Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þx NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þx

As of ~~April~~October 30, 2009, there were ~~126,394,509~~127,250,393 shares of Registrant’s Common Stock outstanding.


	Three Months Ended					Nine Months Ended					Three Months Ended
	March 29, 2009			March 30, 2008		March 29, 2009			March 30, 2008		September 27, 2009			September 28, 2008
Total revenue	$	174,412		$	613,810	$	898,182		$	1,908,751	$	318,548		$	440,361
Cost of goods sold		127,680			320,201		556,212			963,594		187,233			254,203
Cost of goods - 409A expense		—			6,401		—			6,401
Cost of goods sold - restructuring and asset impairments		10,217			—		20,993			—
Cost of goods sold — restructuring and asset impairments												—			3,048
Cost of goods sold — 409A expense												(5,455	)		—

Total cost of goods sold		137,897			326,602		577,205			969,995
Total costs of goods sold												181,778			257,251

Gross margin		36,515			287,208		320,977			938,756		136,770			183,110

Research and development		70,434			80,576		220,778			237,107		71,199			81,563
Selling, general and administrative		58,515			74,491		185,813			210,288		52,119			68,299
Goodwill impairment		89,076			—		89,076			—
Restructuring and asset impairments		13,028			—		39,117			—		2,093			15,968
409A expense		646			43,784		2,250			43,784		(17,893	)		761
In-process research and development		—			2,074		—			2,074

Total operating expenses		231,699			200,925		537,034			493,253		107,518			166,591

Operating income (loss)		(195,184	)		86,283		(216,057	)		445,503
Other income, net		13,497			49,605		15,281			57,201
Operating income												29,252			16,519
Other income (expense), net												(368	)		9,017

Income (loss) before income taxes		(181,687	)		135,888		(200,776	)		502,704
Income before income taxes												28,884			25,536
Income tax expense		16,672			32,364		12,882			135,533		12,087			16,663

Net income (loss)	$	(198,359	)	$	103,524	$	(213,658	)	$	367,171
Net income											$	16,797		$	8,873

Net income (loss) per share:
Basic net income (loss) per share	$	(1.58	)	$	0.83	$	(1.70	)	$	2.95
Net income per share:
Basic net income per share											$	0.13		$	0.07

Diluted net income (loss) per share	$	(1.58	)	$	0.82	$	(1.70	)	$	2.90
Diluted net income per share											$	0.13		$	0.07

Number of shares used in per share calculations:
Basic		125,566			124,768		125,368			124,509		126,774			125,527

Diluted		125,566			126,549		125,368			126,531		127,890			126,819

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Lam Research Corporation (“Lam Research” or the “Company”) for the fiscal year ended June ~~29, 2008,~~28, 2009, which are included in the Annual Report on Form 10-K as of and for the year ended June ~~29, 2008~~28, 2009 (the ~~“2008~~“2009 Form 10-K”). The Company’s Forms 10-K, Forms 10-Q and Forms 8-K are available online at the Securities and Exchange Commission website on the Internet. The address of that site is www.sec.gov. The Company also posts ~~the~~its Forms 10-K, Forms 10-Q and Forms 8-K on its corporate website at ~~www.lamresearch.com.~~http://investor.lamresearch.com.

The Company’s reporting period is a 52/53-week fiscal year. The Company’s current fiscal year will end June ~~28, 2009~~27, 2010 and includes 52 weeks. The ~~quarter~~quarters ended ~~March 29,~~September 27, 2009 (the “September 2009 quarter”) and September 28, 2008 (the “September 2008 quarter”) each included 13 ~~weeks and the quarter ended March 30, 2008 included 14~~ weeks.

~~On June 30, 2008, the Company adopted the required portions of Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements~~” (“SFAS No. 157”). There was no material impact to the Company’s consolidated financial statements from the adoption of SFAS No. 157. This Statement defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. SFAS No. 157 currently applies to all financial assets and liabilities, and nonfinancial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. In ~~February 2008,~~December 2007, the Financial Accounting Standards Board ~~(FASB) issued FASB Staff Position No. 157-2, delaying~~(“FASB”) revised the ~~effective date of SFAS No. 157~~authoritative guidance for ~~nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis.~~business combinations. The delayed portions of SFAS No. 157 will be adopted by the Company beginning in its fiscal year ending June 27, 2010. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active,” which clarifies the application of SFAS No. 157 when the market for a financial asset is inactive. Specifically, FSP FAS 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. Thenew guidance of FSP FAS 157-3 is effective immediately and the Company has adopted its provisions with respect to its financial assets and liabilities as of September 28, 2008. The impact of adopting the non-delayed portions of SFAS No. 157 is more fully described in Note 4.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement was effective for the Company beginning June 30, 2008. The Company has not applied the fair value option to any items; therefore, the Statement did not have an impact on the consolidated financial statements.

~~In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R~~ establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. ~~SFAS No. 141R~~The revised guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. ~~SFAS No. 141R is effective as~~The accounting treatment of tax benefits from acquired companies has changed under the ~~beginning of an entity’s fiscal year that begins after December 15, 2008.~~revised guidance. Any changes to the tax benefits associated with the valuation allowance recorded in the SEZ acquisition will be recorded through income tax expense. The Company ~~expects to adopt SFAS No. 141R in~~adopted the ~~beginning of fiscal year 2010~~revised guidance on June 29, 2009 and ~~is currently evaluating the potential impact, if any, of~~ the adoption ~~of SFAS No. 141R~~did not have a significant impact on its ~~consolidated~~ results of operations ~~and~~or financial condition.

noncontrolling equity investment upon deconsolidation of a subsidiary is initially measured at fair value. ~~SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 160 will result in the reclassification of minority interests to stockholders’ equity.~~ The Company ~~does not believe~~adopted the guidance on June 29, 2009 and the adoption ~~of SFAS No. 160 will~~did not have a ~~material~~significant impact on its results of operations ~~and financial condition.~~

On December 29, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement 133” (“SFAS No. 161”). There was no material impact to the Company’s consolidated financial statements from the adoption of SFAS No. 161. SFAS No. 161 requires expanded and enhanced disclosure for derivative instruments, including those used in hedging activities. See Note 4 for additional information.

In April 2008, the FASB issued FASB Staff Position Statement of Financial Accounting Standards 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 provides guidance with respect to estimating the useful lives of recognized intangible assets acquired on or after the effective date and requires additional disclosure related to the renewal or extension of the terms of recognized intangible assets. FSP SFAS 142-3 is effective for fiscal years and interim periods beginning after December 15, 2008. The Company is currently assessing the impact of the adoption of FSP SFAS 142-3 on its results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” (“FSP SFAS 157-4”) which provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased. This FSP re-emphasizes that regardless of market conditions the fair value measurement is an exit price concept as defined in SFAS No. 157. This FSP clarifies and includes additional factors to consider in determining whether there has been a significant decrease in market activity for an asset or liability and provides additional clarification on estimating fair value when the market activity for an asset or liability has declined significantly. The scope of this FSP does not include assets and liabilities measured under level 1 inputs. FSP SFAS 157-4 is applied prospectively to all fair value measurements where appropriate and will be effective for interim and annual periods ending after June 15, 2009. The Company is currently evaluating the potential impact, if any, of the adoption of FSP SFAS 157-4 on its consolidated results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1 and APB 28-1”). This FSP which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requiresrequire publicly-traded companies, ~~as defined in APB Opinion No. 28, “Interim Financial Reporting,”~~ to provide disclosures on the fair value of financial instruments in interim financial statements. ~~FSP SFAS 107-1~~The Company adopted this guidance on June 29, 2009 and ~~APB 28-1~~the adoption resulted in expanded disclosures but did not have a material impact on the Company’s consolidated results of operations or financial condition.

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification is ~~effective~~the single source for ~~interim~~all authoritative Generally Accepted Accounting Principles (“GAAP”) recognized by the FASB to be applied for financial statements issued for periods ending after September 15, 2009. The Codification does not change GAAP and did not have a material impact on the Company’s financial statements.

In September 2009, the FASB ratified guidance from the Emerging Issues Task Force (“EITF”) regarding revenue arrangements with multiple deliverables. This guidance addresses criteria for separating the consideration in multiple-element arrangements and will require companies to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor-specific objective evidence or other third-party evidence of the selling price. This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, ~~2009.~~2010 and early adoption is permitted. The Company is currently evaluating the potential impact, if any, of the adoption of ~~FSP SFAS 107-1 and APB 28-1~~this guidance will have on its consolidated results of operations ~~and~~or financial condition.

In September 2009, the FASB also ratified guidance from the EITF regarding certain revenue arrangements that include software elements. This guidance modifies the scope of the software revenue recognition rules to exclude (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and early adoption is permitted. The Company is currently evaluating the potential impact, if any, the adoption of this guidance will have on its consolidated results of operations or financial condition.

The Company has adopted stock plans that provide for the grant to eligible participants of equity-based awards, including stock options and restricted stock units, of Lam Research common stock (“Common Stock”). The Company also has an employee stock purchase plan (“ESPP”) that allows employees to purchase its Common ~~Stock.~~Stock at a discount through payroll deductions.

The Company accounts for equity-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) using the modified prospective method. The Company recognized the following equity-based compensation expense and related income tax benefit in the consolidated statements of operations:


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 29, 2009		March 30, 2008		March 29, 2009		March 30, 2008		September 27, 2009		September 28, 2008
	(in millions)								(in millions)
Equity-based compensation expense	$	10.2	$	10.3	$	39.7	$	30.9	$	14.0	$	15.4
Income tax benefit related to equity-based compensation expense	$	1.7	$	1.4	$	6.9	$	4.4	$	1.5	$	2.8

The estimated fair value of the Company’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting ~~period~~periods on a straight-line ~~basis for awards granted after the adoption of SFAS No. 123R and on a graded vesting basis for awards granted prior to the adoption of SFAS No. 123R.~~

The 2007 Stock Incentive Plan provides for the grant of non-qualified equity-based awards to eligible participants. Additional shares are reserved for issuance pursuant to awards previously granted under the Company’s 1997 Stock Incentive Plan and its 1999 Stock Option Plan (together with the 2007 Stock Incentive Plan, the “Plans”). As of ~~March 29,~~September 27, 2009, there were a total of ~~3,640,532~~3,651,123 shares reserved for issuance pursuant to outstanding equity-based awards ~~issued and outstanding.~~under the Plans. There were an additional ~~11,883,733~~10,759,820 shares reserved and available for future issuance pursuant to future equity-based awards granted under the 2007 Stock Incentive Plan as of ~~March 29,~~September 27, 2009.

The Company did not grant any stock options during the three ~~and nine~~ months ended ~~March 30,~~September 27, 2009 and September 28, 2008.

A summary of stock option activity under the Plans as of ~~March 29,~~September 27, 2009 and changes during the ~~nine~~three months then ended is presented below:

There were no options exercised during the three months ended March 30, 2008 due to the suspension of the Plans as a result of the Company’s inability to register securities under Form S-8 due to the Company’s inability to timely file its SEC filings as a result of the voluntary internal stock option review conducted during that time period.

~~Stock options granted during the quarter ended March 29, 2009 were valued using the Black-Scholes model, assuming no expected dividends and the following weighted-average assumptions:~~

As of ~~March 29,~~September 27, 2009, there was approximately ~~$3.6~~$2.6 million of total unrecognized compensation ~~cost~~expense related to ~~nonvested~~unvested stock options granted and outstanding; that ~~cost~~expense is expected to be recognized over a ~~weighted average~~ remaining period of ~~1.9~~1.4 years.

A summary of the status of the Company’s restricted stock units as of ~~March 29,~~September 27, 2009 and changes during the ~~nine~~three months then ended is presented below:


Nonvested Restricted Stock Units	Shares (in thousands)		Average Grant- Date Fair Value		Shares (in thousands)		Average Grant- Date Fair Value
Nonvested at June 29, 2008	1,696		$	46.51
Nonvested at June 28, 2009					2,520		$	30.32
Granted	906			27.67	26		$	29.98
Vested	(673	)		49.77	(265	)	$	42.68
Forfeited	(181	)		44.69	(75	)	$	36.78

Nonvested at March 29, 2009	1,748		$	35.74
Nonvested at September 27, 2009					2,206		$	28.61

The fair value of the Company’s restricted stock units was calculated based upon the fair market value of the Company’s stock at the date of grant. As of ~~March 29,~~September 27, 2009, there was ~~$31.8~~$43.0 million of total unrecognized compensation ~~cost~~expense related to ~~nonvested~~unvested restricted stock units granted; that ~~cost~~expense is expected to be recognized over a weighted average remaining period of ~~0.8~~1.7 years.

The 1999 Employee Stock Purchase Plan (the “1999 ESPP”) allows employees to designate a portion of their base compensation to be withheld through payroll deductions and used to purchase the Company’s Common Stock at a purchase price per share of the lower of 85% of the fair market value of the Company’s Common Stock on the first or last day of the applicable offering period. Typically, each offering period lasts 12 months and ~~comprises~~includes three interim purchase dates. As of ~~March 29,~~September 27, 2009, there were a total of ~~7,695,373~~7,055,581 shares available for issuance under the 1999 ESPP.

Awards under the 1999 ESPP were valued using the Black-Scholes model and were valued assuming no expected dividends and the following weighted-average assumptions for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009:

As of ~~March 29,~~September 27, 2009, there was ~~$7.9~~$2.6 million of total unrecognized compensation ~~cost~~expense related to the 1999 ESPP that is expected to be recognized over a remaining period of ~~0.8~~0.3 years.

The Company adopted the required portions of the fair value measurement and disclosure provisions of SFAS No. 157 on June 30, 2008. SFAS No. 157 establishes specific criteria for the fair value measurements of financial and nonfinancial assets and liabilities that are already subject to fair value measurements under current accounting rules. SFAS No. 157 also requires expanded disclosures related to fair value measurements.

~~SFAS No. 157 establishes~~FASB has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. An asset or liability’s level in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. ~~This Statement requires that assets~~Assets and liabilities carried at fair value beare classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets or ~~liabilities.~~

~~The Company’s Level 1 assets consist of money market fund deposits, U.S. Treasury securities, and equity instruments, all of which are traded in an active market~~liabilities with sufficient volume and frequency of transactions.

Level 2: Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

The Company’s Level 2 assets and liabilities include U.S. agency securities, bank time deposits, government sponsored enterprises, bank and corporate notes, municipal notes and bonds, mortgage and asset-backed securities, equity securities, derivative assets and liability contracts, which are priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or ~~liabilities.~~

~~The Company had no Level 3 assets or~~ liabilities ~~as of March 29, 2009.~~and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.

The following table sets forth the Company’s financial assets and liabilities that were recorded at fair value on a recurring basis during the quarter, by level within the fair value hierarchy at ~~March 29,~~September 27, 2009:

The amounts in the table above are reported in the consolidated balance sheet as of ~~March 29,~~September 27, 2009 as ~~follows:~~follows (in thousands):


	Total		Level 1		Level 2		Level 3
	(in thousands)								Total		Level 1		Level 2		Level 3
Cash equivalents	$	285,530	$	285,530	$	—	$	—	$	282,504	$	282,504	$	—	$	—
Short-term investments		248,500		43,871		204,629		—		215,031		30,775		183,798		458
Restricted cash and investments		183,223		13,002		170,221		—		178,944		178,944		—		—
Prepaid expenses and other current assets		1,256		—		1,256		—		61		—		61		—
Other assets		7,352		7,352		—		—		6,554		6,554		—		—

	$	725,861	$	349,755	$	376,106	$	—	$	683,094	$	498,777	$	183,859	$	458

Accrued expenses and other current liabilities	$	1,175	$	—	$	1,175	$	—	$	1,432	$	—	$	1,432	$	—

At September 27, 2009, the fair value of Level 3 assets measured on a recurring basis was $0.5 million and consisted of a corporate note security. Fair values were based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.

The Company carries derivative financial instruments (derivatives) on its balance sheet at their fair values in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) and Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”).values. The Company enters into foreign exchange forward contracts with financial institutions with the primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate fluctuations. The counterparties to these foreign exchange forward contracts are creditworthy multinational financial institutions; therefore, the risk of counterparty nonperformance is not considered to be material.

The Company’s policy is to attempt to minimize short-term business exposure to foreign currency exchange rate fluctuations using an effective and efficient method to eliminate or reduce such exposures. In the normal course of business, the Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations. To protect against a reduction in value of forecasted Japanese yen-denominated revenues, the Company has instituted a foreign currency cash flow hedging program. The Company enters into foreign exchange forward contracts that generally expire within 12 months and no later than 24 months. These foreign exchange forward contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue in the same period the hedged revenue is recognized.

At inception and at each quarter end, hedges are tested for effectiveness using regression testing. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness and are recognized in revenue in the current period. The change in forward time value was not material for all reported periods. There were no gains or losses during the three months ended ~~March 29,~~September 27, 2009 and ~~March 30, 2008 and during the nine months ended March 30,~~September 28, 2008 associated with ineffectiveness or forecasted transactions that failed to occur. There were $4.0 million of deferred net losses, net of tax, associated with ineffectiveness related to forecasted transactions that were no longer considered probable of occurring and were recognized in “Other income (expense), net” in the Company’s Consolidated Statements of Operations during the nine months ended March 29, 2009. To qualify for hedge accounting, the hedge relationship must meet criteria relating both to the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows will be measured.

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as effective cash flow hedges, the Company is able to defer effective changes in the fair value of the hedging instrument within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, with the exception of excluded time value and hedge ineffectiveness recognized, the Company’s results of operations are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are not highly effective or if the Company does not believe that the underlying hedged forecasted transactions would occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to occur, future changes in the fair values of the Company’s derivative instruments would be recognized in earnings without the benefits of offsets or deferrals of changes in fair value arising from hedge accounting treatment. At ~~March 29,~~September 27, 2009, the Company ~~expected~~expects to reclassify the entire amount associated with the ~~$0.2~~$0.7 million of ~~gains~~losses accumulated in other comprehensive income to earnings during the next 12 months due to the recognition in earnings of the hedged forecasted transactions.

The Company also enters into foreign exchange forward contracts to hedge the effects of foreign currency fluctuations associated with foreign currency denominated assets and liabilities, primarily intercompany receivables and payables. ~~Under SFAS No. 133 and SFAS No. 149, these~~These foreign exchange forward contracts are not designated for hedge accounting treatment. Therefore, the change in fair value of these derivatives is recorded into earnings as a component of other income and expense and offsets the change in fair value of the foreign currency denominated ~~intercompany~~assets and ~~trade receivables,~~liabilities, recorded in other income and ~~expense, assuming the hedge contract fully covers the intercompany and trade receivable balances.~~expense.

