Lam Research Annual Report 2009

FY2009 Annual Report · Lam Research

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2009 Annual

Report

As a major supplier of wafer fabrication equipment and services to the semiconductor industry,
Lam Research is committed to delivering advanced etch and clean technology and processing
capabilities which are vital to our customers at the leading edge technology nodes.

Lam’s etch products address a broad range of applications, from conductor and dielectric etch to
3-D IC. Our leading etch market share is driven by flexible product architecture and by partnering
with our customers to increase their productivity while offering them cost-effective solutions.

Our spin-clean platform was the pioneering technology in single-wafer clean, and Lam Research
has the largest installed base of single-wafer clean systems. We offer the broadest single-wafer
clean product portfolio incorporating spin, linear, and plasma-based technologies, which provides
customized yield-enhancing solutions to our customers.

With our combined etch and single-wafer clean processing expertise and world-class global
customer support, Lam Research is able to address many of today’s most advanced semiconductor
manufacturing challenges.

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10/6/09 3:42 AM

Letter to Sto ckho LderS

To Our Stockholders:

At the time of writing this letter, we are beginning to see business activity levels pick up after a challenging fiscal

2009. In the past year, the global economy deteriorated rapidly in many sectors, leading to the most significant

downturn the semiconductor equipment industry has experienced in its history. Our actions during the downturn

were centered around our long-term goals for the Company and we are confident that the investments we made

throughout the year will contribute to Lam’s continued success. Uncertainty is always a factor in the dynamic

environment in which we operate but the cycle ahead promises to be one of new opportunities and we are

pursuing them with sharp focus and strong determination.

Fiscal year revenues of $1.1 billion for 2009 declined 55% from fiscal 2008, and we recorded a GAAP loss per

share of $2.41 for the fiscal year – t he first time the Company has not been profitable since fiscal year 2003. Our

priorities during the downturn were:

• preserve our targeted strategic investments in leading edge technologies;

• continue our progress with the integration of the SEZ Group; and

• provide the support and partnership that our customers value.

To preserve the liquidity required to achieve these objectives, we made the difficult decision to restructure the

Company. The workforce was resized from 3,700 to 2,700 over the fiscal year and we consolidated buildings and

facilities. In addition, we made temporary reductions in compensation for all remaining employees. While these

actions were significant, their severity was lessened by the work we did several years ago to outsource Lam’s non-

core functions and operate to a more variable-expense based business model. With this model in place, we were

able to react quickly to reduce the cost structure of the Company and address the severity of the current cycle.

Looking ahead, we remain committed to growing Lam’s revenue and cash generation capability from cycle to

cycle. Although focused on minimizing cash outlays, we continued to invest in developing the next-generation

products and technologies that provide critical leading-edge solutions to our customers. Collaborating closely

with our customers through joint development projects allows us to anticipate their fast-changing demands and

deliver solutions that address their most challenging technical and process issues. We feel that providing this

level of support throughout the cycle is key to increasing customer trust and winning tool-of-record decisions

in the current environment. When our customers add capacity once again, we expect to see the results of our

continued investment reflected in a strengthened leading-market share position in etch and an increased market

share in single-wafer clean.

Increasing market share in single-wafer wet clean is a major component of our plans to grow revenue and

earnings over the next few years. The expansion of this market has been slowed during the downturn as

customers have delayed, where possible, the transition from batch to single-wafer clean processing. We have

184733LAM_Narr_R1.indd 2

10/6/09 3:43 AM

taken advantage of this pause to improve the capability of our single-wafer clean products in terms of reliability

and throughput. In addition, the process knowledge shared between Lam’s etch and clean business groups

allows us to demonstrate differentiated performance in R&D environments and we are gaining momentum

toward winning tool-of-record decisions across a variety of single-wafer clean applications.

Over the past year we have continued the integration activities associated with the acquisition of the SEZ Group.

We first prioritized integration activities around the customer interface by consolidating sales and field support.

