MILPITAS, Calif.—October 30, 2008—KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal 2009, which ended on September 30, 2008. KLA-Tencor reported GAAP net income of $19 million and GAAP earnings per diluted share of $0.11 on revenue of $533 million for the first quarter of fiscal 2009.

“Macro-economic uncertainty, declining consumer demand, and limited access to financing are having an adverse impact on semiconductor capital equipment spending across all end markets and geographies. In response to sharp order declines and uncertain outlook, we are implementing actions to reduce costs, while still maintaining our strategic focus and strengthening KLA-Tencor’s competitive position, and to lay the foundation for growth once the business environment improves,” commented Rick Wallace, chief executive officer of KLA-Tencor. “Our market leadership, the exceptional value of our technology and our strong balance sheet provide us with the resources to maintain a high level of customer focus during this downturn.”

A reconciliation between GAAP net income and non-GAAP net income is provided following the financial statements that are part of this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisition, restatement and restructuring related items.

• Completed the acquisition of the Microelectronic Inspection Equipment (MIE) business unit of Vistec Semiconductor Systems.  The MIE business unit manufactures and sells advanced semiconductor mask registration measurement tools and wafer manufacturing defect inspection systems.
• Generated cash flow from operations of $81 million.
• Introduced the eS35 e-beam inspection system, capable of detecting and classifying smaller physical defects and more subtle electrical defects at significantly higher speeds. The eS35 features improved sensitivity along with substantial throughput gains, to accelerate yield of 4Xnm and 3Xnm devices.
• Introduced the latest stylus surface profiling system, the P-6^™, which offers a unique set of advanced features for scientific research and production environments, such as photovoltaic solar cell manufacturing.
• Introduced the Surfscan^® SP2^XP, a new monitor-wafer inspection system for the integrated circuit (IC) market that features improved sensitivity to defects on silicon, poly and metal films and enhanced ability to sort defects by type and size, to accelerate fabs’ development of 3Xnm and 2Xnm next-generation devices.
• Introduced the Candela™ 7100 series for advanced defect inspection and classification of hard disk drive substrates and media, designed to help manufacturers identify and classify submicron critical defects such as pits, bumps, particles and buried defects, for maximizing yield and lowering total cost of inspection.
• Introduced the die-to-database version of its latest mask inspection technology, Wafer Plane Inspection™ (WPI). WPI allows leading-edge logic and foundry mask makers to concurrently detect defects on the mask and assess whether the defects are likely to print on the wafer.
• Introduced PROLITH^TM 12, the latest industry-leading computational lithography tool, which enables researchers to cost-effectively explore the feasibility of various mask designs, photo materials and processes associated with Extreme Ultra-Violet (EUV) lithography.

KLA-Tencor will discuss its fiscal 2009 first quarter results, along with its outlook for the second quarter of fiscal 2009, on a conference call today beginning at 2:00 p.m. Pacific Daylight Time. A webcast of the call will be available at: www.kla-tencor.com

Statements in this press release other than historical facts, such as statements regarding the benefit to customers of KLA-Tencor’s products, anticipated performance of the company’s products, anticipated market conditions, potential market opportunities for KLA-Tencor, anticipated steps designed to reduce KLA-Tencor’s costs and the success of such efforts, KLA-Tencor’s ability to sustain its current market position in the future, and demand for KLA-Tencor’s products, 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; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product offerings by competitors; cancellation of orders by customers; KLA-Tencor’s inability to successfully integrate and manage businesses that it acquires, including ICOS Vision Systems Corporation NV and the MIE business unit; 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 KLA-Tencor’s Annual Report on Form 10-K for the year ended June 30, 2008, 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).

KLA-Tencor Corporation is the world’s leading supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Headquartered in Milpitas, California, 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 at http://www.kla-tencor.com. (KLAC-F)

P-6, Surfscan, Candela, Wafer Plane Inspection and PROLITH are all trademarks of KLA-Tencor Corporation.

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

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is 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 provides 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 the budgeting and planning tools that management uses for future forecasting. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is 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 provides 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 the budgeting and planning tools that management uses for future forecasting. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.