As of ~~March 29,~~September 27, 2009, the Company had the following outstanding foreign currency forward contracts that were entered into to hedge forecasted revenues and purchases:


	Derivatives Designated as SFAS 133 Hedging Instruments:		Derivatives Not Designated as SFAS 133 Hedging Instruments:		Derivatives Designated as Hedging Instruments:		Derivatives Not Designated as Hedging Instruments:
	(in thousands)				(in thousands)
Foreign Currency Forward Contracts
Sell JPY	$	22,579	$	—	$	27,954	$	—
Sell JPY				26,391		—		28,620
BUY CHF				133,630
BUY EUR				98,614
BUY TWD				47,619
Buy CHF						—		174,630
Buy EUR						—		48,616
Buy TWD						—		43,384

	$	22,579	$	306,254	$	27,954	$	295,250

The fair value of derivatives instruments in the Company’s condensed consolidated balance sheets as of ~~March 29,~~September 27, 2009 was as follows:


	Fair Value of Derivative Instruments							Fair Value of Derivative Instruments
	Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(in thousands)							(in thousands)
Derivatives designated as SFAS No. 133 hedging instruments:
Foreign exchange forward contracts	Prepaid expenses and other assets	$	1,242	Accrued expenses	$	(511	)
Derivatives not designated as hedging instruments under SFAS No. 133:
Derivatives designated as hedging instruments:

Foreign exchange forward contracts	Prepaid expenses and other assets		14	Accrued expenses		(664	)	Prepaid expense and other assets	$	59	Accrued liabilities	$	(735	)

Derivatives not designated as hedging instruments:
		$	1,256		$	(1,175	)
Foreign exchange forward contracts								Prepaid expense and other assets	$	2	Accrued liabilities	$	(697	)

Total derivatives									$	61		$	(1,432	)

The effect of derivative instruments designated as cash flow hedges on the Company’s condensed consolidated statements of operations for the ~~nine~~three months ended ~~March 29,~~September 27, 2009 was as follows:


Derivatives Designated as SFAS 133 Hedging Instruments:	Gain (Loss) Recognized (Effective Portion) (1)			Gain (Loss) Recognized (Effective Portion) (2)			Gain (Loss) Recognized (Ineffective Portion) (3)			Gain (Loss) Recognized (Excluded from Effectiveness Testing) (4)
Derivatives Designated as Hedging Instruments:												Gain (Loss) Recognized (Effective Portion) (1)			Gain (Loss) Recognized (Effective Portion) (2)		Gain (Loss) Recognized (Ineffective Portion) (3)		Gain (Loss) Recognized (Excluded from Effectiveness Testing) (4)
	(in thousands)											(in thousands)
Foreign exchange forward contracts	$	(10,078	)	$	(4,363	)	$	(2,973	)	$	1,449	$	(707	)	$	5	$	—	$	36

The effect of derivative instruments not designated as cash flow hedges on the Company’s condensed consolidated statement of operations for the ~~nine~~three months ended ~~March 29,~~September 27, 2009 was as follows:


Derivatives Not Designated as SFAS 133 Hedging Instruments:	Gain (Loss) Recognized (5)
Derivatives Not Designated as Hedging Instruments:				Gain (Loss) Recognized (5)
	(in thousands)			(in thousands)
Foreign exchange forward contracts	$	(7,027	)	$	7,253

The Company accounts for its investment portfolio at fair value. There were no net realized gains or losses on investments due to other-than-temporary impairment charges during the three months ended September 27, 2009 and September 28, 2008. Realized gains and (losses) from investments were less than $0.1 million and $(0.6) million during the three months ended September 27, 2009 and September 28, 2008, respectively. Realized gains and (losses) for investments sold are specifically identified. Management assesses the fair value of investments in debt securities that are not actively traded through consideration of interest rates and their impact on the present value of the cash flows to be received from the investments. The Company also considers whether changes in the credit ratings of the issuer could impact the assessment of fair value.

An analysis of the Company’s fixed income securities in unrealized loss positions as of September 27, 2009 is as follows:

The amortized cost and fair value of cash equivalents and short-term investments and restricted cash and investments with contractual maturities are as follows:

Management has the ability, if necessary, to liquidate any of its investments in order to meet the Company’s liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than one year from the date of purchase nonetheless are classified as short-term on the accompanying consolidated balance sheets.

Inventories are stated at the lower of cost (first-in, first-out method) or market. Shipments to Japanese customers, to whom title does not transfer until customer acceptance, are classified as inventory and carried at cost until title transfers. Inventories consist of the following:


	March 29, 2009		June 29, 2008		September 27, 2009		June 28, 2009
	(in thousands)				(in thousands)
Raw materials	$	156,515	$	157,135	$	121,112	$	145,421
Work-in-process		33,791		54,684		45,611		35,487
Finished goods		70,361		70,399		53,360		52,502

	$	260,667	$	282,218	$	220,083	$	233,410


	March 29, 2009			June 29, 2008			September 27, 2009			June 28, 2009
	(in thousands)						(in thousands)
Manufacturing, engineering and office equipment	$	256,460		$	244,378		$	251,597		$	254,397
Computer equipment and software		69,502			73,237			73,007			69,567
Land		16,072			16,785			15,899			16,550
Buildings		62,849			59,102			64,416			64,488
Leasehold improvements		47,060			46,300			53,374			52,115
Furniture and fixtures		13,557			12,104			14,332			13,295

		465,500			451,906			472,625			470,412
Less: accumulated depreciation and amortization		(239,636	)		(216,171	)		(261,277	)		(254,746	)

	$	225,864		$	235,735		$	211,348		$	215,666

~~Changes in the~~The balance of goodwill ~~during the nine months ended March 29, 2009 were~~was $169.2 million as ~~follows:~~

~~As a result~~ of a combination of factors, including the current economic environment, a sustained decline in the Company’s market valuation and a decline in the Company’s operating results, the Company has concluded, in accordance with Statement of Financial Accounting Standards Number 142, “Goodwill and Other Intangible Assets”, that the fair value of its Clean Product Group has been reduced below its carrying value. As a result, the Company recorded a non-cash goodwill impairment charge of approximately $89.1 million during the quarter ended March 29, 2009. The goodwill impairment charge is based on the Company’s current best estimate.

Due to the complexities involved in determining the implied fair value of goodwill of the Clean Product Group, the Company expects to finalize its goodwill impairment analysis during the fourth quarter of fiscal yearSeptember 27, 2009 and there could be adjustments to the goodwill impairment charge when the goodwill impairment analysis is completed. Any adjustments to the Company’s preliminary estimates as a result of completing this evaluation will be recorded in the Company’s financial statements for the quarter ending June 28, 2009.

If the Company’s future operating results do not meet current forecasts or if the Company experiences a sustained decline in its market capitalization that is determined to be indicative of a reduction in fair value of the Company’s Clean Product Group, an additional impairment analysis may be required which may result in additional impairment charges.

Goodwill attributable to the SEZ acquisition of approximately ~~$106~~$104 million is not tax deductible due to foreign jurisdiction law. The remaining goodwill balance of approximately $65 million is tax deductible.

The following table provides details of the Company’s intangible assets subject to amortization as of ~~March 29,~~September 27, 2009 (in thousands, except years):


	Gross		Accumulated Amortization			Changes in Foreign Currency Exchange Rates			Net		Weighted- Average Useful Life (years)	Gross		Accumulated Amortization			Changes in Foreign Currency Exchange Rates			Net		Weighted-Average Useful Life (years)
Customer relationships	$	35,226	$	(12,318	)	$	—		$	22,908	6.90	$	35,226	$	(14,796	)	$	—		$	20,430	6.90
Existing technology		61,598		(9,837	)		(7,204	)		44,557	6.70		61,598		(13,820	)		(7,204	)	$	40,574	6.70
Other intangible assets		35,216		(16,977	)		(1,298	)		16,941	4.10		35,216		(20,814	)		(1,298	)	$	13,104	4.10
Patents		20,270		(7,102	)		—			13,168	6.13		20,270		(8,744	)		—			11,526	6.13

	$	152,310	$	(46,234	)	$	(8,502	)	$	97,574	6.07	$	152,310	$	(58,174	)	$	(8,502	)	$	85,634	6.07

The following table provides details of the Company’s intangible assets subject to amortization as of June ~~29, 2008~~28, 2009 (in thousands, except years):


	Gross		Accumulated Amortization			Net		Weighted- Average Useful Life (years)	Gross		Accumulated Amortization			Changes in Foreign Currency Exchange Rates			Net		Weighted-Average Useful Life (years)
Customer relationships	$	35,226	$	(8,501	)	$	26,725	6.90	$	35,226	$	(13,557	)	$	—		$	21,669	6.90
Existing technology		61,598		(4,008	)		57,590	6.70		61,598		(11,799	)		(7,204	)		42,595	6.70
Other intangible assets		35,216		(10,157	)		25,059	4.10		35,216		(18,924	)		(1,298	)		14,994	4.10
Patents		17,710		(5,195	)		12,515	7.40		20,270		(7,923	)		—			12,347	6.13

	$	149,750	$	(27,861	)	$	121,889	6.20	$	152,310	$	(52,203	)	$	(8,502	)	$	91,605	6.07

The Company recognized ~~$6.2~~$5.9 million and ~~$18.2~~$6.6 million in intangible asset amortization expense during the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 ~~respectively. The Company recognized $4.2 million~~ and ~~$11.3 million in intangible asset amortization expense during the three and nine months ended March 30,~~September 28, 2008, respectively.

The estimated future amortization expense of purchased intangible assets as of ~~March 29,~~September 27, 2009 is as follows (in thousands):


Fiscal Year	Amount		Amount
2009 (three months)	$	6,072
2010		24,064
2010 (9 months)			$	18,140
2011		21,083		21,206
2012		17,833		17,956
2013		16,403		16,525
2014				9,956
Thereafter		12,119		1,850

	$	97,574	$	85,634


					September 27,		June 28,
	March 29, 2009		June 29, 2008		2009		2009
	(in thousands)				(in thousands)
Accrued compensation	$	167,957	$	225,227	$	146,387	$	171,609
Warranty reserves		25,945		61,308		20,150		21,185
Income and other taxes payable		10,421		32,589		7,526		10,897
Restructuring		26,091		5,487
Other		59,057		65,451		23,367		36,331

	$	289,471	$	390,062	$	197,430	$	240,022

~~As a result~~Following the voluntary independent review of ~~determinations made in connection with~~ the Company’s ~~voluntary independent stock~~historical option ~~review,~~grant process, the Company considered ~~the application of~~whether Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (“IRC”) and similar provisions of state law would apply to certain stock option grants ~~where, under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued~~that were found to ~~Employees”,~~have intrinsic value ~~existed~~ at the time of ~~grant. In the event such~~their respective measurement dates. If a stock option ~~grants are~~is not considered as issued with an exercise price of at least the fair market value atof the ~~original grant date under the IRC and applicable regulations thereunder, these options are~~underlying stock, it may be subject to penalty taxes under Section ~~409A.~~409A and similar provisions of state law. In such a case, such taxes may be assessed not only on the intrinsic value increase, but on the entire stock option gain as measured at various times. On March 30, 2008, the Board of Directors of the Company authorized the Company to assume ~~the~~potential tax ~~liability~~liabilities of certain employees, including the Company’s Chief Executive Officer and certain other executive officers, ~~with~~relating to options that might be subject to Section ~~409A.~~409A and similar provisions of state law. The assumed Section 409A liability was ~~$53.1 million and $50.9~~$53.7 million as of ~~March 29,~~June 28, 2009 ~~and June 29, 2008, respectively,~~ and is included in accrued compensation in the table above.

During the quarter ended September 27, 2009, the Company finalized a portion of the Section 409A liabilities which resulted in a reduction of the liability and net credits recognized in the statements of operations of $(5.5) million recorded in cost of goods sold and $(17.9) million recorded in operating expenses. The remaining assumed Section 409A liability at September 27, 2009 includes $27.6 million in accrued compensation in the table above and legal fees of $2.5 million included in other in the table above. The determinations from the voluntary independent stock option review are more fully described in Note 3, “Restatement of Consolidated Financial Statements” to Consolidated Financial Statements in Item 8 of the Company’s 2007 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of the Company’s 2007 Form 10-K.


	Three Months Ended						Nine Months Ended						Three Months Ended
	March 29, 2009			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			September 28, 2008
	(in thousands)												(in thousands)
Interest income	$	5,360		$	12,426		$	21,287		$	40,398		$	2,048		$	7,796
Interest expense		(1,146	)		(2,866	)		(6,182	)		(9,659	)		(189	)		(2,553	)
Foreign exchange gains		10,911			40,696			612			28,506
Charitable contributions		—			—			—			(908	)
Foreign exchange gains (losses)														(1,794	)		3,266
Other, net		(1,628	)		(651	)		(436	)		(1,136	)		(433	)		508

	$	13,497		$	49,605		$	15,281		$	57,201		$	(368	)	$	9,017

The Company calculates its interim income tax provision in accordance with Accounting Principles Board Opinion No. 28, “Interim Financial Reporting” (“APB No. 28”) and FASB Interpretation No. 18, “Accounting for Income Taxes in Interim Periods” (“FIN 18”). In applying APB No. 28 and FIN 18 to the income tax provision computation for the period ended March 29, 2009, the Company excluded from its calculation of the effective tax rate losses of a certain foreign jurisdiction since the Company cannot benefit those losses due to application of certain foreign tax rulings.

~~The~~ Company’s effective tax rate for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 was approximately ~~-9.2% and -6.4%, respectively. These rates differ~~41.8%. This rate differs significantly from the statutory rate due to the geographical mix of income in higher and lower tax jurisdictions and ~~the implementation of~~ a ~~tax strategy to align the future revenue and profit of SEZ with the Company’s current tax operating structure.~~change in California valuation allowance. The Company recorded the following material discrete events during the ~~March~~September 2009 quarter: (1) a tax ~~benefit~~expense of ~~($4.6)~~$9.3 million related to ~~one-time restructuring costs,~~a settlement of 409A liabilities, (2) ~~a tax benefit of ($0.6) million for federal provision to return true up, (3) a tax benefit of ($0.1) million for foreign provision to return true up, (4)~~ a tax expense of ~~$0.9~~$1.5 million ~~of FIN 48 interest, (5)~~related to a ~~tax expense for~~change in valuation allowance with respect to a ~~Singapore tax holiday clawback of $1.0 million, (6)~~California R&D credit, (3) a tax expense of $1.0 million for ~~revaluation of California deferred~~interest related to uncertain tax ~~assets,~~positions, and ~~(7)~~(4) a tax ~~expense~~benefit of ~~$4.2~~$1.0 million ~~for California valuation allowance.~~of adjustments related to the filing of prior year foreign tax returns.

The total gross unrecognized tax benefits as of each date noted below were as follows:

As of September 27, 2009, the total gross unrecognized tax benefits was $179.6 million compared to $178.4 million as of June 28, 2009, representing an increase of approximately $1.2 million for the three month period. If the remaining balance of ~~$163.4~~$179.6 million of gross unrecognized tax benefits were realized in a future period, it would result in a net tax benefit of ~~$115.2~~$136.7 million and a reduction inof the effective tax rate. ~~Approximately $14.5 million of gross unrecognized tax benefits are related to~~The Company anticipates that the SEZ pre-acquisition period and would result in an adjustment to goodwill of $1.6 million. The accounting treatment related to certain unrecognized tax benefits from acquired companies will change when SFAS 141R becomes effective. SFAS 141R will be effective in the first quarter of our fiscal year 2010. At such time, any changes to the recognition or measurement of thesetotal net unrecognized tax benefits will be recorded through income tax expense, where currently the accounting treatment would require any adjustment to be recognized through the purchase price as an adjustment to goodwill. The Company does not anticipate that the total unrecognized tax benefits will significantly changereduced by approximately $2 million due to the ~~settlement~~recapture of ~~audits and~~SEZ Japan net operating loss reserve at the ~~expiration of statute of limitations in the next 12 months.~~year end.

As of ~~December 28, 2008 and March 29,~~September 27, 2009, the Company had accrued approximately ~~$17.7~~$20.5 million ~~and $18.9 million, respectively,~~ for the payment of gross interest and penalties, relating to unrecognized tax benefits compared to ~~$12.6~~$19.1 million as of June ~~29, 2008. For~~28, 2009. During the ~~three month period and nine month period~~quarter ended ~~March 29,~~September 27, 2009, gross interest and penalties related to unrecognized tax benefits increased by ~~$1.3 million~~$1.4 million. All of the interest and ~~$6.4 million, of which $4.8 million was~~penalties were recognized in the provision for income ~~tax and the remaining balance of approximately $1.5 million related to the SEZ acquisition and was recorded to goodwill.~~tax.

~~The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.~~ Realization of the Company’s net deferred tax assets is ~~dependent on~~based upon the weight of available evidence, including such factors as the recent earnings history and expected future taxable income. The Company believes it is more likely than not that ~~those~~such assets will be ~~realized.~~realized with the exception of $38.1 million related to certain California and foreign deferred tax assets. However, ultimate realization could be negatively impacted by market conditions and other variables not known or anticipated at this time. InIf the ~~event that the Company determines that it would not be able~~valuation allowance related to ~~realize all or part of its net~~ deferred tax assets ~~an adjustment~~were released as of September 27, 2009, approximately $38.1 million would be ~~charged~~credited to ~~earnings in~~ the ~~period such determination~~statement of operations.

The IRS is ~~made. Likewise, if~~examining the ~~Company later determines that it~~Company’s U.S. income tax return for the fiscal year 2007. The State of California Franchise Tax Board (“FTB”) is ~~more likely than not~~examining the Company’s tax returns for the fiscal years 2005 and 2006. It is anticipated that the deferred tax assets would be realized, the previously provided valuation allowance would be reversed. The Company’s current valuation allowance of $7.5 million recorded relates to California deferred tax assets and certain deferred tax assets acquired in the SEZ acquisition. Any subsequently recognized tax benefits associated with valuation allowances recorded in the SEZ acquisitionIRS audit will be ~~recorded as an adjustment to goodwill.~~completed by the end of fiscal year 2010. As of September 27, 2009, no significant adjustments have been proposed by the IRS or FTB. The Company ~~evaluates~~is unable to make a reasonable estimate as to when cash settlements, if any, with the ~~realizability of the deferred tax assets quarterly and~~relevant taxing authorities will ~~continue to assess the need for additional valuation allowances, if any.~~occur.

The ~~Company files U.S. federal, U.S. state,~~French tax authorities have examined the Company’s tax returns for the fiscal years 2004 through 2006 and ~~foreign income tax returns. As of March 29, 2009, tax years 2000-2008 remain subject~~have proposed certain adjustments to ~~examination in the U.S., and tax years 2002-2007 remain subject to examination in various foreign jurisdictions.~~

its transfer pricing. The Company has ~~recorded a valuation allowance of $4.2 million this quarter reflecting~~appealed the ~~potential impacts of the recently adopted State of California rules related to the repeal of the cost of performance sales factor sourcing rule,~~proposed adjustments and the ~~single sales factor apportionment election (both were adopted on February 20, 2009, and will be effective for years beginning on or after January 1, 2011).~~

appeal is currently in review. The ~~“Emergency Economic Stabilization Act of 2008” (the “Act”), which contains the “Tax Extenders and Alternative Minimum Tax Relief Act of 2008”, was enacted on October 3, 2008~~Company is currently under examination by the ~~U.S. government. Under~~Japanese tax authorities for its fiscal years 2002 through 2008. The Company believes it has made adequate tax payments and accrued adequate amounts such that the ~~Act, the research credit was retroactively extended for amounts paid~~outcome of these audits will have no material adverse effects on its results of operations or incurred after December 31, 2007 and before January 1, 2010. As a result, during the quarter ended December 28, 2008, the Company recorded a $5.8 million tax benefit related to the extension of the federal research credit as it pertains to the Company’s fiscal year 2008.financial condition.