Secondly, we defined the Company’s single-wafer clean product roadmap and lastly, we instituted for the

clean group, the same operational processes that have been instrumental in making Lam’s etch business so

successful in the recent past. During the next few months, we will complete the remaining back-office and

information technology systems’ integration activities.

As we look to the next year, we are encouraged by the signs that the worst of the downturn is behind us. We

are exiting the cycle with a strong balance sheet and have sufficient working capital to respond to increasing

demand from customers. In the coming months, we fully expect to post gains in single-wafer clean market

share, deliver new products and capabilities designed to strengthen our etch and customer service related

positions, and return the Company to profitability. We are confident that the strategic investments we have

sustained over the last year will enable us to deliver faster growth in revenues and cash generation compared

with spending for wafer fabrication equipment in the coming upturn.

We are grateful for the loyalty and personal sacrifice our workforce has demonstrated throughout this period of

economic uncertainty. Our customers continue to rely on Lam Research for the most advanced etch and clean

processing solutions available and each Lam employee is instrumental in delivering those solutions. On behalf of

our employees, we would like to thank you for your continued investment in our future.

Sincerely,

Stephen G. Newberry

James W. Bagley

President and Chief Executive Officer

Executive Chairman of the Board

October 5, 2009

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10/6/09 3:43 AM

cAUtIoNS reGArdING ForwArd-LookING
StAteMeNtS

With the exception of historical facts, the statements
contained in this Letter to Our Stockholders
(“Letter”) are forward-looking statements. Forward-
looking statements are subject to the safe harbor
provisions created by the Private Securities Litigation
Reform Act of 1995. We have specifically identified
certain, but not necessarily all, of the forward-
looking statements in the Letter as forward-looking
statements. However, our identification of certain
statements as “forward-looking” does not mean
that other statements not specifically identified are
not forward-looking. Forward-looking statements
include, but are not limited to, statements that
relate to: our future revenue, cash generation and
profitability; improving general economic conditions
and new business opportunities; the future impact
of our investments in research and development and
other areas; increasing market share; our ability to
anticipate customers’ changing demands; customer
demand for and acceptance of our products;
and our success in completing the SEZ Group
integration. These 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
under the heading “Risk Factors” within Item 1A of
our fiscal 2009 Form 10-K and other documents
we file from time to time with the Securities and
Exchange Commission (SEC), such as our quarterly
reports on Form 10-Q and our current reports on
Form 8-K. These risks, uncertainties and changes in
condition, significance, value and effect could cause
our actual results to differ materially from those
expressed in this Letter 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 of this Letter and
are based on information currently and reasonably
known to us. We do not undertake any obligation to
update any forward-looking statements, or to release
the results of any revisions to these forward-looking
statements, to reflect the impact of anticipated or
unanticipated events or circumstances that occur
after the date of this Letter.

trAdeMArk INForMAtIoN
The Lam logo, Lam Research, and all product and
service names used herein are either registered
trademarks or trademarks of Lam Research
Corporation in the United States and/or other
countries. All other marks mentioned herein are
the property of their respective holders.

INdePeNdeNt reGIStered PUBLIc
AccoUNtING FIrM
Ernst & Young LLP

San Jose, California

LeGAL coUNSeL
Jones Day
San Francisco, California

trANSFer AGeNt ANd reGIStrAr
For a response to questions regarding
misplaced stock certificates, changes
of address, or the consolidation of
accounts, please contact the Company’s
transfer agent.

BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015

1.877.265.2630

TDD for Hearing Impaired:
1.800.231.5469

Foreign Shareowners: 1.201.680.6578

TDD Foreign Shareowners:
1.201.680.6610

Web Site Address:
www.bnymellon.com/shareowner/isd

Stock LIStING
The Company’s common stock is traded
on The NASDAQ Global Select MarketSM
under the symbol LRCX. Lam Research
is a NASDAQ-100® Company.

INVeStor reLAtIoNS
Lam Research Corporation welcomes
inquiries from its stockholders and other
interested investors. For additional
copies of this report or other financial
information, please contact:

Investor Relations
Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538
1.510.572.1615
investor.relations@lamresearch.com

ANNUAL MeetING
The Annual Meeting of Stockholders
will be held at 11:00 a.m. Pacific Time
on Thursday, November 5, 2009, at the
Company’s corporate headquarters.

