Press Release

Exhibit 99.1

FOR IMMEDIATE RELEASE


Investor Relations:		Media Relations:
Ed Lockwood		Meggan Powers
Sr. Director, Investor Relations		Sr. Director, Corporate Communications
(408) 875-9529		(408) 875-8733
ed.lockwood@kla-tencor.com		meggan.powers@kla-tencor.com

KLA-TENCOR^TM REPORTS FISCAL 2011 SECOND QUARTER RESULTS

MILPITAS, Calif., January 27, 2011 —KLA-Tencor Corporation^TM (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2011, which ended on December 31, 2010, and reported GAAP net income of $185 million and GAAP earnings per diluted share of $1.09 on revenues of $766 million.

“KLA-Tencor ended calendar year 2010 with an outstanding quarter, as high levels of demand coupled with solid execution in our global manufacturing operations drove increased shipments, revenue and earnings,” commented Rick Wallace, KLA-Tencor’s president and CEO. “We begin calendar 2011 with excellent momentum, driven by our customer focus, competitive market position and a strong demand environment for process control.”


GAAP Results

	Q2 FY 2011		Q1 FY 2011		Q2 FY 2010
Revenues	$	766 million	$	682 million	$	440 million
Net Income	$	185 million	$	154 million	$	22 million
Earnings per Diluted Share	$	1.09	$	0.91	$	0.13


Non-GAAP Results

	Q2 FY 2011		Q1 FY 2011		Q2 FY 2010
Net Income	$	187 million	$	169 million	$	49 million
Earnings per Diluted Share	$	1.10	$	0.99	$	0.28

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

KLA-Tencor will discuss the results for its fiscal year 2011 second quarter, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Standard Time. A webcast of the call will be available at: www.kla-tencor.com

Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements regarding KLA-Tencor’s ability to carry operating momentum into the quarter ending March 31, 2011, the company’s ability to maintain its current market position, the expected levels of demand for process control and the company’s ability to successfully innovate, develop and sell new technologies and products that meet customer needs are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations,

and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to: the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product and technology offerings by competitors; cancellation of orders by customers; the ability of KLA-Tencor’s research and development teams to successfully innovate and develop technologies and products that are responsive to customer demands; market acceptance of the company’s existing and newly issued products; and changing customer demands. For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this release, please refer to KLA-Tencor’s Annual Report on Form 10-K for the year ended June 30, 2010, subsequently filed Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein). KLA-Tencor assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About KLA-Tencor:

KLA-Tencor Corporation (NASDAQ: KLAC), a leading provider of process control and yield management solutions, partners with customers around the world to develop state-of-the-art inspection and metrology technologies. These technologies serve the semiconductor, data storage, LED, photovoltaic, and other related nanoelectronics industries. With a portfolio of industry-standard products and a team of world-class engineers and scientists, the company has created superior solutions for its customers for over 30 years. Headquartered in Milpitas, California, KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at www.kla-tencor.com. (KLAC-F)

Use of Non-GAAP Financial Information:

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

To supplement KLA-Tencor’s condensed consolidated financial statements presented in accordance with GAAP, the company provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user’s overall understanding of KLA-Tencor’s operating performance and its prospects in the future. Specifically, KLA-Tencor believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA-Tencor’s financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

KLA-Tencor Corporation

Condensed Consolidated Unaudited Balance Sheets


(In thousands)	December 31, 2010			June 30, 2010
ASSETS
Cash and marketable securities	$	1,636,400		$	1,534,044
Accounts receivable, net		531,453			440,125
Inventories, net		504,697			401,730
Other current assets		453,761			459,566
Land, property and equipment, net		249,468			236,752
Goodwill		328,147			328,006
Purchased intangibles, net		101,900			117,336
Other non-current assets		362,635			389,497

Total assets	$	4,168,461		$	3,907,056


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	123,166		$	107,938
Deferred system profit		241,494			204,764
Unearned revenue		33,193			37,026
Other current liabilities		396,084			422,059

Total current liabilities		793,937			771,787

Non-current liabilities:
Income tax payable		62,329			53,492
Unearned revenue		28,383			20,354
Other non-current liabilities		71,560			69,065
Long-term debt		746,018			745,747