September 30, 2008 by the State of California, limits the amount of tax credits that can be utilized on the Company’s tax return. This change did not have any impact on the Company’s effective tax rate since the tax credits not utilized in the current year can be used to offset future tax liability.27, 2009

Basic net income ~~(loss)~~ per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income ~~(loss)~~ per share is computed, using the treasury stock method, as though all potential common shares that are dilutive were outstanding during the period. The following table provides a reconciliation of the numerators and denominators of the basic and diluted computations for net income ~~(loss)~~ per share.


	Three Months Ended					Nine Months Ended					Three Months Ended
	March 29, 2009			March 30, 2008		March 29, 2009			March 30, 2008		September 27, 2009		September 28, 2008
	(in thousands, except per share data)										(in thousands, except per share data)
Numerator:
Net income (loss)	$	(198,359	)	$	103,524	$	(213,658	)	$	367,171
Net income											$	16,797	$	8,873

Denominator:
Basic average shares outstanding		125,566			124,768		125,368			124,509		126,774		125,527
Effect of potential dilutive securities:
Employee stock plans		—			1,781		—			2,022		1,116		1,292

Diluted average shares outstanding		125,566			126,549		125,368			126,531		127,890		126,819

Net income (loss) per share - Basic	$	(1.58	)	$	0.83	$	(1.70	)	$	2.95
Net income per share — Basic											$	0.13	$	0.07

Net income (loss) per share - Diluted	$	(1.58	)	$	0.82	$	(1.70	)	$	2.90
Net income per share — Diluted											$	0.13	$	0.07

For purposes of computing diluted net income ~~(loss)~~ per share, weighted-average common shares do not include potential dilutive securities that are anti-dilutive under the treasury stock method. The following potential dilutive securities were excluded:


	Three Months Ended
	September 27, 2009	September 28, 2008
	(in thousands)
Number of potential dilutive securities excluded	136	243

The balance of accumulated other comprehensive ~~income (loss)~~loss is as follows:

During fiscal year 2008, the Company acquired approximately 99% of the outstanding shares of SEZ, a major supplier of single-wafer wet clean technology and products to the global semiconductor manufacturing industry. The acquisition was an all-cash transaction. The Company acquired the remaining outstanding shares during the six months ended December 28, 2008. The acquisition of the shares was conducted pursuant to the terms of a Transaction Agreement entered into on December 10, 2007 by and between the Company and SEZ. SEZ’s Spin-Process single-wafer technology is part of a broad equipment portfolio for wafer cleaning and decontamination that is a key process adjacent to the etch process.

The acquisition was accounted for as a business combination in accordance with SFAS No. 141, “Business Combinations”, and the purchase price at the time of acquisition was allocated based on the estimated fair value of net tangible and intangible assets acquired, and liabilities assumed.

~~The purchase price was allocated to the fair value of assets acquired and liabilities assumed as follows, in thousands:~~

The Company’s contractual cash obligations relating to its existing capital leases and debt as of ~~March 29,~~September 27, 2009 are as follows:


	Capital Leases		Long- term Debt		Total
	(in thousands)
Payments due by period:
One year	$	2,030	$	9,828	$	11,858
Two years		1,994		8,697		10,691
Three years		2,002		6,756		8,758
Four years		1,922		1,842		3,764
Five years		1,741		—		1,741
Over 5 years		12,816		—		12,816

Total		22,505		27,123		49,628
Interest on capital leases		2,472				2,472

Current portion of long-term debt and capital leases		1,541		9,828		11,369

Long-term debt and capital leases	$	18,492	$	17,295	$	35,787

Capital leases ~~include~~reflect building lease obligations ~~assumed from the Company’s acquisition of SEZ.~~and an office equipment lease. The amounts in the table above include the interest portion of payment obligations. ~~The Company’s total capital lease obligations were $18.2 million as of March 29, 2009.~~

On March 27, 2009, the Company paid the outstanding principal balance of $237.5 million of its existing long-term debt with ABN AMRO Bank N.V. (“ABN AMRO”) using existing cash balances. There were no penalties associated with the payment. The originally scheduled remaining principal repayment terms were (a) $12.5 million due in each of the June 2009 and December 2009 quarters and (b) the outstanding remaining principal amount of $212.5 million due on March 3, 2010. In connection with the payment, the parties agreed to terminate the ABN AMRO Credit Agreement and related Collateral Documents. ABN AMRO continues to be a participant in the Company’s operating leases with BNP Paribas Leasing Corporation and continues to provide banking services to the Company for customary fees.

The Company’s ~~remaining~~ total long-term debt of ~~$27.0~~$27.1 million as of ~~March 29,~~September 27, 2009 ~~is the result of obligations assumed in connection with the acquisition of SEZ, consisting~~consists of various bank loans and government subsidized technology loans supporting operating needs.

The Company ~~accounts~~leases most of its administrative, R&D and manufacturing facilities, regional sales/service offices and certain equipment under non-cancelable operating leases, which expire at various dates through fiscal year 2016. Certain of the Company’s facility leases for buildings located at its ~~guarantees in accordance~~Fremont, California headquarters and certain other facility leases provide the Company with ~~FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements~~an option to extend the leases for ~~Guarantees, Including Indirect Guarantees~~additional periods or to purchase the facilities. Certain of ~~Indebtedness~~the Company’s facility leases provide for periodic rent increases based on the general rate of Others” (“FIN 45”). FIN 45 requires a company that is a guarantor to make specific disclosures about its obligations under certain guarantees that it has issued. FIN 45 also requires a company (the guarantor) to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee.inflation.

On December 18, 2007, and as amended on April 3, 2008 and July 9, 2008, the Company entered into a series of two operating leases (the “Livermore Leases”) regarding certain improved properties in Livermore, California. On December 21, 2007, the Company entered into a series of four amended and restated operating leases (the “New Fremont Leases,” and collectively with the Livermore Leases, the “Operating Leases”) with regard to certain improved properties at ~~its~~the Company’s headquarters in Fremont, California. Each of the Operating Leases is an off-balance sheet arrangement. The Operating Leases (and associated documents for each Operating Lease) were entered into by the Company and BNP Paribas Leasing Corporation (“BNPPLC”).

Each Livermore Lease facility has an approximately seven-year term (inclusive of an initial construction period during which BNPPLC’s and the Company’s obligations will be governed by the Construction Agreement entered into with regard to such Livermore Lease facility) ending on the first business day in January 2015. Each New Fremont Lease has an approximately seven-year term ending on the first business day in January 2015.

Under each Operating Lease, the Company may, at its discretion and with 30 days’ notice, elect to purchase the property that is the subject of the Operating Lease for an amount approximating the sum required to prepay the amount of BNPPLC’s investment in the property and any accrued but unpaid rent. Any such amount may also include an additional make-whole amount for early redemption of the outstanding investment, which will vary depending on prevailing interest rates at the time of prepayment.

The Company ~~will be~~is required, pursuant to the terms of the Operating Leases and associated documents, to maintain collateral in an aggregate of approximately ~~$167.4~~$164.9 million ~~(upon completion of the Livermore construction)~~ in separate interest-bearing accounts ~~and/or eligible short-term investments~~ as security for ~~its~~the Company’s obligations under the Operating Leases. The Company completed construction of one of two Livermore properties on December 1, 2008. Upon completion of construction of this property, the property was no longer governed by the Construction Agreement, and is now part of the Operating Leases. As of ~~March 29,~~September 27, 2009, the Company had ~~$170.2~~$164.9 million recorded as restricted cash ~~and short-term investments~~ in its consolidated balance sheet as collateral required under the lease agreements related to the amounts currently outstanding on the facility.

Upon expiration of the term of an Operating Lease, the property subject to that Operating Lease may be remarketed. The Company has guaranteed to BNPPLC that each property will have a certain minimum residual value, as set forth in the applicable Operating Lease. The aggregate guarantee made by the Company under the Operating Leases is no more than approximately ~~$143.9~~$141.7 million (although, under certain default circumstances, the guarantee with regard to an Operating Lease may be 100% of BNPPLC’s investment in the applicable property; in the aggregate, the amounts payable under such guarantees will be no more than ~~$167.4~~$164.9 million plus related indemnification or other obligations).

The lessor under the lease agreements is a substantive independent leasing company that does not have the characteristics of a variable interest entity (VIE) ~~as defined by FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”~~ and is therefore not consolidated by the Company.

The remaining operating lease balances primarily relate to non-cancelable facility-related operating leases.

The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into certain insurance contracts which may limit its exposure to such indemnifications. As of ~~March 29,~~September 27, 2009, the Company has not recorded any liability on its consolidated financial statements in connection with these indemnifications, as it does not believe, based on information available, that it is probable that any amounts will be paid under these guarantees.

Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe, based on information available, that it is probable that any material amounts will be paid under these guarantees.

The Company offers standard warranties on its systems that generally run ~~generally~~ for a period of 12 months from system acceptance. The liability amount is based on actual historical warranty spending ~~activity~~ by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements.


	Three Months Ended						Nine Months Ended						Three Months Ended
	March 29, 2009			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			September 28, 2008
	(in thousands)												(in thousands)
Balance at beginning of period	$	34,570		$	51,780		$	61,308		$	52,186		$	21,185		$	61,308
Warranties assumed from acquisitions		878			6,939			878			6,939
Warranties issued during the period		2,282			14,032			10,294			42,438			4,943			5,216
Settlements made during the period		(7,507	)		(13,846	)		(27,033	)		(43,052	)		(4,626	)		(10,271	)
Expirations and change in liability for pre-existing warranties during the period		(3,985	)		(997	)		(17,674	)		(603	)		(1,777	)		(8,915	)
Changes in foreign currency exchange rates		(293	)		—			(1,828	)		—			425			(1,271	)

Balance at end of period	$	25,945		$	57,908		$	25,945		$	57,908		$	20,150		$	46,067

During the June 2008 quarter the Company incurred restructuring expenses ~~for restructuring~~ and asset impairment charges related to the integration of SEZ and overall streamlining of the Company’s combined Clean Product Group (“June 2008 Plan”). The Company incurred additional expenses under the June 2008 Plan during the quarter ended September 28, 2008. The charges during the June 2008 quarter included severance and related benefits costs, excess facilities-related costs and certain asset impairments associated with the Company’s initial product line integration road maps. The charges during the September 2008 quarter primarily included severance and related benefits costs and certain asset impairments associated with the Company’s product line integration road maps.

During the December 2008 quarter the Company incurred restructuring expenses ~~for restructuring~~ and asset impairment charges designed to better align the Company’s cost structure with its business opportunities in consideration of market and economic uncertainties (“December 2008 Plan”). The charges during the December 2008 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. The Company incurred additional expenses under the December 2008 Plan during the September 2009 quarter consisting of severance and related benefits costs.

During the March 2009 quarter the Company incurred restructuring expenses ~~for restructuring~~ and asset impairment charges designed to align the Company’s cost structure with its outlook for the current economic environment and future business opportunities (“March 2009 Plan”). The charges during the March 2009 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. The Company incurred additional expenses under the March 2009 Plan during the quarter ended June 28, 2009. The charges during the June 2009 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. The Company incurred additional expenses under the March 2009 Plan during the quarter ended September 27, 2009. The charges during the September quarter consisted of severance and related benefits costs as well as certain facilities related costs.

Prior to the end of each of the quarters noted above, the Company initiated the announced restructuring activities and management, with the proper level of authority, approved specific actions under the June 2008 Plan, December 2008 Plan, and March 2009 Plan. Severance packages to affected employees were communicated in enough detail such that the employees could determine their type and amount of benefit. The termination of the affected employees occurred as soon as practical after the restructuring plans were announced. The amount of remaining future lease payments for facilities the Company ceased to use and included in the restructuring charges is based on management’s estimates using known prevailing real estate market conditions at that time based, in part, on the opinions of independent real estate experts. Leasehold improvements relating to the vacated buildings were written off, as these items will have no future economic benefit to the Company and have been abandoned.

~~The Company distinguishes~~Accounting for restructuring activities, as compared to regular operating cost management ~~activities from restructuring activities. Accounting for restructuring~~ activities, requires an evaluation of formally committed and approved plans. Restructuring activities have comparatively greater strategic significance and materiality and may involve exit activities, whereas regular cost containment activities are more tactical in nature and are rarely characterized by formal and integrated action plans or exiting a particular product, facility, or service.

The Company recorded net restructuring charges ~~and asset impairments~~ during ~~fiscal year 2008~~the three months ended September 27, 2009 of approximately ~~$19.0~~$2.1 million, consisting of severance and benefits for involuntarily terminated employees of ~~$5.5~~$0.6 million and charges for the present value of remaining lease payments, net of sublease income, on vacated facilities of ~~$0.9 million, and the write-off of related fixed assets of $1.9~~$1.5 million. The ~~Company also recorded asset impairments related to initial product line integration road maps of $10.7 million. Of the total $19.0~~$2.1 million ~~in charges, $12.6 million was recorded in cost of goods sold and $6.4 million~~restructuring charge was recorded in operating expenses in the Company’s ~~fiscal year 2008~~condensed consolidated statement of operations.

The Company recorded net restructuring charges and asset impairments during the quarter ended September 28, 2008 quarter of approximately $19.0 million, consisting of severance and benefits for involuntarily terminated employees of $12.5 million. The Company also recorded additional asset impairments related to product line integration road maps of $6.5 million. Of the total $19.0 million in charges, $3.0 million was recorded in cost of goods sold and $16.0 million was recorded in operating expenses in the Company’s consolidated statement of operations for the three months ended September 28, 2008.

The Company recorded net restructuring charges and asset impairments during the December 2008 quarter of approximately $17.8 million, consisting of severance and benefits for involuntarily terminated employees of $16.4 million. The Company also recorded approximately $0.8 million related to asset impairments and $0.6 million related to excess facilities. Of the total $17.8 million in charges, $7.7 million was recorded in cost of goods sold and $10.1 million was recorded in operating expenses in the Company’s consolidated statement of operations for the three months ended December 28, 2008.

The Company recorded net restructuring charges and asset impairments during the March 2009 quarter of approximately $23.2 million, consisting of severance and benefits for involuntarily terminated employees of $20.9 million. The Company also recorded approximately $1.5 million related to asset impairments and $0.8 million related to excess facilities. Of the total $23.2 million in charges, $10.2 million was recorded in cost of goods sold and $13.0 million was recorded in operating expenses in the Company’s consolidated statement of operations for the three months ended March 29, 2009.


	Severance and Benefits			Facilities		Total
	(in thousands)
Balance at June 28, 2009	$	567		$	26	$	593
Cash payments		(525	)		—		(525	)

Balance at September 27, 2009	$	42		$	26	$	68

The severance and benefits-related balances are anticipated to be paid by the end of fiscal year 2010. The facilities balance consists primarily of lease payments, net of sublease income, on vacated buildings and is expected to be paid by the end of fiscal year ~~2010.~~2015.

On September 8, 2008, the Company announced that its Board of Directors had authorized the repurchase of up to $250 million of Company common stock from the public market or in private purchases. While the repurchase program does not have a defined termination date, it may be suspended or discontinued at any time, and is funded using the Company’s available cash. The Company suspended repurchases under the ~~Board authorized~~ program ~~prior to the end of~~during the December 2008 quarter. ~~Share repurchases~~The Company did not repurchase any shares under the ~~authorizations were as follows:~~

~~In addition to shares repurchased under~~ Board authorized ~~repurchase programs shown above,~~program during the three months ended ~~March 29, 2009, December 28, 2008 and~~ September ~~28, 2008,~~27, 2009. However, during the same period, the Company withheld ~~29,629, 73,437 and 85,047~~78,922 shares ~~respectively,~~ through net share settlements upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans to cover tax withholding obligations. The repurchases effected through this withholding are not a part of the Board-authorized program but instead are authorized under the Company’s equity compensation plans.

From time to time, the Company has received notices from third parties alleging infringement of such parties’ patent or other intellectual property rights by the Company’s products. In such cases it is the Company’s policy to defend the claims, or if considered appropriate, negotiate licenses on commercially reasonable terms. However, no assurance can be given that the Company will be able in the future to negotiate necessary licenses on commercially reasonable terms, or at all, or that any litigation resulting from such claims would not have a material adverse effect on the Company’s consolidated financial position or operating results.

The Company ~~made a decision during~~evaluated subsequent events through November 5, 2009, the ~~quarter ending June 28, 2009 that it does not plan to occupy one~~date of issuance of the ~~two buildings associated with~~condensed consolidated financial statements. During the ~~Livermore Leases noted above in Note 14. The lease associated with this facility is an off-balance sheet arrangement and has an approximately seven-year term ending on~~period from September 27, 2009 to November 5, 2009, the ~~first business day in January 2015. The~~ Company ~~is currently evaluating the impact of this decision on the Company’s future consolidated results of operations and financial condition.~~did not have any material recognizable subsequent events.

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified. The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate toto: trends in the global economic environment and the semiconductor industry; our future shipments, revenue ~~shipments, cost~~ and ~~margins, product development,~~operating expenses generally; the future revenue value of shipments; customer requirements and our ability to satisfy those requirements; customer capital spending and their demand ~~acceptance and~~for our products; our ability to defend our market share ~~competitiveness,~~and to win new market ~~opportunities,~~share; the level of international sales (including but not limited to as a percentage of revenue); levels of research and development ~~(“R&D”), outsourced activities and operating expenses, anticipated manufacturing, customer and technical requirements, the ongoing viability of the solutions that we offer~~expenditures; our ability to manage our expenditures and our ~~customer’s success,~~cash position; effectiveness of restructuring activities in reducing expenses; adequacy of prior tax ~~expenses,~~payments, future tax liabilities and the adequacy of our ~~management’s plans~~accruals relating to them; future obligations under guarantees and ~~objectives for~~indemnities; estimated future lives of intangible assets; future amortization expenses; our ~~current~~access to capital markets; and ~~future operations and business focus, the levels of customer spending,~~ the sufficiency of our financial resources to support future business activities (including but not limited to operations, investments, debt service requirements and capital ~~expenditures and general economic conditions.~~expenditures). Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (SEC), such as our annual reports on Form 10-K and our current reports on Form ~~8-K ..~~8-K. Such risks, uncertainties and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We undertake no obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date hereof or to reflect the occurrence or effect of anticipated or unanticipated events.

Documents To Review In Connection With Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

For a full understanding of our financial position and results of operations for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009, this discussion should be read in conjunction with the condensed consolidated financial statements and notes presented in this Form 10-Q and the financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended June ~~29, 2008.~~28, 2009.