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10/6/09 3:43 AM

October 15, 2009

Dear Lam Research Stockholders,

We cordially invite you to attend in person or by proxy the Lam Research Corporation 2009 Annual
Meeting of Stockholders. The Annual Meeting will be held on Thursday, November 5, 2009, at 11:00 a.m.
Pacific Standard Time at the principal executive offices of Lam Research Corporation, which are located at
4650 Cushing Parkway, Fremont, California 94538. You may also watch the Annual Meeting by clicking on the
Calendar/Webcasts link at http://investor.lamresearch.com.

At this year’s Annual Meeting, the agenda includes the following items:

Agenda Item

Board Recommendation

Proposal No. 1: Election of Directors

Proposal No. 2: Amendment to Certificate of Incorporation to Eliminate

Cumulative Voting in the Election of Directors

Proposal No. 3: Ratification of the appointment of Ernst & Young LLP

as the independent registered public accounting firm for
fiscal 2010

FOR

Please refer to the Proxy Statement for detailed information about the Annual Meeting and each of the
Proposals, as well as voting instructions. Your vote is important, and we strongly urge you to cast your vote
via the Internet, phone or mail.

Sincerely yours,

Lam Research Corporation

James W. Bagley
Executive Chairman of the Board

4650 Cushing Parkway
Fremont, California 94538
Telephone: 510-572-0200

NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS

DATE AND TIME Thursday, November 5, 2009 at 11:00 a.m. Pacific Standard Time

PLACE

INTERNET

Principal executive offices of Lam Research Corporation, 4650 Cushing Parkway,
Fremont, California, 94538

View the Annual Meeting online by clicking on the Calendar/Webcasts link at
http://investor.lamresearch.com. The proxy materials are also available at that
website and at www.proxyvote.com.

AGENDA

Vote on Proposal No. 1: Election of Directors to serve for the ensuing year, and until

their respective successors are elected and qualified

Vote on Proposal No. 2: Amendment to Certificate of Incorporation to Eliminate

Cumulative Voting in the Election of Directors

Vote of Proposal No. 3: Ratification of the appointment of Ernst & Young LLP as the
independent registered public accounting firm for fiscal 2010

Transact other business that may properly come before the Annual Meeting (including
any adjournment or postponement)

RECORD DATE

September 10, 2009. Only stockholders of record at the close of business on the Record
Date are entitled to notice of and to vote at the Annual Meeting.

VOTING

Please vote as soon as possible, even if you plan to attend the Annual Meeting in
person. You have three options for submitting your vote before the Annual Meeting:
Internet, phone and mail. The Proxy Statement and the accompanying proxy card
provide detailed voting instructions.

By Order of the Board of Directors

George M. Schisler, Jr.
Secretary

This Proxy Statement is first being mailed to our stockholders on or about October 15, 2009

LAM RESEARCH CORPORATION

PROXY STATEMENT
FOR
2009 ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 5, 2009

TABLE OF CONTENTS

Important Meeting and Voting Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Meeting Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proposal No. 1: Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nominees for Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Compensation and Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Compensation Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Securities Authorized for Issuance Under Equity Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . .

Proposal No. 2: Amendment to Certificate of Incorporation to Eliminate Cumulative Voting

in the Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proposal No. 3: Ratification of the Appointment of Ernst & Young LLP as the Independent

Registered Public Accounting Firm for Fiscal 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relationship With Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . .

Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LAM RESEARCH CORPORATION

PROXY STATEMENT FOR 2009 ANNUAL MEETING OF STOCKHOLDERS

Our Board of Directors solicits your proxy for the 2009 Annual Meeting of Stockholders and at any
adjournment or postponement of the Annual Meeting, for the purposes described in the “Notice of 2009 Annual
Meeting of Stockholders.” The table below shows some important details about the Annual Meeting and voting.
We use the terms “Lam Research,” “Lam,” the “Company,” “we,” “our” and “us” in this Proxy Statement to refer
to Lam Research Corporation, a Delaware corporation.