Total liabilities		1,702,227			1,660,445

Stockholders’ equity:
Common stock and capital in excess of par value		972,870			921,460
Retained earnings		1,506,747			1,356,454
Accumulated other comprehensive income (loss)		(13,383	)		(31,303	)

Total stockholders’ equity		2,466,234			2,246,611

Total liabilities and stockholders’ equity	$	4,168,461		$	3,907,056

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations


	Three months ended						Six months ended
(In thousands, except per share data)	December 31, 2010			December 31, 2009			December 31, 2010			December 31, 2009
Revenues:
Product	$	627,857		$	314,946		$	1,178,466		$	544,197
Service		138,470			125,409			270,203			238,845

Total revenues		766,327			440,355			1,448,669			783,042

Costs and operating expenses:
Costs of revenues		311,398			207,286			575,367			379,178
Engineering, research and development		94,897			83,301			189,617			161,510
Selling, general and administrative		91,166			102,673			179,203			180,309

Total costs and operating expenses		497,461			393,260			944,187			720,997
Income from operations		268,866			47,095			504,482			62,045

Interest income and other, net		(17,675	)		(9,079	)		(29,979	)		(1,237	)

Income before income taxes		251,191			38,016			474,503			60,808
Provision for income taxes		65,699			16,222			134,815			18,609


Net income	$	185,492		$	21,794		$	339,688		$	42,199


Net income per share:
Basic	$	1.11		$	0.13		$	2.03		$	0.25

Diluted	$	1.09		$	0.13		$	2.00		$	0.24


Cash dividend paid per share	$	0.25		$	0.15		$	0.50		$	0.30


Weighted average number of shares:
Basic		166,886			171,408			167,052			171,053
Diluted		169,513			173,808			169,685			173,292

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows


	Three months ended December 31,
*(In thousands)*	2010			2009
Cash flows from operating activities:
Net income	$	185,492		$	21,794
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,653			23,240
Asset impairment charges		6,800			10,592
Non-cash stock-based compensation expense		19,431			20,855
Net gain on sale of marketable securities and other investments		(430	)		(1,582	)
Gain on sale of real estate assets		(1,372	)		(160	)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Increase in accounts receivable, net		(28,890	)		(55,564	)
Increase in inventories		(39,710	)		(2,621	)
Decrease (increase) in other assets		(10,151	)		101,550
Increase (decrease) in accounts payable		(15,416	)		12,328
Increase in deferred system profit		39,831			32,856
Increase in other liabilities		16,687			313

Net cash provided by operating activities		193,925			163,601

Cash flows from investing activities:
Capital expenditures, net		(11,552	)		(10,735	)
Proceeds from sale of assets		18,185			5,878
Purchase of available-for-sale securities		(189,361	)		(337,025	)
Proceeds from sale and maturity of available-for-sale securities		123,677			182,799
Purchase of trading securities		(12,397	)		(15,001	)
Proceeds from sale of trading securities		13,905			17,476

Net cash used in investing activities		(57,543	)		(156,608	)

Cash flows from financing activities:
Issuance of common stock		28,768			20,545
Tax withholding payments related to vested and released restricted stock units		(10,732	)		(10,371	)
Common stock repurchases		(57,017	)		—
Payment of dividends to stockholders		(41,809	)		(25,686	)

Net cash used in financing activities		(80,790	)		(15,512	)

Effect of exchange rate changes on cash and cash equivalents		2,128			(876	)


Net increase (decrease) in cash and cash equivalents		57,720			(9,395	)

Cash and cash equivalents at beginning of period		538,384			540,839


Cash and cash equivalents at end of period	$	596,104		$	531,444


Supplemental cash flow disclosures:
Income taxes paid (refunds received), net	$	71,309		$	(68,491	)
Interest paid	$	26,095		$	26,084

KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share data)