The semiconductor industry is cyclical in nature and has historically experienced periodic downturns and upturns. Today’s leading indicators of changes in customer investment patterns may not be any more reliable than in prior years. Demand for our equipment can vary significantly from period to period as a result of various factors, including, but not limited to, economic conditions, supply, demand, and prices for semiconductors, customer capacity requirements, and our ability to develop and market competitive products. For these and other reasons, our results of operations for the three and nine months ended March 29, 2009 may not necessarily be indicative of future operating results.Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations consists of the following sections:

Executive Summary provides a summary of key highlights of our results of operations

Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant judgments and estimates ~~used in the preparation of~~we use to prepare our condensed consolidated financial statements

Liquidity and Capital Resources provides an analysis of cash flows, contractual obligations and financial position

We design, manufacture, market, and service semiconductor processing equipment used ~~in the fabrication of~~to fabricate integrated ~~circuits and~~circuits. We are recognized as a major provider of such equipment to the worldwide semiconductor industry. Semiconductor wafers ~~are subjected to~~undergo a complex series of process and preparation steps that result in the simultaneous creation of many individual integrated circuits. We leverage our expertise in these areas to develop integrated and standalone processing solutions ~~which~~that typically benefit our customers through reduced cost, lower defect rates, enhanced yields, or faster processing time as well as by facilitating their ability to meet more stringent performance and design standards.

The demand for semiconductor manufacturing equipment is cyclical in nature and has historically experienced significant periodic upturns and downturns. Demand is dependent in part on overall world economic conditions. Other factors that influence demand for our products include, but are not limited to, general supply and demand (including demand for the products that our customers manufacture), prices for semiconductors, customer capacity requirements and our ability to develop and market competitive products. For these and other reasons, our results of operations for the three months ended September 27, 2009 may not necessarily be indicative of future operating results.

Recent adverse conditions in the global economy have significantly reduced customer demand for our ~~products.~~products in recent quarters. While our ability to predict the demand for wafer fabrication equipment in the future is limited, we believe that, over the long term, demand for our products will increase as customers’ capital expenditures increase to meet demand for semiconductor devices. However, our visibility for shipment volumes over the next few quarters remains ~~very limited and, as~~limited. As a result, ~~we remain cautious~~any forecast about ~~forecasting any significant resumption in~~ equipment spending in the near ~~term.~~term is subject to a high degree of uncertainty.

The following summarizes certain key ~~quarterly~~ financial information for the periods indicated ~~below (in thousands, except percentages and per share amounts):~~below:


										Three Months Ended
	Three Months Ended									September 27, 2009			June 28, 2009			September 28, 2008
	March 29, 2009			December 28, 2008			March 30, 2008			(in thousands, except per share data and percentages)
Revenue	$	174,412		$	283,409		$	613,810		$	318,548		$	217,764		$	440,361
Gross margin		36,515			101,352			287,208			136,770			67,757			183,110
Gross margin as a percent of total revenue		20.9	%		35.8	%		46.8	%		42.9	%		31.1	%		41.6	%
Net income (loss)		(198,359	)		(24,172	)		103,524			16,797			(88,490	)		8,873
Diluted net income (loss) per share	$	(1.58	)	$	(0.19	)	$	0.82
Diluted earnings (loss) per share										$	0.13		$	(0.70	)	$	0.07

Our results for the September 2009 quarter reflect continued improvement in the global business environment and in the semiconductor industry, as evidenced by improved foundry fab utilization at the leading-edge technology nodes and an increase in the rate of next-generation DRAM and NAND wafer starts by leading memory companies.

During calendar year 2009, we maintained our investments in new product research and development (“R&D”) and continued our focus on improving customer productivity in our installed base and on delivering continuously improved high-performance, lower-cost designs for our products. We have also focused on defending application-based market share and winning new application share.

While conditions in our industry have clearly improved, we cannot predict the robustness of the macroeconomic recovery. The electronics and semiconductor industries remain very linked to worldwide GDP and consumer spending, and while we will continue to use our operational flexibility and rapid response capabilities to meet the shipment needs of our customers, we will remain cautious with the level of our expenditures. Going forward, we plan to continue our strong focus on managing and growing our cash position.

Our results during the quarter ended ~~March 29,~~September 27, 2009 ~~reflect declines~~reflected growth in customer ~~demand, consistent with~~requirements for new capacity and an increase in our installed-base business through higher utilization levels. Despite the ~~deterioration~~sequential upturn, revenue for the September 2009 quarter was still well below revenue for the quarter ended September 28, 2008, due to adverse conditions in the ~~general economic outlook~~global economy during late 2008 and ~~specifically,~~ the ~~downturn in the semiconductor industry. As a result~~first half of ~~this downturn, our March 2009 quarter revenue decreased 38% sequentially compared to the December 2008 quarter.~~2009.

In the quarter ended ~~March 29,~~September 27, 2009, gross margin as a percent of revenues ~~decreased~~increased to ~~20.9%~~42.9% compared to 31.1% in the quarter ended June 28, 2009. This improvement was primarily due to improved factory utilization as a result of ~~lower manufacturing~~increased business volume and ~~field utilization levels from reduced business activity and changes in the~~a more favorable product ~~and business unit~~ mix. ~~Gross margin includes restructuring and asset impairment charges~~Additionally, we recorded a credit of ~~$10.2~~$5 million in the ~~March~~September 2009 quarter ~~and $7.7 million in~~related to a partial settlement of matters associated with our 409A expenses from the ~~December 2008 quarter.~~2007 options review.

Operating expenses in the ~~March~~September 2009 quarter ~~increased $93~~decreased $25 million sequentially primarily due to a ~~non-cash~~partial settlement of matters associated with our 409A expenses from the 2007 options review. Additionally, we recorded a charge of $7 million in the June 2009 quarter for goodwill impairment ~~charge of $89.1 million~~ related to our Clean Product Group. In addition, $13.0 million of restructuring and asset impairment charges were included in the March 2009 quarter’s operating expenses compared to $10.1 million in the December 2008 quarter. We also recorded a charge of $6.8 million to increase the reserves against our accounts receivables balance for specific distressed customers, partially offset by a reduction in employee-related expenses as a result of restructuring and other cost-saving activities.

Equity-based compensation expense recognized during the March 2009 quarter in cost of goods sold and in operating expenses was $1.8 million and $8.4 million, respectively. Equity-based compensation expense recognized during the December 2008 quarter in cost of goods sold and in operating expenses was $2.8 million and $11.2 million, respectively.

Our cash and cash equivalents, short-term investments, and restricted cash and investments totaled approximately ~~$806~~$761 million as of ~~March 29,~~September 27, 2009 compared to ~~$1.1 billion~~$758 million as of ~~December~~June 28, ~~2008. The decrease included our payment of the outstanding principal balance of $237.5~~2009. Net cash provided by operating activities was approximately $3 million ~~of our existing long-term debt with ABN AMRO Bank N.V. (“ABN AMRO”)~~ during the ~~March~~September 2009 ~~quarter.~~

We are focused on addressing the challenges presented by the current economic conditions, and in particular our expectations regarding our markets and customers. We believe that customer spending will remain depressed in the near term, consistent with reduced economic activity and we expect that demandquarter compared to net cash used for ~~our systems will be largely limited to key technology conversions and upgrades. In addition to addressing upgrade needs, we are focused on working together with our customers on the development~~operating activities of next-generation technology solutions. Accordingly, we have deployed working capital by placing a significant number of etch and clean evaluation units at our customers’ locations and into joint development projects in order to enable successful penetration of new products and applications, and defend and grow our existing market share.

We are also carefully evaluating and managing the expense structure of the Company during this downturn, with a particular focus on managing our cash flow. We believe that the actions we took in the December 2008 and March 2009 quarters, such as the restructuring and asset impairments charges and our cost-cutting measures, will be of long term benefit to us. We believe that our focus on limiting cash outlays will allow us to use our financial resources to make strategic investments in product development and solution support for our customers. We will continue to invest in other areas that strengthen our position$58 million during the ~~current downturn, to position ourselves to take advantage~~June 2009 quarter and net cash provided by operating activities of ~~growth opportunities in any subsequent industry upturn.~~$43 million during the September 2008 quarter.


	Three Months Ended									Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			September 27, 2009			June 28, 2009			September 28, 2008
Shipments (in millions)	$	159		$	226		$	658		$	355		$	246		$	345

North America		16	%		17	%		15	%		10	%		16	%		15	%
Europe		17	%		12	%		7	%		6	%		8	%		11	%
Japan											18	%		17	%		18	%
Korea											24	%		16	%		29	%
Taiwan											31	%		30	%		16	%
Asia Pacific		8	%		12	%		14	%		11	%		13	%		11	%
Taiwan		15	%		20	%		19	%
Korea		17	%		17	%		28	%
Japan		27	%		22	%		17	%

Shipments for the ~~March~~September 2009 quarter ~~decreased sequentially by 30%~~met our anticipated range and increased 44% compared to the June 2009 quarter and 3% year over ~~year by 76% reflecting the industry and economic environment noted above.~~year. During the ~~March~~September 2009 quarter, 300 millimeter applications represented approximately ~~87%~~95% of total systems shipments, and ~~87%~~94% of total systems shipments were for applications at less than or equal to the 9065 nanometer technology node. We classify total systems shipments market segmentation for the ~~March~~September quarter as Memory at approximately ~~56%~~58%, Integrated Device Manufacturers and Logic at ~~28%~~14%, and Foundry at ~~16%~~28%.


	Three Months Ended									Nine Months Ended						Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			June 28, 2009			September 28, 2008
Revenue (in thousands)	$	174,412		$	283,409		$	613,810		$	898,182		$	1,908,751		$	318,548		$	217,764		$	440,361

North America		15	%		15	%		18	%		15	%		18	%		9	%		18	%		15	%
Europe		14	%		10	%		8	%		11	%		9	%		7	%		10	%		10	%
Japan																	18	%		17	%		17	%
Korea																	23	%		14	%		27	%
Taiwan																	29	%		29	%		14	%
Asia Pacific		8	%		8	%		14	%		13	%		12	%		14	%		12	%		17	%
Taiwan		20	%		17	%		23	%		16	%		22	%
Korea		19	%		22	%		20	%		23	%		21	%
Japan		24	%		28	%		17	%		22	%		18	%

~~The sequential quarterly revenue declines~~Revenue for September 2009 exceeded our expectations and increased 46% compared to the June 2009 quarter and decreased 28% year over ~~year declines for the three and nine months ended March 29, 2009 reflect a continued decline in demand for our products due to the industry and economic environments noted above.~~year. Our revenue levels are correlated to the amount of our shipments and ~~our~~ installation and acceptance timelines. The overall Asia region continues to account for a significant portion of our revenues as a substantial amount of the worldwide capacity additions for semiconductor manufacturing continues to occur in this region. Our deferred revenue balance ~~decreased~~increased to ~~$43.7~~$89.7 million as of ~~March 29,~~September 27, 2009 compared to ~~$68.4~~$64.7 million ~~at December~~as of June 28, ~~2008.~~2009. Our deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The anticipated future revenue value from shipments to Japanese customers was approximately ~~$7.5~~$23 million as of ~~March 29,~~September 27, 2009 compared to $13 million as of June 28, 2009.


	Three Months Ended									Nine Months Ended						Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			June 28, 2009		September 28, 2008
	(in thousands, except percentages)															(in thousands, except percentages)
Gross Margin	$	36,515		$	101,352		$	287,208		$	320,977		$	938,756		$	136,770		67,757		183,110
Percent of total revenue		20.9	%		35.8	%		46.8	%		35.7	%		49.2	%		42.9	%	31.1	%	41.6	%

~~In the quarter ended March 2009, gross~~Gross margin as a percent of revenue ~~declined sequentially primarily~~for the September 2009 quarter was 42.9%. The gross margin during the September 2009 quarter increased compared to the June 2009 quarter due to ~~lower manufacturing~~improved factory utilization and ~~field utilization levels resulting from reduced business activity~~a more favorable product mix as ~~well as product mix. Restructuring and asset impairment charges~~the proportion of ~~$10.2~~revenue attributed to systems increased. Additionally, we recorded a credit of $5 million in the ~~March~~September 2009 quarter ~~and $7.7 million in~~related to a partial settlement of matters associated with our 409A expenses from the ~~December 2008 quarter are included in gross margin.~~2007 options review. The reduction in gross margin ~~during~~dollars in the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 compared towith the same ~~periods~~period in the prior year was primarily due to lower customer utilization of their factories associated with the deteriorating economic environment. Additionally, September 2008 gross margin included restructuring ~~charges~~ and asset ~~impairments, unfavorable product mix and reduced manufacturing and field support utilization consistent with reduced business levels.~~impairment charges of $3 million.


	Three Months Ended									Nine Months Ended						Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			June 28, 2009			September 28, 2008
	(in thousands, except percentages)															(in thousands, except percentages)
Research & Development (“R&D”)	$	70,434		$	68,781		$	80,576		$	220,778		$	237,107
Research & Development (R&D)																$	71,199		$	67,491		$	81,563
Percent of total revenue		40.4	%		24.3	%		13.1	%		24.6	%		12.4	%		22.4	%		31.0	%		18.5	%

We continue to ~~make significant investments~~invest significantly in R&D focused on plasma etch, ~~single-wafer~~single wafer clean and new products. The increase in R&D expenses during the ~~March~~September 2009 quarter compared to the ~~December 2008~~June 2009 quarter is mainly due to ~~seasonally high payroll taxes, partially offset by expected savings from salary reductions~~an increase of $2 million in supplies and ~~lower equity-based~~outside services and $3 million in benefits and other employee compensation.

The ~~decrease~~decline in R&D expenses during the three and nine months ended March 29, 2009 compared to the same period the prior year is mainly due to the reduction of variable compensation and cost controls, offset by the inclusion of the results of SEZ as the results from the prior year only include SEZ’s results from the acquisition date of March 11, 2008. Decreases duringfor the three months ended ~~March 29,~~September 27, 2009 compared to the same period in the prior year ~~include~~was mainly due to an approximately $3$2 million reduction in ~~lower incentive based compensation on lower profits, $4 million in lower salaries~~salary and benefits related to cost savings measures and a ~~decrease of approximately $6~~$7 million decline in outside services and ~~supplies, partially offset by an increase of $3 million in depreciation and amortization related to the inclusion of SEZ.~~

The decreases in R&D expenses during the nine months ended March 29, 2009, compared to the same period in the prior year, include approximately $14 million in lower incentive based compensation on lower profits and a $17 million decrease in outside services and supplies, partially offset by an increase of $4 million in equity-based compensation and $7 million in depreciation and amortization related to the inclusion of SEZ.supplies.


	Three Months Ended									Nine Months Ended						Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			June 28, 2009			September 28, 2008
	(in thousands, except percentages)															(in thousands, except percentages)
Selling, General & Administrative (“SG&A”)	$	58,515		$	59,842		$	74,491		$	185,813		$	210,288
Selling, General & Administrative (SG&A)																$	52,199		$	47,248		$	68,299
Percent of total revenue		33.5	%		21.1	%		12.1	%		20.7	%		11.0	%		16.4	%		21.7	%		15.5	%

The sequential ~~decrease~~increase in SG&A expenses during the ~~March~~September 2009 quarter ~~is mainly~~was primarily due to ~~savings from salary reductions partially offset by an increase~~increases of approximately $2 million in ~~employer payroll taxes which are typically higher~~employee compensation and $2 million in ~~the first quarter of a new calendar year. Additionally, in response to recent financial announcements from our customer base~~outside services and consistent with our accounts receivable valuation allowance methodology, we recorded within operating expenses a charge of $6.8 million to increase the reserves against our receivables balance for specific distressed customers.supplies.

The decrease in SG&A expenses ~~during~~for the three months ended ~~March 29,~~September 27, 2009 compared to the same period in the prior year was driven by reductions of approximately $8$11 million in ~~incentive-based compensation, $5~~employee-related expenses associated with prior restructuring activities and other cost reduction activities, a decrease of $2 million in ~~salaries~~rent and ~~benefits related~~utilities due to ~~cost savings measures, $6 million in cost incurred as~~lower interest rates on certain leases, and a ~~result~~reduction of ~~the voluntary stock option reviews, and $3~~approximately $2 million in outside ~~services and supplies, offset by the $6.8 million to increase the reserves against our receivables balance noted above.~~

The decrease in SG&A expenses during the nine months ended March 29, 2009 compared to the same period in the prior year was driven by reductions of approximately $33 million in incentive-based compensation and $16 million in cost incurred as a result of the voluntary stock option reviews, partially offset by $4 million in salaries and wages and $7 million of other expenses related to the inclusion of SEZ, $4 million in equity-based compensation, and the $6.8 million to increase the reserves against our receivables balance noted above.services.

During the June 2008 quarter we incurred restructuring expenses ~~for restructuring~~ and asset impairment charges related to the integration of SEZ and overall streamlining of our combined Clean Product Group (“June 2008 Plan”). We incurred additional expenses under the June 2008 Plan during the quarter ended September 28, 2008. The charges during the June 2008 quarter included severance and related benefits costs, excess facilities-related costs and certain asset impairments associated with our initial product line integration road maps. The charges during the September 2008 quarter primarily included severance and related benefits costs and certain asset impairments associated with our product line integration road maps.

During the December 2008 quarter we incurred restructuring expenses ~~for restructuring~~ and asset impairment charges designed to better align our cost structure with our business opportunities in consideration of market and economic uncertainties (“December 2008 Plan”). The charges during the December 2008 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. We incurred additional expenses under the December 2008 Plan during the September 2009 quarter consisting of severance and related benefits costs.

During the March 2009 quarter we incurred restructuring expenses ~~for restructuring~~ and asset impairment charges designed to align our cost structure with our outlook for the current economic environment and future business opportunities (“March 2009 Plan”). The charges during the March 2009 quarter consisted primarily of severance and related benefits costs as well as certain facilities related costs and asset impairments. We incurred additional expenses under the March 2009 Plan during the September 2009 quarter. The charges during the September 2009 quarter consisted of severance and related benefits costs as well as certain facilities related costs.

Prior to the end of each quarter noted above, we initiated the announced restructuring activities and management, with the proper level of authority, approved specific actions under the June 2008 Plan, December 2008 Plan, and March 2009 Plan. Severance packages to affected employees were communicated in enough detail such that the employees could determine their type and amount of benefit. The termination of the affected employees occurred as soon as practical after the restructuring plans were announced. The amount of remaining future lease payments for facilities we ceased to use and included in the restructuring charges is based on management’s estimates using known prevailing real estate market conditions at that time based, in part, on the opinions of independent real estate experts. Leasehold improvements relating to the vacated buildings were written off, as these items will have no future economic benefit to the Company and have been abandoned.

~~We distinguish~~Accounting for restructuring activities, as compared to regular operating cost management ~~activities from restructuring activities. Accounting for restructuring~~ activities, requires an evaluation of formally committed and approved plans. Restructuring activities have comparatively greater strategic significance and materiality and may involve exit activities, whereas regular cost containment activities are more tactical in nature and are rarely characterized by formal and integrated action plans or exiting a particular product, facility, or service.