Record Date

Shares
Outstanding

Quorum

Inspector of
Elections

Effect of
Abstentions and
Broker Non-Votes

IMPORTANT MEETING AND VOTING DETAILS

September 10, 2009. Only stockholders of record at the close of business on the
Record Date are entitled to receive notice of and to vote at the Annual Meeting.

127,126,111 shares of common stock outstanding as of September 10, 2009.

A majority of shares outstanding on the Record Date constitutes a quorum.
A quorum is required to transact business at the Annual Meeting.

The Company will appoint an Inspector of Elections to determine whether a quorum
is present. The Inspector will also tabulate the votes cast by proxy or in person at the
Annual Meeting.

Shares voted “abstain” and broker non-votes (shares held by brokers that do not
receive voting instructions from the beneficial owner of the shares, and do not
have discretionary authority to vote on a matter) will be counted as present for
purposes of determining whether we have a quorum. For purposes of voting results,
abstentions and broker non-votes will not be counted. They will have no effect on
the election of directors or Proposal 3. However, they will have the same effect as
negative votes on Proposal 2 because Proposal 2 requires the affirmative vote of a
majority of all outstanding shares to pass.

Voting by Proxy

Stockholders may vote by Internet, phone, or mail, per the instructions on the
accompanying proxy card.

Voting at the
Meeting

Changing
Your Vote

Stockholders can vote in person during the Annual Meeting. Stockholders of record
will be on a list held by the Inspector of Elections. Each beneficial holder (a holder
who is not the record holder of their shares) must obtain a proxy from the holder’s
brokerage firm, bank, or other stockholder of record and present it to the Inspector
of Elections with a ballot. Voting in person by a stockholder will replace any
previous votes submitted by proxy.

Stockholders of record may change their votes by revoking their proxies. This may
be done at any time before the polls close by (a) submitting a later-dated proxy by
telephone or by mail, (b) submitting a vote in person at the Annual Meeting, or
(c) delivering voting instructions to our Corporate Secretary before the Annual
Meeting, to the attention of George M. Schisler, Jr., Office of the Secretary, Lam
Research Corporation, 4650 Cushing Parkway, Fremont, California 94538. If you
hold shares through a bank or brokerage firm, you may revoke any prior voting
instructions by contacting that firm.

Voting Instructions

Voting Results

Availability of
Proxy Materials

Proxy Solicitation
Costs

If you complete and submit your proxy voting instructions, the persons named on
the proxy card as proxy holders (the “Proxy Holders”) will follow your instructions.
If you submit proxy voting instructions but do not direct how to vote on each item,
the Proxy Holders will vote as the Board recommends on each proposal for which
you did not include an instruction. The Proxy Holders will vote on any other matters
properly presented at the Annual Meeting in accordance with their best judgment.

We will announce preliminary results at the Annual Meeting. We will report final
results at http://investor.lamresearch.com and in our Form 10-Q for the second
quarter of fiscal 2010.

We mailed this Proxy Statement and the accompanying proxy card and 2009
Annual Report to stockholders entitled to vote at the Annual Meeting beginning
on or about October 15, 2009. These materials are also available on our website at
http://investor.lamresearch.com and at www.proxyvote.com. We will furnish, without
charge, a physical copy of these materials and our 2009 Annual Report on request by
phone (510-572-1615), by mail to Investor Relations, 4650 Cushing Parkway, Fremont,
California 94538, or by email to investor.relations@lamresearch.com.

The Company will bear the cost of all proxy solicitation activities. Our directors,
officers and other employees may solicit proxies personally or by telephone, e-mail or
other communication means, without any cost to Lam Research. We are required to
request that brokers and nominees who hold stock in their names furnish our proxy
materials to the beneficial owners of the stock, and we must reimburse these brokers
and nominees for the expenses of doing so in accordance with statutory fee schedules.

OTHER MEETING INFORMATION

Voting on Proposals

Each share is entitled to one vote on Proposals No. 2 and No. 3. Votes may be cast “for,” “against,” or

“abstain” on each proposal.

