San Jose, Calif. - July 27, 2000 - KLA-Tencor Corporation today announced record fourth quarter results of $482 million in revenues, $92 million in net income and $0.47 earnings per share. These results compared with revenues of $234 million, net income of $26 million and earnings per share of $0.14 for the same period of the prior year.

For the twelve months ended June 30, 2000, revenues were $1.50 billion, up 78 percent from $843 million in the prior year. Net income and earnings per share, excluding non-recurring restructuring and acquisition charges, grew 275 percent to $251 million from $67 million and 251 percent to $1.30 from $0.37, respectively. Net income and earnings per share including non-recurring restructuring and acquisition charges were $254 million and $1.32 for the current fiscal year versus $39 million and $0.21 for the prior year.

The Company also posted record bookings during the quarter. The United States, Korea and Japan exhibited the strongest growth during the quarter, driven in part by design shrinks, capacity expansions, 300mm wafers, and new processes such as copper/low-k interconnect. The US and Europe were a larger proportion of the total bookings compared to historical norms. While Japan bookings also increased dramatically, they were still below historical share. The rest of Asia was at normal proportions of the total bookings.

On a product line basis, every product group grew during the quarter. Wafer inspection, both e-beam and optical, experienced the highest growth during the quarter, a result of the escalating importance of these tools for all of the semiconductor industry's major technology transitions.

Gross margins improved one percent sequentially to 57 percent in the June quarter from 56 percent in the March quarter. Similar to the previous quarter, capacity absorption and a shift toward higher gross margin products provided the majority of the gross margin improvement. Total fixed costs decreased as a percent of revenue from 34 percent in the March quarter to 33 percent, or $159 million, in the June quarter.

Cash and investments climbed to $964 million during the quarter, a $76 million increase from the prior quarter and a $209 million increase from the prior year ending balance.

"KLA-Tencor's rapid growth reflects the increasing demand for our process control solutions that help IC manufacturers quickly navigate critical technology transitions for higher return on their fab investments," stated Ken Schroeder, President and CEO. "Going forward, you will see KLA-Tencor continue to merge new hardware, software and yield management expertise into innovative defect, parametric and lithography solutions that meet our customers' emerging process control requirements."

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.

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About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., the company has sales and service offices around the world. An S&P 500 company, KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC.

Contact:
Meggan Powers
Director Corporate Communications