San Jose, Calif. - October 12, 2000 - KLA-Tencor Corporation today announced record operating results for its first fiscal quarter ended September 30, 2000. Revenues were $535 million, a 96% increase from the $273 million of the September, 1999 quarter and an 11% increase from the previous quarter. Net income improved almost three-fold to $106 million, or $0.54 per share, compared to $36 million, or $0.19 per share, excluding the impact of non-recurring acquisition, restructuring and other charges in the same period one year ago. Net income and earnings per share increased 15% sequentially from the June, 2000 quarter when the company reported $92 million and $0.47 respectively.

Ken Schroeder, KLA-Tencor's president and chief executive officer, said, "The strong demand across our entire product line contributed to our current quarter's positive financial results. Our recently introduced wafer inspection systems, 2350, es20xp, and AIT III, have been well received by customers and we expect significant order activity for these systems over the next several quarters. Going forward, we believe we can enhance our leadership position by continuing to pursue our strategy of besting our own best-in-class products with new and innovative solutions."

The Company ended the quarter with over six months backlog at current shipping levels due to the continued healthy book to bill ratio. Geographically, the strongest performance came from Japan and Singapore. Orders from the U.S., Europe and Taiwan returned to more historical proportions of total bookings.

Bookings remained strong in all product areas, with record bookings for overlay metrology, macro inspection and optical review products. Both reticle inspection and wafer inspection products had significant order interest in the new product platforms.

Gross margins increased to 57.3% during the September quarter from 57.1% in the June quarter. Total fixed costs decreased as a percent of revenue from 33.0% in the June quarter to 32.1%, or $172 million, in the September quarter. The Company increased spending on engineering programs during the quarter to $81 million, compared with $76 million in the June quarter, to support advanced e-beam and optical wafer inspection programs.

During the quarter, the Company purchased land in Livermore, California for the construction of a new campus to support revenue and headcount growth in a location that offers cost of living advantages over Silicon Valley. Two buildings currently under construction at this site will initially contain manufacturing, training and customer support activities.

Cash and investments decreased slightly during the quarter to $935 million due to share repurchases, investments in land and buildings, and increased inventory.

Forward Looking Statements: Statements in this press release regarding future order activity and 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: delays or cancellations of orders by customers; shipments or acceptances; inability by the company to meet its production and/or product development schedules; the demand for semiconductors; and new and enhanced product offerings by competitors. For other factors that may cause actual results to differ from those projected, please refer to the company's Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission.

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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.

Contact:
Meggan Powers
Director Corporate Communications