Pursuant to Proposal No. 1, Board members will be elected at the Annual Meeting under a plurality voting
standard, which means that the eight candidates who receive the highest number of affirmative votes will be
elected to the Board. Each stockholder may cast one vote (“for” or “withhold”) per share held, for each of the
eight nominees.

A stockholder may cumulate votes in the election of directors. This means that the stockholder may either
give a single candidate eight votes per share held, or distribute the same number of votes among as many
candidates as the stockholder chooses. Stockholders may cumulate votes for a candidate only if the candidate’s
name has been placed in nomination prior to the voting at the Annual Meeting.

If a stockholder desires to cumulate votes, the stockholder should mark the accompanying proxy card
clearly to indicate that the stockholder desires to cumulate votes, and to indicate how the votes are to be allocated
among the listed nominees for directors. A stockholder may instruct the Proxy Holders not to vote for one
or more nominee(s) by writing the name(s) of the nominee(s) on the space provided on the proxy card. If a
stockholder withholds authority to vote for one or more nominees, the stockholder’s cumulative votes will be
distributed among the remaining listed nominees as indicated on the proxy card, or at the discretion of the Proxy
Holders if the stockholder does not provide instructions.

If a stockholder votes by means of the proxy solicited by this Proxy Statement and does not instruct the
Proxy Holders how to vote, the Proxy Holders will have discretionary authority to cumulate the votes held by
the stockholder. If the stockholder chooses to cumulate votes but does not indicate on the proxy card how to
distribute cumulative votes, or votes FOR all nominees, the Proxy Holders, in their discretion, will cast the
cumulative votes in a manner that will elect as many nominees nominated by the Board as they believe possible
under the then-prevailing circumstances.

Voting by 401(k) Plan Participants

Each employee participant in Lam’s 401(k) Savings Plus Plan (“401(k) Plan”) who held unitized interests
in Lam’s Common Stock in his or her personal 401(k) Plan account as of the Record Date will receive this Proxy
Statement so that each participant may vote, by proxy, his or her interest in the Company’s Common Stock as
held in the 401(k) Plan. The 401(k) Plan trustee, or the Company as the 401(k) Plan Administrator, will aggregate
and vote proxies in accordance with the instructions in the proxies received.

Stockholder Accounts Sharing the Same Last Name and Address

To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one
account holding Lam Research stock but who share the same address, we have adopted a procedure approved by
the Securities and Exchange Commission (“SEC”) called “householding.” Under this procedure, stockholders of
record who have the same address and last name will receive only one copy of our Proxy Statement and Annual
Report unless the stockholders notify our Investor Relations Department that they want to receive separate
copies. This procedure reduces duplicate mailings and saves printing and mailing costs, as well as natural
resources. Stockholders who participate in householding will continue to have access to all proxy materials
at http://investor.lamresearch.com, as well as the ability to submit separate proxy voting instructions for each
account through the Internet or by phone.

Stockholders may request separate copies of the proxy materials for multiple accounts holding Lam
Research stock by contacting the Company by phone (510-572-1615), by mail to Investor Relations, 4650 Cushing
Parkway, Fremont, California 94538 or by email to investor.relations@lamresearch.com. Stockholders may also
request consolidation of proxy materials mailed to multiple accounts through the same points of contact.

Stockholder-Initiated Proposals and Nominations for 2010 Annual Meeting

Proposals Submitted under SEC Rules. Stockholder-initiated proposals (other than director nominations)
may be eligible for inclusion in our Proxy Statement for next year’s 2010 Annual Meeting (in accordance with
SEC Rule 14a-8) and for consideration at the Annual Meeting. The Company must receive a stockholder proposal
no later than June 17, 2010 for the proposal to be eligible for inclusion. Any stockholder interested in submitting a
proposal is advised to contact legal counsel familiar with the detailed securities law requirements for submitting
proposals for inclusion in a company’s proxy statement.