We recorded net restructuring charges ~~and asset impairments~~ during ~~fiscal year 2008~~the three months ended September 27, 2009 of approximately ~~$19.0~~$2.1 million, consisting of severance and benefits for involuntarily terminated employees of ~~$5.5~~$0.6 million and charges for the present value of remaining lease payments, net of sublease income, on vacated facilities of ~~$0.9~~$1.5 million. The $2.1 million and the write-off of related fixed assets of $1.9 million. We also recorded asset impairments related to initial product line integration road maps of $10.7 million. Of the total $19.0 million in charges, $12.6 million was recorded in cost of goods sold and $6.4 millionrestructuring charge was recorded in operating expenses in our ~~fiscal year 2008~~condensed consolidated statement of operations.

We recorded net restructuring charges and asset impairments during the September 2008 quarter of approximately $19.0 million, consisting of severance and benefits for involuntarily terminated employees of $12.5 million. We also recorded additional asset impairments related to product line integration road maps of $6.5 million. Of the total $19.0 million in charges, $3.0 million was recorded in cost of goods sold and $16.0 million was recorded in operating expenses in our consolidated statement of operations for the three months ended September 28, 2008.

We recorded net restructuring charges and asset impairments during the December 2008 quarter of approximately $17.8 million, consisting of severance and benefits for involuntarily terminated employees of $16.4 million. We also recorded approximately $0.8 million related to asset impairments and $0.6 million related to excess facilities. Of the total $17.8 million in charges, $7.7 million was recorded in cost of goods sold and $10.1 million was recorded in operating expenses in our consolidated statement of operations for the three months ended December 28, 2008.

We recorded net restructuring charges and asset impairments during the March 2009 quarter of approximately $23.2 million, consisting of severance and benefits for involuntarily terminated employees of $20.9 million. We also recorded approximately $1.5 million related to asset impairments and $0.8 million related to excess facilities. Of the total $23.2 million in charges, $10.2 million was recorded in cost of goods sold and $13.0 million was recorded in operating expenses in our consolidated statement of operations for the three months ended March 29, 2009.

As a result of the June 2008, September 2008, December 2008, and March 2009 quarters’ restructuring activities, we expect annual savings, relative to the cost structure immediately preceding the activities, in total expenses of approximately $179 million to $189 million. These estimated savings from the June 2008, December 2008, and March 2009 Plans’ discrete actions are primarily related to lower employee payroll, facilities, and depreciation expenses. Actual savings may vary from these forecasts, depending upon future events and circumstances.

The severance and benefits-related ~~balance is~~balances are anticipated to be paid by the end of fiscal year 2010. The facilities balance consists primarily of lease payments, net of sublease income, on vacated buildings and is expected to be paid by the end of fiscal year ~~2010.~~2015.

AsFollowing the voluntary independent review of our historical option grant process, we considered whether Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (“IRC”) and similar provisions of state law would apply to certain stock option grants that were found to have intrinsic value at the time of their respective measurement dates. If a ~~result~~stock option is not considered as issued with an exercise price of a combination of factors, including the current economic environment, a sustained decline in our market valuation and a decline in our operating results, we have concluded, in accordance with Statement of Financial Accounting Standards Number 142, “Goodwill and Other Intangible Assets”, thatat least the fair market value of the underlying stock, it may be subject to penalty taxes under Section 409A and similar provisions of state law. In such a case, such taxes may be assessed not only on the intrinsic value increase, but on the entire stock option gain as measured at various times. On March 30, 2008, the Board of Directors of the Company authorized the Company to assume potential tax liabilities of certain employees, including our ~~Clean Product Group has been reduced below its carrying value. As a result, we recorded a non-cash goodwill impairment charge~~Chief Executive Officer and certain other executive officers, relating to options that might be subject to Section 409A and similar provisions of ~~approximately $89.1~~state law. The assumed Section 409A liability was $53.7 million ~~during~~as of June 28, 2009.

During the quarter ended ~~March 29, 2009. The goodwill impairment charge is based on our current best estimate.~~

~~Due to the complexities involved in determining the implied fair value of goodwill~~September 27, 2009, we finalized a portion of the ~~Clean Product Group, we expect to finalize our goodwill impairment analysis during~~Section 409A liabilities which resulted in a reduction of the ~~fourth quarter~~liability and net credits recognized in the statements of ~~fiscal year 2009 and there could be adjustments to the goodwill impairment charge when the goodwill impairment analysis is completed. Any adjustments to our preliminary estimates as a result~~operations of ~~completing this evaluation will be~~$(5.5) million recorded in ~~our financial statements for~~cost of goods sold and $(17.9) million recorded in operating expenses . The remaining assumed Section 409A liability, including accrued legal fees, at September 27, 2009 was $30.0 million. The determinations from the ~~quarter ending June 28, 2009.~~

~~If our future operating results do not meet current forecasts or if we experience a sustained decline~~voluntary independent stock option review are more fully described in ~~our market capitalization that is determined~~Note 3, “Restatement of Consolidated Financial Statements” to ~~be indicative of a reduction~~Consolidated Financial Statements in ~~fair value~~Item 8 of our ~~Clean Product Group, an additional impairment analysis may be required which may result~~2007 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~additional impairment charges.~~Item 7 of our 2007 Form 10-K.


	Three Months Ended									Nine Months Ended						Three Months Ended
	March 29, 2009			December 28, 2008			March 30, 2008			March 29, 2009			March 30, 2008			September 27, 2009			June 28, 2009			September 28, 2008
	(in thousands)															(in thousands)
Interest income	$	5,360		$	8,131		$	12,426		$	21,287		$	40,398		$	2,048		$	2,995		$	7,796
Interest expense		(1,146	)		(2,483	)		(2,866	)		(6,182	)		(9,659	)		(189	)		(316	)		(2,553	)
Foreign exchange gain (loss)		10,911			(13,565	)		40,696			612			28,506
Charitable contributions		—			—			—			—			(908	)
Foreign exchange gains (losses)																	(1,794	)		310			3,266
Other, net		(1,628	)		684			(651	)		(436	)		(1,136	)		(433	)		(118	)		508

	$	13,497		$	(7,233	)	$	49,605		$	15,281		$	57,201		$	(368	)	$	2,871		$	9,017

Interest income decreased during the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 and June 28, 2009 compared with the ~~same periods in the prior year and during the~~ three months ended ~~March 29, 2009 compared with the December~~September 28, 2008 ~~quarter~~ and was primarily attributable to decreases in interest rate yields and ~~to a lesser extent~~ decreases in our average cash and investment ~~balances. Average cash and investment~~ balances ~~were lower year over primarily as the result of our acquisition of SEZ in March 2008.~~used to fund operating needs.

During the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009, our interest expense decreased compared with the corresponding three month period ended ~~December~~September 28, ~~2008 and the three and nine month periods ended March 30,~~ 2008 primarily as a result of our $250.0 million loan payment to ABN AMRO during the 2009 fiscal year and to a lesser extent decreases in interest rates.

Included in foreign exchange loss during the three months ended September 27, 2009 was $1.7 million of losses associated with the Company’s foreign currency denominated liabilities with non U.S. dollar functional currency subsidiaries where the U.S. dollar weakened against certain currencies, primarily the Swiss franc and, to a lesser extent, the Euro.

The foreign exchange gains during the three months ended March 29, 2009 was $6.7 million of gains associated with the Company’s accelerated tax planning strategy and $4.2 million of gains primarily due to changes in the value of our foreign currency denominated assets and liabilities with non-U.S. dollar functional subsidiaries due to the U.S. dollar’s weakening against the Euro and strengthening against the Japanese yen.

Included in the foreign exchange gains during the nine months ended March 29, 2009 was $4.0 million of deferred net losses associated with ineffectiveness of our cash flow hedges related to forecasted transactions that were no longer considered probable of occurring due to a significant decline in the market and $5.5 million of gains primarily due to changes in the value of our foreign currency denominated assets and liabilities with non-U.S. dollar functional subsidiaries due to the U.S. dollar’s weakening against the Euro and Taiwanese dollar and strengthening against the Japanese yen.

~~Included in foreign exchange gains during the three and nine months ended March 30,~~September 28, 2008 are gains associated with the acquisition of SEZ of $49.3 million relating primarily to the settlement of a hedge of the Swiss franc. For the nine months ended March 30, 2008, this gain is partially offset by an unrealized loss recognized during the quarter ended December 23, 2007, representing the change in fair value of $7.2 million on the hedge of the Swiss franc related to the acquisition of SEZ. These net foreign exchange gains were offset by foreign exchange losses of approximately $8.6 million during the three months ending March 30, 2008 and $13.6 million during the nine months ending March 30, 2008. These foreign exchange losses were primarily due to ~~the changes in value of~~ our foreign currency denominated liabilities with non-U.S. dollar functional currency subsidiaries ~~due to~~where the U.S. dollar ~~weakening~~strengthened against certain currencies, primarily the Euro and Taiwan dollar.

A description of our exposure to foreign currency exchange rates can be found in the Risk Factors section of this Quarterly Report on Form 10-Q under the heading “Our Future Success Depends on International Sales and Management of Global Operations.”

Our effective tax rate for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 was ~~approximately - -9.2% and -6.4%, respectively.~~41.8%. Our effective tax ~~rates~~rate for the three ~~and nine~~ months ended ~~March 30,~~September 28, 2008 ~~were 23.8% and 26.9%, respectively.~~was 65.3%. We recorded the following material discrete events during the ~~March~~September 2009 quarter: (1) a tax ~~benefit~~expense of ~~($4.6)~~$9.3 million related to ~~one-time restructuring costs,~~a settlement of 409A liabilities, (2) ~~a tax benefit of ($0.6) million for federal provision to return true up, (3) a tax benefit of ($0.1) million for foreign provision to return true up, (4)~~ a tax expense of ~~$0.9~~$1.5 million ~~of FIN 48 interest, (5) tax expense for~~related to a ~~Singapore tax holiday clawback of $1.0 million, (6)~~change in valuation allowance with respect to a California R&D credit, (3) a tax expense of $1.0 million for ~~revaluation~~interest related to uncertain tax positions, and (4) a tax benefit of ~~California deferred tax assets, and (7) tax expense of $4.2~~$1.0 million for ~~California valuation allowance.~~adjustments related to the filing of prior year foreign tax returns.

The ~~overall change~~decrease in the effective tax rate ~~in all periods~~ is ~~impacted by~~primarily due to the ~~jurisdictional~~more favorable geographical mix of income in lower and ~~significant~~higher tax jurisdictions and the impact of discrete items mentioned above. We calculate our interim income tax provision in accordance with Accounting Principles Board Opinion No. 28, “Interim Financial Reporting” and FASB Interpretation No. 18, “Accounting for Income Taxes in Interim Periods” (FIN 18). In applying APB 28 and FIN 18 to the income tax provision computation for the period ended March 2009, we excluded from our calculation of the effective tax rate losses of a certain foreign jurisdiction since we cannot benefit those losses due to application of certain foreign tax rulings.events.

The “Emergency Economic Stabilization Act of ~~2008” (the “Act”),~~2008,” which contains the “Tax Extenders and Alternative Minimum Tax Relief Act of ~~2008”,~~2008,” was enacted on October 3, 2008 by the U.S. government. Under the Act, the research tax credit was retroactively extended for amounts paid or incurred after December 31, 2007 and before January 1, 2010. As a result, during the ~~nine~~three months ended ~~March 29,~~September 27, 2009, we ~~recorded~~forecasted a ~~$5.8~~$4.5 million annual tax benefit related to the ~~extension~~availability of the federal research credit as it pertains to our fiscal year ~~2008.~~

We recorded a valuation allowance during the quarter ended March 29, 2009 reflecting the potential impacts of the new California rules related to the repeal of the cost of performance sales factor sourcing rule, and the single sales factor apportionment election (both passed February 20, 2009, effective for years beginning on or after January 1, 2011).

Assembly Bill 1452, enacted on September 30, 2008 by the State of California, limits the amount of tax credits that can be utilized on the tax return. This change did not have any impact on our effective tax rate since the tax credits not utilized in the current year can be used to offset future tax liability.2009.

Our effective tax rate is based on our current profitability outlook and our expectations of earnings from operations in various tax jurisdictions throughout the world. We have implemented strategies intended to ~~limit~~minimize our tax liability on the sale of our products worldwide. These tax strategies are intended to align the asset ownership and functions of our various legal entities around the world with our forecasts of the level, timing and sources of future revenues and profits.

We had gross deferred tax assets, related primarily to reserves and accruals that are not currently deductible and tax credit carryforwards, of ~~$152.7~~$144.6 million and ~~$173.1~~$157 million as of ~~March 29,~~September 27, 2009 and June ~~29, 2008,~~28, 2009, respectively. The gross deferred tax assets were offset by deferred tax liabilities of ~~$39.3~~$41.9 million and a valuation allowance of ~~$7.5~~$38.1 million as of ~~March 29, 2009 and deferred tax liabilities of $53.1 million and a valuation allowance of $3.4 million as of June 29, 2008, respectively.~~September 27, 2009.

Deferred tax assets decreased from June ~~29, 2008~~28, 2009 to ~~March 29,~~September 27, 2009 by approximately ~~$10.7 million. This decrease mainly represents establishing California valuation allowance on~~$12.4 million primarily related to release in 409A accrual, certain ~~deferred~~foreign tax ~~assets, other comprehensive income~~return true ups, and ~~shortfall on stock options.~~2008 amended tax return adjustments.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is more likely than not that such assets will be realized; however, ultimate realization could be negatively impacted by market conditions and other variables not known or anticipated at this time. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets, an adjustment would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the deferred tax assets would be realized, then the previously provided valuation allowance would be reversed. Our current valuation allowance of ~~$7.5~~$38.1 million relates to certain California and foreign deferred tax assets.

As part of the valuation allowance recorded in fiscal year 2009, we recorded a valuation allowance on certain California deferred tax assets reflecting the potential impacts of the new California law related to the repeal of the cost of performance sales factor sourcing rule and the single sales factor apportionment election (both passed February 20, 2009, effective for years beginning on or after January 1, 2011). In addition, we recorded a valuation allowance against certain foreign deferred tax ~~assets acquired~~assets.

We reevaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the ~~SEZ acquisition. Any subsequently recognized~~recognition of a tax ~~benefits associated with valuation allowances recorded in~~benefit or an additional charge to the ~~SEZ acquisition will be recorded as an adjustment to goodwill. We evaluate the realizability of the deferred~~ tax ~~assets quarterly and will continue to assess the need for additional valuation allowances, if any.~~provision.

A critical accounting policy is defined as one that has both a material impact on our financial condition and results of operations and requires us to make difficult, complex and/or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain judgments, estimates and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We ~~based~~base our estimates and assumptions on historical experience and on various other assumptions ~~believed~~we believe to be applicable and evaluate them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results could differ significantly from those estimates.

Revenue Recognition: We recognize all revenue when persuasive evidence of an arrangement exists, delivery has occurred and title has passed or services have been rendered, the selling price is fixed or determinable, collection of the receivable is reasonably assured, and we have completed our system installation obligations, received customer acceptance or are otherwise released from our installation or customer acceptance obligations. In the event that terms of the sale provide for a lapsing customer acceptance period, we recognize revenue upon the expiration of the lapsing acceptance period or customer acceptance, whichever occurs first. In circumstances where the practices of a customer do not provide for a written acceptance or the terms of sale do not include a lapsing acceptance provision, we recognize revenue where it can be reliably demonstrated that the delivered system meets all of the agreed-to customer specifications. In situations with multiple deliverables, revenue is recognized upon the delivery of the separate elements to the customer and when we receive customer acceptance or are otherwise released from our customer acceptance obligations. Revenue from multiple-element arrangements is allocated among the separate elements based on their relative fair values, provided the elements have value on a stand-alone basis, there is objective and reliable evidence of fair value, the arrangement does not include a general right of return relative to the delivered item and delivery, or performance of the undelivered item(s) is considered probable and substantially in our control. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the delivery of additional items. Revenue related to sales of spare parts and system upgrade kits is generally recognized upon shipment. Revenue related to services is generally recognized upon completion of the services requested by a customer order. Revenue for extended maintenance service contracts with a fixed payment amount is recognized on a straight-line basis over the term of the contract.

Inventory Valuation: Inventories are stated at the lower of cost or market using standard costs which generally approximate actual costs on a first-in, first-out basis. We maintain a perpetual inventory system and continuously record the quantity on-hand and standard cost for each product, including purchased components, subassemblies, and finished goods. We maintain the integrity of perpetual inventory records through periodic physical counts of quantities on hand. Finished goods are reported as inventories until the point of title transfer to the customer. Generally, title transfer is documented in the terms of sale. When the terms of sale do not specify title transfer, we assume title transfers when we complete physical transfer of the products to the freight carrier unless other customer practices prevail. Transfer of title for shipments to Japanese customers generally occurs at the time of customer acceptance.

Standard costs are reassessed as needed but annually at a minimum, and reflect achievable acquisition costs. Acquisition costs are generally based on the most recent vendor contract prices for purchased parts, normalized assembly and test labor utilization levels, methods of manufacturing, and ~~overhead for internally manufactured products.~~normalized overhead. Manufacturing labor and overhead costs are attributed to individual product standard costs at a level planned to absorb spending at average utilization volumes. All intercompany profits related to the sales and purchases of inventory between our legal entities are eliminated from our consolidated financial statements.

Management evaluates the need to record adjustments for impairment of inventory at least quarterly. Our policy is to assess the valuation of all inventories including manufacturing raw materials, work-in-process, finished goods, and spare parts in each reporting period. Obsolete inventory or inventory in excess of management’s estimated usage requirements over the next 12 to 36 months is written down to its estimated market value if less than cost. ~~Inherent in the estimates~~Estimates of market value include, but are not limited to, management’s forecasts related to our future manufacturing schedules, customer demand, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative ~~uses, and ultimate realization of excess inventory.~~uses. If future customer demand or market conditions are less favorable than our projections, additional inventory write-downs may be required and would be reflected in cost of sales in the period the revision is made.

Warranty: Typically, the sale of semiconductor capital equipment includes providing parts and service warranty to customers as part of the overall price of the system. We offer standard warranties for our systems that generally run ~~generally~~ for a period of 12 months from system acceptance. When appropriate, we record a provision for estimated warranty expenses

to cost of sales for each system upon revenue recognition. The amount recorded is based on an analysis of historical activity which uses factors such as type of system, customer, geographic region, and any known factors such as tool reliability trends. All actual or estimated parts and labor costs incurred in subsequent periods are charged to those established reserves on a system-by-system basis.

Actual warranty expenses are accounted for on a system-by-system basis, and may differ from our original estimates. While we periodically monitor the performance and cost of warranty activities, if actual costs incurred are different than our estimates, we may recognize adjustments to provisions in the period in which those differences arise or are identified. We do not maintain general or unspecified reserves; all warranty reserves are related to specific systems. In addition to the provision of standard warranties, we offer customer-paid extended warranty services. Revenues for extended maintenance and warranty services with a fixed payment amount are recognized on a straight-line basis over the term of the contract. Related costs are recorded either as incurred or when related liabilities are determined to be probable and estimable.

