology and product differentiation continues to enable market leadership for KLAC. 1. Had another strong qtr. brightfield adoption in 4Q08, placing 28xx full spectrum brightfield tools with industry

leaders in foundry and memory. 2. Brightfield portfolio is unparallel in the marketplace. 1. Delivering advanced capability required to find killer defects and critical patterning layers allow competitive

technologies in terms of desensitivity, …