SAN JOSE, Calif., July 24, 2003--KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and 2003 fiscal year. For the quarter ending June 30, 2003, the company reported improvement on a quarter-over-quarter basis. Net income of $29 million and earnings per share of $0.15 in the June 2003 fiscal quarter were a 7 percent improvement over net income of $27 million and earnings per share of $0.14 posted in the March quarter. Revenue of $308 million in the June quarter was up slightly from revenue of $304 million in the March quarter. The June 2003 quarter results compare to net income of $47 million and earnings per share of $0.23 on revenues of $373 million for the same period last year. For the full 2003 fiscal year, KLA-Tencor reported net income of $137 million and earnings per share of $0.70 on revenue of $1.32 billion compared, to fiscal year 2002 net income of $216 million and earnings per share of $1.10 on revenues of $1.64 billion.

Ken Schroeder, Chief Executive Officer of KLA-Tencor, stated that while the company continues to streamline its operations to increase profitability, it is taking equal care to preserve its ability to capitalize on an industry upturn. "Although the increase in business activity is not broad based, we are definitely seeing a number of our customers reporting an upturn in their business," Schroeder observed. "As the recovery occurs, we believe that the twin forces of rising demand for leading-edge chips and an under-investment in leading-edge capacity will contribute to stronger sales for semiconductor process control equipment. During the year, KLA-Tencor worked closely with semiconductor manufacturers to overcome the yield challenges of next-generation processes, including copper interconnects, sub-130-nm design rules and 300-mm wafers. We are now well positioned to benefit from future industry growth with solutions that have proven critical to ramping and sustaining yields of next-generation chips."

KLA-Tencor reported that it ended the year with approximately six months of backlog at current shipping levels. Geographically, during the quarter, the strongest order activity originated from Japan which was above its historical share. China and Singapore were also above historical levels while the United States, Europe, Taiwan and Korea fell below historical levels during the quarter.

Gross margins improved from 48.5 percent in the third quarter of fiscal year 2003 to 49.0 percent in the fourth quarter. Cost reductions in service and manufacturing expenses contributed to the improvement in gross margins. Operating expenses were unchanged at $122 million; a decrease in selling, general and administrative expense offset a $3 million increase in engineering expense.

The company increased total cash, cash equivalents and marketable securities by $90 million to $1.49 billion, while the balance sheet remained free of long-term debt. Inventory and accounts receivables decreased during the quarter. Inventory was reduced by $10 million to $259 million, and accounts receivable were lowered by $8 million to $224 million.

Click here to view Condensed Consolidated Unaudited Balance Sheets and Unaudited Statements Of Operations

Forward Looking Statements: Statements in this press release regarding the company's positioning for future industry growth, potential economic recovery, upturn in customer business, current order backlog, rising demand for semiconductor process control equipment and cost-saving measures are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations, and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: delays or cancellations of orders by customers; shipments or acceptances; inability by the company to meet its production and/or product development schedules; the demand for semiconductors; and new and enhanced product offerings by competitors. For other factors that may cause actual results to differ from those projected, please refer to the company's Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the company's SEC filings.


About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., with operations around the world, KLA-Tencor ranked #6 on S&P's 2002 index of the top 500 companies in the U.S. KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC. Additional information about the company is available on the Internet at http://www.kla-tencor.com.

Contact:
Meggan Powers
Director Corporate Communications