Equity-based Compensation — Employee Stock Purchase Plan and Employee Stock Plans: ~~We account for our employee stock purchase plan (“ESPP”) and stock plans under the provisions of Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”). SFAS No. 123R~~U.S. GAAP requires the recognition of the fair value of equity-based compensation in net income. The fair value of our restricted stock units was calculated based upon the fair market value of Company stock at the date of grant. The fair value of our stock options and ESPP awards was estimated using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions, ~~and elections in adopting and implementing SFAS No. 123R,~~ including expected stock price volatility and the estimated life of each award. The fair value of equity- based awards is amortized over the vesting period of the award and we have elected to use the straight-line method ~~for awards granted after the adoption~~ of ~~SFAS No. 123R and continue to use a graded vesting method for awards granted prior to the adoption of SFAS No. 123R.~~amortization.

We make quarterly assessments of the adequacy of our tax credit pool related to equity-based compensation to determine if there are any deficiencies that require recognition in our consolidated statements of operations. ~~As a result of the adoption of SFAS No. 123R, we~~We will only recognize a benefit from stock-based compensation in paid-in-capital if an incremental tax benefit is realized after all other tax attributes currently available to us have been utilized. In addition, we have elected to account for the indirect benefits of stock-based compensation on the research tax credit through the income statement (continuing operations) rather than through paid-in-capital. We have also elected to net deferred tax assets and the associated valuation allowance related to net operating loss and tax credit carryforwards for the accumulated stock award tax benefits ~~determined under Accounting Principles Board No. 25~~ for income tax footnote disclosure purposes. We will track these stock award attributes separately and will only recognize these attributes through ~~paid-in-capital in accordance with Footnote 82 of SFAS No. 123R.~~paid-in-capital.

Income Taxes: Deferred income taxes reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is more likely than not that such assets will be realized; however, ultimate realization could be negatively impacted by market conditions and other variables not known or anticipated at this time. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets, an adjustment would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the deferred tax assets would be realized, then the previously provided valuation allowance would be reversed.

We calculate our current and deferred tax provision based on estimates and assumptions that can differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are recorded when identified.

We provide for income taxes on the basis of annual estimated effective income tax rates. Our estimated effective income tax rate reflects our underlying profitability, the level of R&D spending, the regions where profits are recorded and the respective tax rates imposed. We carefully monitor these factors and adjust the effective income tax rate, if necessary. If actual results differ from estimates, we could be required to record an additional valuation allowance on deferred tax assets or adjust our effective income tax rate, which could have a material impact on our business, results of operations, and financial condition.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws. Our estimate for the potential outcome of any uncertain tax issue is highly judgmental. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial condition.

In July 2006, the FASB issued ~~FASB Interpretation 48, “Accounting for Income Tax Uncertainties” (“FIN 48”). FIN 48~~guidance which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. It provides guidance on the ~~derecognition,~~de-recognition, measurement

and classification of income tax uncertainties, along with any related interest and penalties. ~~FIN 48~~This guidance also includes ~~guidance~~information concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to these uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. We believe that we will ultimately recover a substantial majority of the deferred tax assets recorded on our consolidated balance sheets. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determined that the recovery was not probable.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. ~~As a result of the implementation of FIN 48, we~~We recognize liabilities for uncertain tax positions based on the two-step process prescribed within the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the ~~period.~~period such determination is made.

Goodwill and Intangible Assets: We account for goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 142 requires that goodwillGoodwill and identifiable intangible assets with indefinite useful lives ~~no longer be~~are not amortized, but instead be tested for impairment at least annually. ~~SFAS No. 142 also requires that intangible~~Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives to their estimated residual values and reviewed for ~~impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.~~impairment.

We review goodwill at least annually for impairment. Should certain events or indicators of impairment occur between annual impairment tests, we would perform ~~the~~an impairment test of goodwill at that date. In testing for a potential impairment of goodwill, we: (1) allocate goodwill to our various reporting units to which the acquired goodwill relates; (2) estimate the fair value of our reporting units; and (3) determine the carrying value (book value) of those reporting units, as some of the assets and liabilities related to those reporting units are not held by those reporting units but by a corporate ~~headquarters.~~function. Furthermore, if the estimated fair value of a reporting unit is less than the carrying value, we must estimate the fair value of all identifiable assets and liabilities of that reporting unit, in a manner similar to a purchase price allocation for an acquired business. This can require independent valuations of certain internally generated and unrecognized intangible assets such as in-process research and development and developed technology. Only

after this process is completed can the amount of goodwill impairment, if any, be determined.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. In estimating the fair value of a reporting unit for the purposes of our annual or periodic analyses, we make estimates and judgments about the future cash flows of that reporting unit. Although our cash flow forecasts are based on assumptions that are consistent with our plans and estimates we are using to manage the underlying businesses, there is significant ~~exercise of~~ judgment involved in determining the cash flows attributable to a reporting ~~unit over its estimated remaining useful life.~~unit. In addition, we make certain judgments about allocating shared assets to the estimated balance sheets of our reporting units. We also consider our and our competitor’s market capitalization on the date we perform the analysis. Changes in judgment on these assumptions and estimates could result in a goodwill impairment charge.

The value assigned to intangible assets is based on estimates and judgments regarding expectations such as the success and life cycle of products and technology acquired. If actual product acceptance differs significantly from the estimates, we may be required to record an impairment charge to write down the asset to its realizable value.

~~On June 30, 2008, we adopted the required portions of Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements~~” (“SFAS No. 157”). There was no material impact to our consolidated financial statements from the adoption of SFAS No. 157. This Statement defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair value measurements. SFAS No. 157 currently applies to all financial assets and liabilities, and nonfinancial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. In ~~February 2008,~~December 2007, the Financial Accounting Standards Board ~~(FASB) issued FASB Staff Position No. 157-2, delaying~~(“FASB”) revised the ~~effective date of SFAS No. 157~~authoritative guidance for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis. The delayed portions of SFAS No. 157 will be adopted by us beginning in our fiscal year ending June 27, 2010. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active,”business combinations, which clarifies the application of Statement 157 when the market for a financial asset is inactive. Specifically, FSP FAS 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value. The guidance of FSP FAS 157-3 is effective immediately and we have adopted its provisions with respect to our financial assets and liabilities as of September 28, 2008. The impact of adopting the non-delayed portions of SFAS No. 157 is more fully described in Note 4 of Notes to Condensed Consolidated Financial Statements.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement was effective for us beginning June 30, 2008. We have not applied the fair value option to any items; therefore, the Statement did not have an impact on the consolidated financial statements.

~~In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R~~ establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. ~~SFAS No. 141R~~The revised guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. ~~SFAS No. 141R is effective as~~The accounting treatment of tax benefits from acquired companies has changed under the ~~beginning of an entity’s fiscal year that begins after December 15, 2008. We expect~~revised guidance. Any changes to ~~adopt SFAS No. 141R~~the tax benefits associated with the valuation allowance recorded in the ~~beginning of fiscal year 2010~~SEZ acquisition will be recorded through income tax expense. We adopted the revised guidance on June 29, 2009 and ~~we are currently evaluating the potential impact, if any, of~~ the adoption ~~of SFAS No. 141R~~did not have a significant impact on our ~~consolidated~~ results of operations ~~and~~or financial condition.

In December 2007, the FASB issued ~~Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB 51” (“SFAS No. 160”). SFAS 160~~guidance which establishes accounting and reporting standards for the treatment of noncontrolling interests in a subsidiary. Noncontrolling interests in a subsidiary ~~will~~are to be reported as a component of equity in the consolidated financial statements and any retained noncontrolling equity investment upon deconsolidation of a subsidiary is initially measured at fair value. ~~SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 160 will result in~~We adopted the ~~reclassification of minority interests to stockholders’ equity. We don’t believe~~guidance on June 29, 2009 and the adoption ~~of SFAS No. 160 will~~did not have a ~~material~~significant impact on our results of operations ~~and financial condition.~~

On December 29, 2008, we adopted the provisions of Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement 133” (“SFAS No. 161”). There was no material impact to our consolidated financial statements from the adoption of SFAS No. 161. SFAS No. 161 requires expanded and enhanced disclosure for derivative instruments, including those used in hedging activities. See Note 4 of Notes to Condensed Consolidated Financial Statements for more information.

In April 2008, the FASB issued FASB Staff Position Statement of Financial Accounting Standards 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3 provides guidance with respect to estimating the useful lives of recognized intangible assets acquired on or after the effective date and requires additional disclosure related to the renewal or extension of the terms of recognized intangible assets. FSP SFAS 142-3 is effective for fiscal years and interim periods beginning after December 15, 2008. We are currently assessing the impact of the adoption of FSP SFAS 142-3 on our results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” (“FSP SFAS 157-4”), which provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased. This FSP re-emphasizes that regardless of market conditions the fair value measurement is an exit price concept as defined in SFAS No. 157. This FSP clarifies and includes additional factors to consider in determining whether there has been a significant decrease in market activity for an asset or liability and provides additional clarification on estimating fair value when the market activity for an asset or liability has declined significantly. The scope of this FSP does not include assets and liabilities

measured under level 1 inputs. FSP SFAS 157-4 is applied prospectively to all fair value measurements where appropriate and will be effective for interim and annual periods ending after June 15, 2009. The Company is currently evaluating the potential impact, if any, of the adoption of FSP SFAS 157-4 on its consolidated results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1 and APB 28-1”). FSP SFAS 107-1 and APB 28-1 amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require publicly-traded companies, ~~as defined in APB Opinion No. 28, “Interim Financial Reporting,”~~ to provide disclosures on the fair value of financial instruments in interim financial statements. ~~FSP SFAS 107-1~~We adopted this guidance on June 29, 2009 and ~~APB 28-1~~the adoption resulted in expanded disclosures but did not have a material impact on our consolidated results of operations or financial condition.

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification is ~~effective~~the single source for ~~interim~~all authoritative Generally Accepted Accounting Principles (“GAAP”) recognized by the FASB to be applied for financial statements issued for periods ending after ~~June~~September 15, 2009. The ~~Company~~Codification does not change GAAP and did not have a material impact on our financial statements.

In September 2009, the FASB ratified guidance from the Emerging Issues Task Force (“EITF”) regarding revenue arrangements with multiple deliverables. This guidance addresses criteria for separating the consideration in multiple-element arrangements and will require companies to allocate the overall consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor-specific objective evidence or other third-party evidence of the selling price. This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and early adoption is permitted. We are currently evaluating the potential impact, if any, of the adoption of ~~FSP SFAS 107-1 and APB 28-1~~this guidance will have on ~~its~~our consolidated results of operations ~~and~~or financial condition.

In September 2009, the FASB also ratified guidance from the EITF regarding certain revenue arrangements that include software elements. This guidance modifies the scope of the software revenue recognition rules to exclude (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. This guidance will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and early adoption is permitted. We are currently evaluating the potential impact, if any, the adoption of this guidance will have on our consolidated results of operations or financial condition.

As of ~~March 29,~~September 27, 2009, we had ~~$0.8 billion~~$761.2 million in gross cash and cash equivalents, short-term investments, and restricted cash and investments (total cash and investments) compared to ~~$1.2 billion~~$757.8 million as of June 29, 2008. This decrease included our payment of the outstanding principal balance of $237.5 million of our existing long-term debt with ABN AMRO Bank N.V. during the March 2009 quarter. Cash used by operating activities was $(20.0) million for the nine months ended March 29,28, 2009.

Net cash ~~used~~provided by operating activities of ~~$(20.0)~~$2.7 million during the ~~nine~~three months ended ~~March 29,~~September 27, 2009, consisted of (in millions):


Net loss	$	(213.7	)
Net income				$	16.8
Non-cash charges:
Depreciation and amortization		54.7			17.7
Equity-based compensation		39.7			13.9
Goodwill impairment		89.1
Restructuring charges, net		60.1			2.1
Net tax benefit on equity-based compensation plans		(6.6	)		(0.5	)
Deferred income taxes		10.6			12.5
Changes in operating asset accounts		(60.7	)
Changes in operating asset and liability accounts					(61.0	)
Other		6.8			1.2

	$	(20.0	)	$	2.7

~~Significant changes~~Changes in operating asset and liability accounts ~~included above during the nine months ended March 29, 2009~~of $(61.0) million included the following uses of cash: ~~decreases~~an increase in accounts receivable of $70.7 million on increased business volume and a decrease in accrued expenses and other liabilities of approximately ~~$134 million, deferred profit of $92 million, accounts payable of $50 million, and prepaid expenses and other assets of $9 million,.~~$38.5 million. These uses of cash were partially offset by ~~decreases~~the following sources of cash: an increase in accounts ~~receivable~~payable of ~~approximately $207~~$22.9 million, an increase in deferred profit of $9.8 million, and a decrease in inventories of ~~$17 million. These changes in operating accounts are consistent with decreased~~$17.0 million; all on increased business ~~volumes.~~volume.

Net cash used for investing activities during the ~~nine~~three months ended ~~March 29,~~September 27, 2009 was ~~$38.7~~$23.1 million, ~~and included~~primarily consisting of net purchases of available-for-sale securities of $9.8 million, the transfer of restricted cash and investments of approximately ~~$48~~$6.6 million, and capital expenditures of $38 million, acquisitions of businesses of $23 million which included the acquisition of the remaining shares outstanding of SEZ and the completion of the acquisition of assets related to Bullen Semiconductor (Suzhou) Co., Ltd. These uses of cash were partially offset by approximately $81 million in net sales of available-for-sale securities.$5.8 million.

Net cash ~~used for~~provided by financing activities during the ~~nine~~three months ended ~~March 29,~~September 27, 2009 was ~~$269.5~~$4.4 million, and included ~~$255 million in principal payments on long-term debt and capital lease obligations primarily due to the long-term debt payment noted above, $28 million of share repurchases, partially offset by~~ net proceeds from issuance of common stock related to employee equity-based plans of ~~$19 million.~~$8.0 million, partially offset by $2.4 in treasury stock purchases and $1.9 million in principal payments on long-term debt and capital leases.

Given the cyclical nature of the semiconductor equipment industry, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Based upon our current business outlook, we expect that our levels of cash, cash equivalents, and short-term investments at ~~March 29,~~September 27, 2009 ~~are expected to~~will be sufficient to support our presently anticipated levels of operations, investments, debt service requirements, and capital expenditures, through at least the next 12 months.

In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services. ~~Should~~If we require additional funding, ~~be required,~~ we may need to raise the required funds through borrowings or public or private sales of debt or equity securities. We believe that, ~~in the event of such requirements,~~if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, given the possibility of changes in market conditions or other occurrences, there can be no certainty that such funding will be available in needed quantities or on terms favorable to us.

We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not. Obligations are recorded on our balance sheet in accordance with U.S. generally accepted accounting principles and include our long-term debt which is outlined in the following table and noted below. Our off-balance sheet arrangements include contractual relationships and are presented as operating leases and purchase obligations in the table below. Our contractual cash obligations and commitments as of September 27, 2009 relating to these agreements and our guarantees are included in the following table. The amounts in the table below exclude ~~$124.9~~$106 million of liabilities ~~under FIN 48~~related to uncertain tax benefits as we are unable to reasonably estimate the ultimate amount or time of settlement.


	Operating Leases		Capital Leases		Purchase Obligations		Long-term Debt and Interest Expense		Total		Operating Leases		Capital Leases		Purchase Obligations		Long-term Debt and Interest Expense		Total
	(in thousands)										(in thousands)
Payments due by period:
Less than 1 year	$	9,842	$	1,845	$	108,567	$	4,599	$	124,853	$	8,115	$	2,030	$	112,078	$	10,257	$	132,480
1-3 years		17,584		3,674		65,055		18,943		105,256		7,374		3,996		57,944		15,852		85,166
3-5 years		16,081		3,669		40,616		4,346		64,712		3,475		3,663		31,817		1,856		40,811
Over 5 years		149,268		13,217		19,280		—		181,765		141,999		12,816		20,477		—		175,292

Total	$	192,775	$	22,405	$	233,518	$	27,888	$	476,586	$	160,963	$	22,505	$	222,316	$	27,965	$	433,749

We lease most of our administrative, R&D and manufacturing facilities, regional sales/service offices and certain equipment under non-cancelable operating leases, which expire at various dates through fiscal year 2016. Certain of our facility leases for buildings located at our Fremont, California headquarters and certain other facility leases provide us with an option to extend the leases for additional periods or to purchase the facilities. Certain of our facility leases provide for periodic rent increases based on the general rate of inflation.

Included in the Operating Leases Over 5 years section of the table above is ~~$143.9~~$141.7 million in guaranteed residual values for lease agreements relating to certain properties at our Fremont, California campus and properties in Livermore, California.

On December 18, 2007, and as amended on April 3, 2008 and July 9, 2008, we entered into a series of two operating leases (the “Livermore Leases”) regarding certain improved properties in Livermore, California. On December 21, 2007, we entered into a series of four amended and restated operating leases (the “New Fremont Leases,” and collectively with the Livermore Leases, the “Operating Leases”) with regard to certain improved properties at our headquarters in Fremont, California. Each of the Operating Leases is an off-balance sheet arrangement. The Operating Leases (and associated documents for each Operating Lease) were entered into by usthe Company and BNP Paribas Leasing Corporation (“BNPPLC”).

Each Livermore Lease facility has an approximately seven-year term ~~(inclusive of an initial construction period during which BNPPLC’s and our obligations will be governed by the Construction Agreement entered into with regard to such Livermore Lease facility)~~ ending on the first business day in January 2015. Each New Fremont Lease has an approximately seven-year term ending on the first business day in January 2015.

Under each Operating Lease, wethe Company may, at ~~our~~its discretion and with 30 days’ notice, elect to purchase the property that is the subject of the Operating Lease for an amount approximating the sum required to prepay the amount of BNPPLC’s investment in the property and any accrued but unpaid rent. Any such amount may also include an additional make-whole amount for early redemption of the outstanding investment, which will vary depending on prevailing interest rates at the time of prepayment.

We ~~will be~~are required, pursuant to the terms of the Operating Leases and associated documents, to maintain collateral in an aggregate of approximately ~~$167.4~~$164.9 million ~~(upon completion of the Livermore construction)~~ in separate interest-bearing accounts ~~and/or eligible short-term investments~~ as security for our obligations under the Operating Leases. We completed construction of one of two Livermore properties on December 1, 2008. Upon completion of construction of this property, the property was no longer governed by the Construction Agreement, and is now part of the Operating Leases. As of ~~December 28, 2008,~~September 27, 2009, we had ~~$170.2~~$164.9 million recorded as restricted cash ~~and short-term investments~~ in our consolidated balance sheet as collateral required under the lease agreements related to the amounts currently outstanding on the facility.

Upon expiration of the term of an Operating Lease, the property subject to that Operating Lease may be remarketed. We have guaranteed to BNPPLC that each property will have a certain minimum residual value, as set forth in the applicable Operating Lease. The aggregate guarantee made by us under the Operating Leases is no more than approximately ~~$143.9~~$141.7 million (although, under certain default circumstances, the guarantee with regard to an Operating Lease may be 100% of BNPPLC’s investment in the applicable property; in the aggregate, the amounts payable under such guarantees will be no more than ~~$167.4~~$164.9 million plus related indemnification or other obligations).