Reconciliation of GAAP Net Income to Non-GAAP Net Income


		Three months ended									Six months ended
		December 31, 2010			September 30, 2010			December 31, 2009			December 31, 2010			December 31, 2009
GAAP net income		$	185,492		$	154,196		$	21,794		$	339,688		$	42,199
Adjustments to reconcile GAAP net income to non-GAAP net income
Acquisition related charges	a		8,178			8,178			8,104			16,356			16,199
Restructuring, severance and other related charges	b		(974	)		—			14,450			(974	)		10,041
Restatement related charges	c		1,147			—			7,077			1,147			12,265
Income tax effect of non-GAAP adjustments	d		(2,921	)		(2,857	)		(10,762	)		(5,778	)		(13,883	)
Discrete tax items	e		(3,706	)		9,154			8,693			5,448			8,693

Non-GAAP net income		$	187,216		$	168,671		$	49,356		$	355,887		$	75,514


GAAP net income per diluted share		$	1.09		$	0.91		$	0.13		$	2.00		$	0.24

Non-GAAP net income per diluted share		$	1.10		$	0.99		$	0.28		$	2.10		$	0.44

Shares used in diluted shares calculation			169,513			169,839			173,808			169,685			173,292

Pre-tax impact of items included in Consolidated Statements of Operations


	Acquisition related charges		Restructuring, severance and other related charges			Restatement related charges		Total pre-tax GAAP to non-GAAP adjustment
Three months ended December 31, 2010
Costs of revenues	$	5,790	$	—		$	—	$	5,790
Engineering, research and development		898		—			—		898
Selling, general and administrative		1,490		(974	)		1,147		1,663

Total in three months ended December 31, 2010	$	8,178	$	(974	)	$	1,147	$	8,351


Three months ended September 30, 2010
Costs of revenues	$	5,790	$	—		$	—	$	5,790
Engineering, research and development		898		—			—		898
Selling, general and administrative		1,490		—			—		1,490

Total in three months ended September 30, 2010	$	8,178	$	—		$	—	$	8,178


Three months ended December 31, 2009
Costs of revenues	$	5,727	$	2,052		$	—	$	7,779
Engineering, research and development		898		566			—		1,464
Selling, general and administrative		1,479		11,832			7,077		20,388

Total in three months ended December 31, 2009	$	8,104	$	14,450		$	7,077	$	29,631

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user’s overall understanding of our operating performance and our prospects in the future. Specifically, we believe that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to our financial performance by excluding certain costs and expenses that we believe are not indicative of our core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion. As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.

Acquisition related charges include amortization of intangible assets, inventory fair value adjustments, and in-process research and development charges associated with acquisitions. Management believes that the expense associated with the amortization of acquisition related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both KLA-Tencor’s newly acquired and long-held businesses. Management believes that it is appropriate to exclude acquisition related inventory fair value adjustments and in-process research and development charges as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

Restructuring, severance and other related charges include gains and costs associated with the company’s facilities divestment and consolidation program, reductions in force, and gains and losses from sales of facilities. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

Restatement related charges include legal and other expenses related to the investigation regarding the company’s historical stock option granting process and related shareholder litigation and other matters. The Company paid or reimbursed legal expenses incurred in connection with the investigation of its historical stock option practices and the related litigation and government inquiries by a number of its current and former directors, officers and employees. The Company is currently paying defense costs a former officer and employee facing SEC civil actions to which the Company is not a party. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.

d	Income tax effect of non-GAAP adjustments includes the income tax effects of the excluded items noted above. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Discrete tax items include the tax impact of shortfalls in excess of cumulative windfall tax benefits recorded as provision for income taxes during the period. Windfall tax benefits arise when a company’s tax deduction for employee stock activity exceeds book compensation for the same activity and are generally recorded as increases to capital in excess of par value. Shortfalls arises when the tax deduction is less than book compensation and are recorded as decreases to capital in excess of par value to the extent that cumulative windfalls exceed cumulative shortfalls. Shortfalls in excess of cumulative windfalls are recorded as provision for income taxes. When there are shortfalls recorded as provision for income taxes during an earlier quarter, windfalls arising in subsequent quarters within the same fiscal year are recorded as a reduction to income taxes to the extent of the shortfalls recorded. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability. Management believes excluding these items helps investors compare our operating performance with our results in prior periods as well as with the performance of other companies.