KLA-Tencor Reduces Workforce

KLA-Tencor Corporation announced that, in continuation of its efforts to control costs and in response to depressed market conditions, the company will reduce its global workforce by approximately 10 percent. This reduction is in addition to the company’s workforce reduction that was announced in November 2008. The reduction is one of many cost-saving actions being undertaken by KLA-Tencor that are designed to help reduce the company’s quarterly non-GAAP operating expenses to a range of $140-145 million per quarter by the end of calendar year 2009, adjusted from the company’s previously announced target of $165-170 million per quarter.

“Although we have been successful in our efforts to reduce operating costs in late 2008 and early 2009, we must now further reduce our operating expenses in order to respond to the current demand environment,” said Rick Wallace, chief executive officer of KLA-Tencor. “Today’s reduction in force is an extremely difficult decision as we realize the effect this action will have on both impacted and remaining employees.”

In addition to the workforce reduction being announced today, the company will also implement a number of other cost-cutting actions over the next several quarters, including the consolidation of several of the company’s facilities, additional forced time off and a reduction in employee stock purchase plan benefits. However, KLA-Tencor is steadfast in its commitment to maintain a healthy research and development program and sustain its strategic business focus. The company remains committed to continuing to innovate process control technology for customers and optimizing efficiencies throughout the organization, which KLA-Tencor believes will continue to solidify its market leadership position and ability to provide superior process control technologies to its customers.

KLA-Tencor currently estimates that, in connection with the cost-reduction activities announced today, it will incur charges in the range of approximately $20 million to $30 million, including approximately $18 million to $22 million related to estimated severance costs associated with the workforce reduction, with the remainder of such charges related to facilities consolidation. A significant portion of these restructuring charges will be recorded in KLA-Tencor’s fiscal quarter ending March 31, 2009. KLA-Tencor estimates that the restructuring measures announced today will result in approximately $18 million to $22 million in cash payments (reflecting the estimated severance costs associated with the restructuring), which KLA-Tencor believes will be paid out by the end of calendar year 2009. The remainder will be a non-cash accounting-related charge associated with facilities consolidations.

The company anticipates incurring additional restructuring charges, which will likely include severance costs, lease termination charges, other exit costs associated with facility site consolidations or closures, and other related expenses in connection with the cost reduction actions announced today through the remainder of calendar year 2009, but is unable to estimate the aggregate amount of such additional charges at this time.