The remaining operating lease balances primarily relate to non-cancelable facility-related operating leases.

Capital leases reflect building lease obligations ~~assumed from our acquisition of SEZ.~~and an office equipment lease. The amounts in the table above include the interest portion of payment obligations.

Purchase obligations consist of significant contractual obligations either on an annual basis or over multi-year periods related to our outsourcing activities or other material commitments, including vendor-consigned inventories. We continue to enter into new agreements and maintain existing agreements to outsource certain activities, including elements of our manufacturing, warehousing, logistics, facilities maintenance, certain information technology functions, and certain transactional general and administrative functions. The contractual cash obligations and commitments table presented above contains our obligations at ~~December 28, 2008~~September 27, 2009 under these arrangements and others. Actual expenditures will vary based on the volume of transactions and length of contractual service provided. In addition to these obligations, certain of these agreements include early termination provisions and/or cancellation penalties which could increase or decrease amounts actually paid.

Consignment inventories, which are owned by vendors but located in our storage locations and warehouses, are not reported as our inventory until title is transferred to us or our purchase obligation is determined. At ~~March 29,~~September 27, 2009, vendor-owned inventories held at our locations and not reported as our inventory were ~~$20.5~~$17.1 million.

On March 27, 2009, we paid the outstanding principal balance of $237.5 million of our existing long-term debt with ABN AMRO Bank N.V. (“ABN AMRO”) using existing cash balances. There were no penalties associated with the payment. The originally scheduled remaining principal repayment terms were (a) $12.5 million due in each of the June 2009 and December 2009 quarters and (b) the outstanding remaining principal amount of $212.5 million due on March 3, 2010. In connection with the payment, the parties agreed to terminate the ABN AMRO Credit Agreement and related Collateral Documents. ABN AMRO continues to be a participant in our operating leases with BNP Paribas Leasing Corporation and continues to provide banking services to us for customary fees.

Our ~~remaining~~ total long-term debt of ~~$27.0~~$27.1 million as of ~~March 29,~~September 27, 2009 ~~is the result of obligations assumed in connection with the acquisition of SEZ, consisting~~consists of various bank loans and government subsidized technology loans supporting operating needs.

We account for our guarantees in accordance with FASB Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires a company that is a guarantor to make specific disclosures about its obligations under certain guarantees that it has issued. FIN 45 also requires a company (the guarantor) to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee.

We have issued certain indemnifications to our lessors for taxes and general liability under some of our agreements. We have entered into certain insurance contracts which may limit our exposure to such indemnifications. As of ~~March 29,~~September 27, 2009, we have not recorded any liability on our consolidated financial statements in connection with these indemnifications, as we do not believe, based on information available, that it is probable that any amounts will be paid under these guarantees.

The Company offers standard warranties on its systems that run generally for a period of 12 months from system acceptance. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements.

We made a decision during the quarter ending June 28, 2009 that we do not plan to occupy one of the two buildings associated with the Livermore Leases disclosed above in “Operating Leases”. The lease associated with this facility is an off-balance sheet arrangement and has an approximately seven-year term ending on the first business day in January 2015. We are currently evaluating the impact of this decision on our future consolidated results of operations and financial condition.

For financial market risks related to changes in interest rates and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our ~~2008~~2009 Form 10-K.

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio, long-term debt, and synthetic leases. We maintain a conservative investment policy, which focuses on the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to achieve portfolio liquidity and maintain a prudent amount of diversification.

We believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in our business activities. Based upon our current business outlook, our levels of cash, cash equivalents, and short-term investments at ~~March 29,~~September 27, 2009 are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, and capital expenditures, through at least the next 12 months. However, the current uncertainty in the global economic conditions and the recent disruption in credit markets have impacted customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors. If the current situation deteriorates further, our business could suffer further negative impacts.

As required by Exchange Act Rule 13a-15(b), as of ~~March 29,~~September 27, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer, along with our Chief Financial Officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our senior management has timely access to material information that could affect our business.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting. The effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100% effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

From time to time, we have received notices from third parties alleging infringement of such parties’ patent or other intellectual property rights by our products. In such cases it is our policy to defend the claims, or if considered appropriate, negotiate licenses on commercially reasonable terms. However, no assurance can be given that we will be able in the future to negotiate necessary licenses on commercially reasonable terms, or at all, or that any litigation resulting from such claims would not have a material adverse effect on our consolidated financial position or operating results.

In addition to the other information in this ~~Quarterly Report on~~ Form 10-Q for the three months ended September 27, 2009, the following risk factors should be carefully considered in evaluating the Company and its business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended, ornor should be attached, to the order in which the risk factors appear.

We Face Risks Related to the Deterioration in the General Economic Outlook and the Downturn in the Semiconductor Industry

~~Current~~Recent global economic conditions have impacted customer demand for our products and ~~our ability to manage~~ normal commercial relationships with our customers, suppliers, and creditors. Additionally, some of our customers’ ability to access credit has been adversely affected, which limits their ability to purchase our products and services. The degree of the impact on our business of the current credit and economic environment will continue to depend on a number of factors, including the duration and severity of the recession facing the U.S. economy and the global economy generally, and the semiconductor industry specifically. This impact may cause potential material adverse changes to our results of operations and financial condition including, but not limited to:

~~we may be exposed~~exposure to claims from our suppliers for payment on inventory that we order in anticipation of customer purchases that do not come to fruition;

Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. If revenue levels in a particular quarter do not meet our expectations, our operating results may be adversely affected. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a single transaction can unfavorably affect operating results in a particular quarter. Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:

transportation, communication, demand, information technology or supply disruptions based on factors outside our control such as acts of God, wars, terrorist activities, and natural disasters;

Further, because a significant amount of our R&D and administrative operations and capacity is located at our Fremont, California campus, natural, physical, logistical or other events or disruptions affecting these facilities (including labor disruptions, earthquakes, and power failures) could adversely impact our financial performance.

We Derive Our Revenues Primarily from a Relatively Small Number of High-Priced Systems

System sales constitute a significant portion of our total revenue. Our systems ~~can range in price~~are priced up to approximately $6 million per unit, and our revenues in any given quarter are dependent upon the acceptance of a rather limited number of such systems. As a result, the inability to ~~declare~~recognize revenue on even a few systems can cause a significant adverse impact on our revenues for that quarter.

Variations in the Amount of Time it Takes for Our Customers to Accept Our Systems May Cause Fluctuation in Our Operating Results

We generally recognize revenue for new system sales on the date of customer acceptance or the date the contractual customer acceptance provisions lapse. As a result, the fiscal period in which we are able to recognize new systems revenues is typically subject to the length of time that our customers require to evaluate the performance of our equipment after shipment and installation, which may vary from customer to customer and tool to tool. Such variations could cause our quarterly operating results to fluctuate.

The Semiconductor Equipment Industry is Volatile and Reduced Product Demand Has a Negative Impact on Shipments

Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products using integrated circuits. The semiconductor industry is cyclical in nature and historically experiences periodic downturns. Business conditions historically have changed rapidly and unpredictably.

Fluctuating levels of investment by semiconductor manufacturers could continue to materially affect our aggregate shipments, revenues and operating results. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in research and development and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our financial results.

We Depend on New Products and Processes for Our Success. Consequently, We are Subject to Risks Associated with Rapid Technological Change

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances enabling such processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. We may be unable to develop and manufacture new products successfully, or new products that we introduce may fail in the marketplace. Our failure to complete commercialization of these new products in a timely manner could result in unanticipated costs and inventory obsolescence, which would adversely affect our financial results.

In order to develop new products and processes, we expect to continue to make significant investments in R&D and to pursue joint development relationships with customers, suppliers or other members of the industry. We must manage product transitions and joint development relationships successfully, as introduction of new products could adversely affect our sales of existing products. Moreover, future technologies, processes or product developments may render our current product offerings obsolete, leaving us with non-competitive products, or obsolete inventory, or both.

We are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification

We derive a substantial percentage of our revenues from a limited number of products, and we expect these products to continue to account for a large percentage of our revenues in the near term. Continued market acceptance of these products is, therefore, critical to our future success. Our business, operating results, financial condition, and cash flows could therefore be adversely affected by:

In addition, the fact that we offer a more limited product line creates the risk that our customers may view us as less important to their business than our competitors that offer additional products as well. This may impact our ability to maintain or expand our business with certain customers. Such product concentration may also subject us to additional risks associated with technology changes. Since we are primarily a provider of etch equipment, our business is affected by our customers’ use of etching steps in their processes. Should technologies change so that the manufacture of semiconductor chips requires fewer etching steps, this ~~might~~could have a larger impact on our business than it would on the business of our less concentrated competitors.

Sales to a limited number of large customers constitute a significant portion of our overall revenue, new orders and profitability. As a result, the actions of even one customer may subject us to revenue swings that are difficult to predict. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers, so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.

Increasingly, semiconductor companies are entering into strategic alliances with one another to expedite the development of processes and other manufacturing technologies. Often, one of the outcomes of such an alliance is the definition of a particular tool set for a certain function or a series of process steps that use a specific set of manufacturing equipment. While this could work to our advantage if ~~Lam Research’s~~our equipment becomes the basis for the function or process, it could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such function or process. In the latter case, even if ~~Lam Research’s~~our equipment was previously used by a customer, that equipment may be displaced in current and future applications by the tools standardized by the alliance.

Similarly, our customers may team with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. These actions could adversely impact our market share and ~~subsequent business.~~financial results.

We obtain certain components and sub-assemblies included in our products from a single supplier or a limited group of suppliers. We have established long-term contracts with many of these suppliers. These long-term contracts can take a variety of forms. We may renew these contracts periodically. In some cases, these suppliers sold us products during at least the last ~~four~~five years, and we expect that we will continue to renew these contracts in the future or that we will otherwise replace them with competent alternative suppliers. However, several of our suppliers are relatively new providers to us so that our experience with them and their performance is limited. Where practical, our intent is to establish alternative sources to mitigate the risk that the failure of any single supplier will adversely affect our business. Nevertheless, a prolonged inability to obtain certain components could impair our ability to ship products, lower our revenues and thus adversely affect our operating results and result in damage to our customer relationships.

Outsource providers have played and will continue to play a key ~~roles~~role in our manufacturing operations and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. Although we aim at selecting reputable providers and secure their performance on terms documented in written contracts, it is possible that one or more of these providers could fail to perform as we expect and such failure could have an adverse impact on our business.

In addition, the expansive role of outsource providers has required and will continue to require us to implement changes to our existing operations and to adopt new procedures to deal with and manage the performance of these outsource providers. Any delay or failure in the implementation of our operational changes and new procedures could adversely affect our customer relationships and/or have a negative effect on our operating results.

Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing Equipment, the Manufacturer Typically Continues to Purchase that Competitor’s Equipment, Making it More Difficult for Us to Sell Our Equipment to that Customer

Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that specific production line ~~application.~~application for an extended period of time. Accordingly, we expect it to be more difficult to sell to a given customer if that customer initially selects a competitor’s equipment.

We are Subject to Risks Associated with Our Competitors’ Strategic Relationships and Their Introduction of New Products and We May Lack the Financial Resources or Technological Capabilities of Certain of Our Competitors Needed to Capture Increased Market Share

We expect to face significant competition from multiple current and future competitors. We believe that other companies are developing systems and products that are competitive to ours and are planning to introduce new products, which may affect our ability to sell our existing products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.

We believe that to remain competitive we will require significant financial resources to offer a broad range of products, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Certain of our competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to increasingly dominate the semiconductor equipment industry. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. For these reasons, we may fail to continue to compete successfully worldwide.

In addition, our competitors may provide innovative technology that may have performance advantages over systems we currently, or expect to, offer. They may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we currently are developing additional product enhancements that we believe will address future customer requirements, we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, we may be unable to continue to compete in our markets, competition may intensify, or future competition may have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.

Our Future Success Depends on International Sales and the Management of Global Operations

Non-U.S. sales accounted for approximately 85% of total revenue in fiscal year 2009, 83% in fiscal year 2008 and 84% in fiscal year ~~2007 and 86% in fiscal year 2006 of our total revenue.~~2007. We expect that international sales will continue to account for a significant portion of our total revenue in future years.

We are subject to various challenges related to the management of global operations and international sales ~~are subject to risks~~ including, but not limited to:

Certain international sales depend on our ability to obtain export licenses from the U.S. Government. Our failure or inability to obtain such licenses would substantially limit our markets and severely restrict our revenues. Many of the challenges noted above are applicable in China, which is a fast developing market for the semiconductor equipment industry and therefore an area of potential significant growth for our business. As the business volume between China and the rest of the world grows, there is inherent risk, based on the complex relationships between China, Taiwan, Japan, and the United States, that political and diplomatic influences might lead to trade disruptions which would adversely affect our business with China and/or Taiwan and perhaps the entire Asia Pacific region. A significant trade disruption in these areas could have a ~~material,~~materially adverse impact on our future revenue and profits.

We are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. WeHowever, we are exposed to foreign currency exchange rate fluctuations related to certain of our revenues denominated in Japanese yen and ~~Euro,~~Euros, and to certain of our spares and service contracts, and expenses related to our non-U.S. sales and support offices which are denominated in ~~these~~the related countries’ local currency.

We currently enter into foreign exchange forward contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on Japanese yen-denominated assets and forecasted Japanese yen-denominated revenue and ~~also~~ on U.S. dollar-denominated assets where the Euro is the functional currency. We also enter into foreign exchange forward contracts to minimize the short-term impact of exchange rate fluctuations on various other non U.S. dollar-denominated assetsnet intercompany liability exposures denominated in Swiss francs, Euros and ~~liabilities.~~Taiwanese dollars. We currently believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, in the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of customer acceptances and our forecasts of those acceptances may leave us either over- or under-hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, assets and liabilities with foreign exchange forward contracts, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated assets and liabilities other than those currency exposures previously discussed and currently do not enter into such foreign exchange forward contracts to hedge these other foreign currency exposures, and we therefore are subject to both favorable and unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in other currencies.

Our Financial Results May be Adversely Impacted by Higher Than Expected Tax Rates or Exposure to Additional ~~Income~~ Tax Liabilities

As a global company, our effective tax rate is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region. We are subject to income taxes in ~~both~~ the United States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax liabilities. Our effective tax rate could be adversely affected by changes in the split of earnings between countries with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws or by material audit assessments, which could affect our profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent on our ability to generate future taxable income in the United States. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.

A Failure to Comply with Environmental Regulations May Adversely Affect Our Operating Results

We are subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals. We believe that we are in general compliance with these regulations and that we have obtained (or will obtain or are otherwise ~~addressing)~~addressing the need for) all ~~necessary~~ environmental permits necessary to conduct our business. These permits generally relate to the disposal of hazardous wastes. Nevertheless, the failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, cessation of our operations or reduction in our customers’ acceptance of our products. These regulations could require us to alter our current operations, to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Our failure to control the use, sale, transport or disposal of hazardous substances could subject us to future liabilities.

If We are Unable to Adjust the Scale of Our Business in Response to Rapid Changes in Demand in the Semiconductor Equipment Industry, Our Operating Results and Our Ability to Compete Successfully May be Impaired

The business cycle in the semiconductor equipment industry has historically been characterized by frequent periods of rapid change in demand that challenge our management to adjust spending and resources allocated to operating activities. During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems and procedures, and in training, managing, and appropriately sizing our supply chain, our work force, and other components of our business on a timely basis. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively. If we do not adequately meet these challenges, our gross margins and earnings may be impaired during periods of demand decline, and we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during periods of demand growth.

If We Choose to Acquire or Dispose of Product Lines and Technologies, We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance

An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, or enhance our technological capabilities. As a result, we may make acquisitions of complementary companies, products or technologies, such as our March 2008 acquisition of SEZ, or we may reduce or dispose of certain product lines or technologies that no longer fit our long-term strategies. Managing an acquired business, disposing of product technologies or reducing personnel entails numerous operational and financial risks, including difficulties in assimilating acquired operations and new personnel or separating existing business or product groups, diversion of management’s attention away from other business concerns, amortization of acquired intangible assets and potential loss of key employees or customers of acquired or disposed operations among others. ~~We anticipate that our recent acquisition of SEZ will give rise to risks like these, as we integrate its operations with ours.~~ There can be no assurance that we will be able to achieve and manage successfully any such integration of potential acquisitions, disposition of product lines or technologies, or reduction in personnel or that our management, personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies could have a material adverse effect on our business, operating results, financial condition, and cash flows.

In addition, any ~~acquisitions~~acquisition could result in changes such as potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the amortization of related intangible assets, and goodwill impairment charges, any of which could materially adversely affect our business, financial condition, and results of operations and/or the price of our Common Stock.

The Market for Our Common Stock is Volatile, Which May Affect Our Ability to Raise Capital or Make Acquisitions

The market price for our Common Stock is volatile and has fluctuated significantly over the past years. The trading price of our Common Stock could continue to be highly volatile and fluctuate widely in response to factors, including but not limited to the following:

variations in our revenues, earnings or other business and financial metrics from those experienced by other companies in our industry or forecasts by securities analysts;

announcements of restructurings, technological innovations, reductions in force, departure of key employees, consolidations of operations, or introduction of new products;

In addition, the stock market experiences significant price and volume fluctuations. Historically, we have witnessed significant volatility in the price of our Common Stock due in part to the actual or anticipated movement in interest rates and the price of and markets for semiconductors. These broad market and industry factors have and may again adversely affect the price of our Common Stock, regardless of our actual operating performance. In the past, following volatile periods in the price of stock, many companies became the object of securities class action litigation. If we are sued in a securities class action, we could incur substantial costs, and it could divert management’s attention and resources and have an unfavorable impact on the price for our Common Stock.

We Rely Upon Certain Critical Information Systems for the Operation of Our Business

We maintain and rely upon certain critical information systems for the effective operation of our business. These information systems include telecommunications, the internet, our corporate intranet, various computer hardware and software applications, network communications, and e-mail. These information systems may be owned by us or by our outsource providers or even third parties such as vendors and contractors and may be maintained by us or by such providers and third parties. These information systems are subject to attacks, failures, and access denials from a number of potential sources including viruses, destructive or inadequate code, power failures, and physical damage to computers, hard drives, communication lines, and networking equipment. To the extent that these information systems are under our control, we have implemented security procedures, such as virus protection software and emergency recovery processes, to address the outlined risks. However, security procedures for information systems cannot be guaranteed to be failsafe and our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business.

