SAN JOSE, Calif., Oct. 4, 2004--KLA-Tencor Corporation (NASDAQ: KLAC) announced today that it has signed a definitive agreement to acquire Candela Instruments--a leading supplier of laser-based surface inspection systems optimized for the data storage industry. Company officials report that this transaction marks another milestone in KLA-Tencor's long-term strategy to expand into other high-growth markets beyond the semiconductor industry.

According to KLA-Tencor President and CEO Ken Schroeder, "Candela's optical surface analyzers add another important core technology to our growing portfolio of inspection and metrology solutions for the Data Storage Industry. In addition, with its versatility and speed, this novel inspection technology has already enabled first-mover advantage in a number of other microelectronic markets--paving the way to future growth opportunities."

As with the semiconductor industry, the data storage industry continues to face severe challenges in the form of escalating technical complexity, tighter market windows and increasing cost pressures. "Our strategy has been to combine our own best-in-class technologies and expertise with other enabling technologies to create intelligent, ROI-driven solutions for some of the industry's toughest process problems," explained Jeff Donnelly, General Manager of KLA-Tencor's Data Storage Division.

Candela Instruments is an excellent example of that strategy in action--offering a complementary and highly focused product portfolio that will allow KLA-Tencor to deliver solutions across a broader array of process steps. "As we continue to expand both the breadth and depth of our data storage solution set, we remain focused on those areas that are most critical and deliver the greatest value to our customers. This includes enabling their technology roadmaps, reducing their costs, and speeding their time-to-market and time-to-profit on next-generation drives and components," Donnelly added.

Founded in 1997, Candela Instruments is the leader in a breakthrough inspection technology called optical surface analysis (OSA) for both opaque and transparent films and substrates. Due to their speed, sensitivity and excellent cost of ownership, these tools have been aggressively adopted in the storage industry for disk inspection and metrology. With more than 180 tools installed, Candela is the market leader in the data storage industry's disk inspection market and has also developed offerings for the inspection of transparent wafers and films in industries such as high-brightness light-emitting diodes (LEDs) and coated glass for liquid crystal on silicon (LCoS) applications.

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., the company has sales and service offices around the world. An S&P 500 company, 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

Contact:
Meggan Powers
Director Corporate Communications