Intellectual Property, Indemnity and Other Claims Against Us Can be Costly and Could Result in the Loss of Significant Rights ~~Which~~That are Necessary to Our Continued Business and Profitability

Third parties may assert infringement, unfair competition or other claims against us. From time to time, other parties send us notices alleging that our products infringe their patent or other intellectual property rights. In addition, our Bylaws and indemnity obligations provide that we will indemnify officers and directors against losses that they may incur in legal proceedings resulting from their service to Lam Research. We also face risks of claims from commercial and other relationships. In such cases, it is our policy either to defend the claims or to negotiate licenses or other settlements on commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses or reach agreement on other settlements on commercially reasonable terms, or at all, and any litigation resulting from these claims by other parties may materially adversely affect our business and financial results. Moreover, although we seek to obtain insurance to protect us from claims and cover losses to our property, there is no guarantee that such insurance will fully indemnify us for any losses that we may incur.

We May Fail to Protect Our Proprietary Technology Rights, Which Could Affect Our Business

Our success depends in part on our proprietary technology. While we attempt to protect our proprietary technology through patents, copyrights and trade secret protection, we believe that our success also depends on increasing our technological expertise, continuing our development of new systems, increasing market penetration and growth of our installed base, and providing comprehensive support and service to our customers. However, we may be unable to protect our technology in all instances, or our competitors may develop similar or more competitive technology independently. We currently hold a number of United States and foreign patents and pending patent applications. However, other parties may challenge or attempt to invalidate or circumvent any patents the United States or foreign governments issue to us or these governments may fail to issue patents for pending applications. In addition, the rights granted or anticipated under any of these patents or pending patent applications may be narrower than we expect or, in fact, provide no competitive advantages.

We are Subject to the Internal Control Evaluation and Attestation Requirements of Section 404 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our annual report our assessment of the effectiveness of our internal control over financial reporting and our audited financial statements as of the end of each fiscal year. Furthermore, our independent registered public accounting firm (the “Independent Registered Public Accounting Firm”) is required to report on whether it believes we maintained, in all material respects, effective internal control over financial reporting as of the end of each fiscal year. We have successfully completed our assessment and obtained our Independent Registered Public Accounting Firm’s attestation as to the effectiveness of our internal control over financial reporting as of June ~~29, 2008.~~28, 2009. In future years, if we fail to timely complete this assessment, or if our Independent Registered Public Accounting Firm cannot timely attest to our assessment, we could be subject to regulatory sanctions and a loss of public confidence in our internal control. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to timely meet our regulatory reporting obligations.

Our Independent Registered Public Accounting Firm Must Confirm Its Independence in Order for Us to Meet Our Regulatory Reporting Obligations on a Timely Basis

Our Independent Registered Public Accounting Firm communicates with us at least annually regarding any relationships between the Independent Registered Public Accounting Firm and Lam Research that, in the Independent Registered Public Accounting Firm’s professional judgment, might have a bearing on the Independent Registered Public Accounting Firm’s independence with respect to us. If, for whatever reason, our Independent Registered Public Accounting Firm finds that it cannot confirm that it is independent of Lam Research based on existing securities laws and registered public accounting firm independence standards, we could experience delays or other failures to meet our regulatory reporting obligations.

~~The Results of Our Independent Committee Review of Our Historical Stock Option Practices and Resulting Restatements May Continue to Have Adverse Effects on Our Financial Results~~

The review by a special committee of our Board of Directors consisting of two independent Board members (the “Independent Committee”) of our historical stock option practices and the resulting restatement of our historical financial statements have required us to expend significant management time and incur significant accounting, legal, and other expenses during fiscal year 2008. The resulting restatements have had a material adverse effect on our results of operations. We have restated our historical results of operations to record additional non-cash, stock-based compensation expense of $95.2 million in the aggregate for the periods from fiscal 1997 to fiscal 2006 (excluding the impact of related payroll and income taxes). We amortized less than $0.1 million of compensation expense under Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”) in periods subsequent to fiscal year 2006 to properly account for previously issued stock options with deemed incorrect measurement dates. Furthermore, to address potential adverse tax consequences certain of our employees have incurred or may incur as a result of the issuance and/or exercise of misdated stock options, we have taken and will continue to take remedial actions to make such employees including our Chief Executive Officer and other affected executive officers, whole for any or all such additional tax liabilities which were approximately $53 million as of March 29, 2009. Such actions have caused and in the future may cause us to incur additional cash or noncash compensation expense. See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 3, “Restatements of Consolidated Financial Statements,” to Notes to Consolidated Financial Statements of our Annual Report on Form 10-K as of and for the year ended June 24, 2007 (“2007 Form 10-K”) for further discussion.

~~We May Be Subject to the Risks of Lawsuits in Connection With Our Historical Stock Option Practices, the Resulting Restatements, and the Remedial Measures We Have Taken~~

We, and our current and former directors and officers, may become the subject of shareholder derivative and/or class action lawsuits and other legal proceedings relating to our historical stock option practices and resulting restatements in the future. We may also be subject to other kinds of lawsuits. Should any of these events occur, they could require us to expend significant management time and incur significant accounting, legal and other expenses. This could divert attention and resources from the operation of our business and adversely affect our financial condition and results of operations. In addition, the ultimate outcome of these potential actions could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price for our securities. Litigation may be time-consuming, expensive and disruptive to normal business operations, and the outcome of litigation is difficult to predict. The defense of these potential lawsuits could result in significant expenditures.

Subject to certain limitations, we are obliged to indemnify our current and former directors, officers and employees in connection with any government inquiry or litigation related to our historical stock option practices that may arise. We currently hold insurance policies for the benefit of our directors and officers, although there can be no assurance that the insurance would cover all of the expenses that would be associated with any proceedings.

(c) On September 8, 2008, the Company announced that its Board of Directors had authorized the repurchase of up to $250 million of Company common stock from the public market or in private purchases. While the repurchase program does not have a defined termination date, it may be suspended or discontinued at any time, and will be funded using the Company’s available cash. The Company suspended repurchases under the Board authorized program prior to the end of the December 2008 quarter. ~~Share repurchases~~The Company did not repurchase any shares under the ~~authorizations were as follows:~~Board authorized program during the three months ended September 27, 2009. During the three months ended September 27, 2009, the Company withheld 78,922 shares through net share settlements upon the vesting of restricted stock unit awards under the Company’s equity compensation plans to cover tax withholding obligations.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

LAM RESEARCH CORPORATION

(Registrant)

/s/ S/ ERNEST E. MADDOCK

Ernest E. Maddock

~~Ernest E. Maddock~~

Senior Vice President, Chief Financial Officer ~~(Principal~~

(Principal Financial Officer and Principal Accounting Officer)


Delaware		94-2634797
*(State or other jurisdiction of* *incorporation or organization)*		*(I.R.S. Employer* *Identification No.)*

4650 Cushing Parkway Fremont, California 94538		94538
*(Address of principal executive offices including zip code)*		*(Zip Code)*


Large accelerated filerþ	x		Accelerated filer	¨

Non-accelerated filer	~~Accelerated filer~~ ¨		~~Non-accelerated filer~~ ¨	~~Smaller reporting company~~ ¨
		~~(Do~~ (Do not check if a smaller reporting company)	Smaller reporting company	¨


		Page No.
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of ~~March 29,~~September 27, 2009 and June ~~29, 2008~~28, 2009		3
CondensedConsolidated Statements of Operations for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 and ~~March 30,~~September 28, 2008		4
Condensed Consolidated Statements of Cash Flows for the three ~~and nine~~ months ended ~~March 29,~~September 27, 2009 and ~~March 30,~~September 28, 2008		5
Notes to Condensed Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2623

Item 3. Quantitative and Qualitative Disclosures about Market Risk		4136

Item 4. Controls and Procedures		4236

PART II. Other Information		4236

Item 1. Legal Proceedings		4236

Item 1A. Risk Factors		4337

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5243

Item 3. Defaults Upon Senior Securities		5243

Item 4. Submission of Matters to a Vote of Security Holders		5243

Item 5. Other Information		5243

Item 6. Exhibits		5243

Signatures		5244

Exhibit Index		5345
EX-31.1
EX-31.2
EX-32.1
EX-32.2


	March 29, 2009			June 29, 2008
	(unaudited)			(1)
ASSETS
Cash and cash equivalents	$	374,648		$	732,537
Short-term investments		248,500			326,199
Accounts receivable, less allowance for doubtful accounts of $10,717 as of March 29, 2009 and $4,102 as of June 29, 2008		196,842			412,356
Inventories		260,667			282,218
Deferred income taxes		90,541			96,748
Prepaid expenses and other current assets		82,273			67,649

Total current assets		1,253,471			1,917,707
Property and equipment, net		225,864			235,735
Restricted cash and investments		183,277			146,072
Deferred income taxes		15,281			19,793
Goodwill		170,675			281,298
Intangible assets, net		97,574			121,889
Other assets		87,340			84,261

Total assets	$	2,033,482		$	2,806,755

LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	39,177		$	89,158
Accrued expenses and other current liabilities		289,471			390,062
Deferred profit		36,076			128,250
Current portion of long-term debt and capital leases		5,274			30,209

Total current liabilities		369,998			637,679
Long-term debt and capital leases		39,943			276,121
Income taxes payable		99,807			85,611
Other long-term liabilities		20,476			23,400

Total liabilities		530,224			1,022,811
Minority interests		—			5,347
Commitments and contingencies
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized - 5,000 shares, none outstanding		—			—
Common stock, at par value of $0.001 per share; authorized - 400,000 shares; issued and outstanding - 125,652 shares at March 29, 2009 and 125,187 shares at June 29, 2008		126			125
Additional paid-in capital		1,361,715			1,332,159
Treasury stock, at cost, 34,890 shares at March 29, 2009 and 34,220 shares at June 29, 2008		(1,501,724	)		(1,490,701	)
Accumulated other comprehensive income (loss)		(69,595	)		10,620
Retained earnings		1,712,736			1,926,394

Total stockholders’ equity		1,503,258			1,778,597

Total liabilities and stockholders’ equity	$	2,033,482		$	2,806,755


	September 27, 2009			June 28, 2009
	(unaudited)			(1)
ASSETS
Cash and cash equivalents	$	361,163		$	374,167
Short-term investments		215,031			205,221
Accounts receivable, less allowance for doubtful accounts of $10,723 as of September 27, 2009 and $10,719 as of June 28, 2009		325,756			253,585
Inventories		220,083			233,410
Deferred income taxes		57,293			69,043
Prepaid expenses and other current assets		61,128			60,401

Total current assets		1,240,454			1,195,827
Property and equipment, net		211,348			215,666
Restricted cash and investments		185,010			178,439
Deferred income taxes		16,298			17,007
Goodwill		169,182			169,182
Intangible assets, net		85,634			91,605
Other assets		87,179			84,145

Total assets	$	1,995,105		$	1,951,871


LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	72,540		$	49,606
Accrued expenses and other current liabilities		197,430			240,022
Deferred profit		55,572			45,787
Current portion of long-term debt and capital leases		11,369			5,348

Total current liabilities		336,911			340,763
Long-term debt and capital leases		35,787			40,886
Income taxes payable		105,925			102,999
Other long-term liabilities		12,722			14,134

Total liabilities		491,345			498,782

Commitments and contingencies
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized — 5,000 shares, none outstanding		—			—
Common stock, at par value of $0.001 per share; authorized — 400,000 shares; issued and outstanding — 127,180 shares at September 27, 2009 and 126,532 shares at June 28, 2009		127			127
Additional paid-in capital		1,391,085			1,377,231
Treasury stock, at cost, 34,456 shares at September 27, 2009 and 34,679 shares at June 28, 2009		(1,490,017	)		(1,495,693	)
Accumulated other comprehensive loss		(38,478	)		(52,822	)
Retained earnings		1,641,043			1,624,246

Total stockholders’ equity		1,503,760			1,453,089

Total liabilities and stockholders’ equity	$	1,995,105		$	1,951,871

(1) Derived from audited financial statements


Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value as of March 29, 2009 (in thousands)
Outstanding at June 29, 2008	2,607		$	21.60	1.59
Granted	476			20.21	4.92
Exercised	(457	)		12.53
Forfeited or expired	(733	)		24.92

Outstanding at March 29, 2009	1,893		$	22.15	2.37	$	6,871

Exercisable at March 29, 2009	1,415		$	22.82	1.51	$	5,037


~~Expected term:~~	~~4.0~~	~~years~~
~~Expected volatility:~~	~~46.9~~	%
~~Risk-free interest rate:~~	~~2.07~~	%


Expected term:	0.68	years
Expected volatility:	74.00	%
Risk-free interest rate:	0.41	%


			Fair Value Measurement at March 29, 2009
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets
Fixed Income
Cash equivalents	$	298,532	$	298,532	$	—	$	—
U.S. Treasuries and Agencies		46,330		43,871		2,459
Government Sponsored Enterprises		21,554		—		21,554		—
Bank and Corporate Notes		207,738		—		207,738		—
Municipal Notes and Bonds		143,099		—		143,099		—

Total fixed income		717,253		342,403		374,850		—
Equities		7,352		7,352		—		—
Derivatives assets		1,256		—		1,256		—

Total	$	725,861	$	349,755	$	376,106	$	—

Liabilities
Derivatives liabilities	$	1,175	$	—	$	1,175	$	—


			Fair Value Measurement at September 27, 2009
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Fixed income
Money market funds	$	277,284	$	277,284	$	—	$	—
US treasury & agencies		30,775		30,775		—		—
Government-sponsored enterprises		8,269		—		8,269		—
Bank and corporate notes		236,029		184,164		51,407		458
Municipal notes and bonds		102,975		—		102,975		—
Mortgage backed securities — residential		9,470		—		9,470		—
Mortgage backed securities — commercial		11,677		—		11,677		—

Total fixed income	$	676,479	$	492,223	$	183,798	$	458
Equities		6,554		6,554		—		—
Derivatives assets		61		—		61		—

Total	$	683,094	$	498,777	$	183,859	$	458

Liabilities

Derivative liabilities	$	1,432	$	—	$	1,432	$	—


	September 27, 2009
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Value
	(in thousands)
Cash	$	84,725	$	—	$	—		$	84,725
Money market funds		277,284		—		—			277,284
Municipal notes and bonds		100,606		2,370		(1	)		102,975
US treasury & agencies		30,305		479		(9	)		30,775
Government-sponsored enterprises		8,123		146		—			8,269
Bank and corporate notes		234,601		1,505		(77	)		236,029
Mortgage backed securities — residential		9,079		425		(34	)		9,470
Mortgage backed securities — commercial		11,598		241		(162	)		11,677

Total	$	756,321	$	5,166	$	(283	)	$	761,204

Long Term Investments:
Publicly traded equity securities	$	9,320	$	—	$	(2,767	)	$	6,553

Reported as:
Cash and cash equivalents	$	361,162	$	—	$	—		$	361,162
Short-term investments		210,148		5,166		(283	)	$	215,031
Restricted cash and investments		185,010		—		—		$	185,010
Other assets		9,320		—		(2,767	)	$	6,553

Total	$	765,640	$	5,166	$	(3,050	)	$	767,756


	UNREALIZED LOSSES LESS THAN 12 MONTHS					UNREALIZED LOSSES 12 MONTHS OR GREATER					TOTAL
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
	(in thousands)
Fixed Income Securities
Municipal notes and bonds	$	2,687	$	(1	)	$	—	$	—		$	2,687	$	(1	)
US treasury & agencies		6,494		(9	)		—		—			6,494		(9	)
Bank and corporate bonds		1,494		(51	)		2,445		(26	)		3,939		(77	)
Mortgage backed securities — residential		—		—			177		(34	)		177		(34	)
Mortgage backed securities — commercial		—		—			805		(162	)		805		(162	)

Total Fixed Income	$	10,675	$	(61	)	$	3,427	$	(222	)	$	14,102	$	(283	)


	September 27, 2009
	Cost		Estimated Fair Value
	(in thousands)
Due in less than one year	$	523,276	$	524,100
Due in more than one year		148,321		152,379

	$	671,597	$	676,479


	(in thousands)
Balance as of June 29, 2008	$	281,298
Additional share purchases / acquisitions		10,960
Tax adjustments		(3,186	)
Goodwill impairment		(89,076	)
Effect of changes in foreign currency exchange rates		(29,321	)

Balance as of March 29, 2009	$	170,675


Cash consideration	$	628,092
Transaction costs		11,115

	$	639,207

Net tangible assets	$	345,494
Intangible assets		67,743
Goodwill		225,970

	$	639,207


	Capital Leases		Long-term Debt		Total
	(in thousands)
Payments due by period:
One year	$	1,845	$	4,161	$	6,006
Two years		1,835		10,840		12,675
Three years		1,839		7,665		9,504
Four years		1,836		4,315		6,151
Five years		1,833		—		1,833
Over five years		13,217		—		13,217

Total		22,405		26,981		49,386
Interest on capital leases		4,169				4,169

Current portion of long-term debt and capital leases		1,113		4,161		5,274

Long-term debt and capital leases	$	17,123	$	22,820	$	39,943


	Severance and Benefits			Facilities			Abandoned Assets			Inventory			Total
	(in thousands)
June 2008 quarter expense	$	5,513		$	899		$	1,893		$	10,671		$	18,976
Cash payments		(927	)		—			—			—			(927	)
Non-cash charges		—			—			(1,893	)		(10,671	)		(12,564	)

Balance at June 29, 2008		4,586			899			—			—			5,485

September 2008 quarter expense		12,554			—			3,395			3,067			19,016
Cash payments		(1,098	)		(215	)		—			—			(1,313	)
Non-cash charges		—			—			(3,395	)		(3,067	)		(6,462	)

Balance at September 28, 2008		16,042			684			—			—			16,726

Cash payments		(2,483	)		(52	)		—			—			(2,535	)

Balance at December 28, 2008		13,559			632			—			—			14,191

Cash payments		(7,374	)		(344	)		—			—			(7,718	)

Balance at March 29, 2009	$	6,185		$	288		$	—		$	—		$	6,473


Period	Total Number of Shares Repurchased	Total Cost of Repurchase		Average Price Paid Per Share		Amount Available Under Repurchase Program
	(in thousands, except per share data)
Authorization of up to $250 million - September 2008						$	250,000
Quarter ended September 28, 2008	1	$	15	$	30.00	$	249,985
Quarter ended December 28, 2008	1,053		23,043	$	21.87	$	226,942
Quarter ended March 29, 2009	—		—		—	$	226,942


Period	Total Number of Shares Repurchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Amount Available Under Repurchase Program
	(in thousands, except per share data)
June 30 - July 27, 2008	—	$	—	—	$	—
July 28 - August 24, 2008	—	$	—	—	$	—
Authorization of up to $250 million - September 2008					$	250,000
August 25 - September 28, 2008	84	$	30.00	1	$	249,985
September 29, 2008 - October 19, 2008	575	$	23.44	571	$	236,618
October 20, 2008 - November 23, 2008	489	$	20.02	482	$	226,942
November 24, 2008 - December 28, 2008	64	$	19.15	—	$	226,942
December 29, 2008 - January 18, 2009	4	$	21.80
January 19, 2009 - February 15, 2009	9	$	20.59
February 16, 2009 - March 29, 2009	16	$	19.74

Total	1,241	$	22.24	1,054	$	226,942


Exhibit Number		Description

31.1		Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)

31.2		Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)

32.1		Section 1350 Certification (Principal Executive Officer)

32.2		Section 1350 Certification (Principal Financial Officer)