Proposals and Nominations Submitted under Company Bylaws. Stockholders may also submit proposals
for consideration at the Annual Meeting by following certain requirements set forth in our Bylaws, as described
below. These proposals will not be eligible for inclusion in the Company’s proxy statement unless they are
submitted in compliance with Rule 14a-8 described above, but they will be presented for discussion at the
Annual Meeting if all requirements for submission described below have been satisfied. Stockholders may also
nominate candidates for election to the Board. Our Bylaws establish the requirements for these stockholder
proposals and nominations. Assuming that the 2010 Annual Meeting takes place at roughly the same date next
year as the 2009 Annual Meeting, the principal requirements for the 2010 Annual Meeting will be as follows:

For proposals and for nominations:

1. A stockholder of record (“Stockholder”) must submit the proposal or nomination in writing; it
must be received by the Secretary of the Company no earlier than July 27, 2010, and no later than
August 26, 2010;

2. The Stockholder’s notice to the Secretary of a proposal or nomination must state for each of the
Stockholder and the beneficial owner of Company Common Stock, if any, on behalf of whom the
proposal or nomination is being made (“Beneficial Owner”):

the name and record address of the Stockholder and the Beneficial Owner;

the class, series and number of shares of capital stock of the Company that are owned beneficially
or of record by the Stockholder and the Beneficial Owner;

a description of any options, warrants, convertible securities, or similar rights held by the
Stockholder or the Beneficial Owner with respect to the Company’s stock, and any other
opportunities by the Stockholder or the Beneficial Owner to profit or share in any profit derived
from any increase or decrease in the value of shares of the Company, including through a
general or limited partnership or ownership interest in a general partner;

a description of any proxies, contracts, or other voting arrangements to which the Stockholder
or the Beneficial Owner is a party concerning the Company’s stock;

a description of any short interest held by the Stockholder or the Beneficial Owner in the
Company’s stock;

a description of any rights to dividends separated or separable from the underlying shares of the
Company to which the Stockholder or the Beneficial Owner are entitled;

any other information relating to the Stockholder or the Beneficial Owner that would be
required to be disclosed in a proxy statement or other filings required to be made in connection
with solicitations of proxies for, as applicable, the proposal and/or for the election of directors
in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations
pursuant thereto; and

a statement whether or not the Stockholder or the Beneficial Owner will deliver a proxy
statement and form of proxy to holders of, in the case of a proposal, at least the percentage of
voting power of all of the shares of capital stock of the Company required under applicable law
to carry the proposal or, in the case of a nomination or nominations, at least the percentage of
voting power of all of the shares of capital stock of the Company reasonably believed by the
Stockholder or the Beneficial Owner, as the case may be, to be sufficient to elect the nominee
or nominees proposed to be nominated by the Stockholder.

Additionally, for nominations, the notice must:

Set forth, as to each person whom the Stockholder proposes to nominate for election or reelection as a
director, all information relating to such person as would be required to be disclosed in solicitations of
proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934; and

2. Be accompanied by a written consent of each proposed nominee to being named as a nominee and to

serve as a director if elected.

Additionally, for proposals, the notice must:

Set forth any material interest of the Stockholder or the Beneficial Owner in the proposed business; and

Set forth a brief description of such business, the reasons for conducting such business at the meeting
and any material interest in such business of such Record Stockholder and the Beneficial Owner, if
any, on whose behalf the proposal is made.

For more details, see the section entitled “Corporate Governance” below, and for a full description of the
requirements for submitting a proposal or nomination, see the Company’s Bylaws. Submissions or questions
should be sent to: George M. Schisler, Jr., Office of the Secretary, Lam Research Corporation, 4650 Cushing
Parkway, Fremont, California 94538.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

NOMINEES FOR DIRECTOR

A board of eight directors is to be elected at the 2009 Annual Meeting, consistent with resolutions adopted
by the Board establishing the size of the board as eight members, effective immediately prior to the Annual
Meeting. The eight nominees who receive the highest number of “For” votes will be elected. The term of office
of each person elected as a director will be for the ensuing year, and until his or her successor is elected and
qualified.

Unless otherwise instructed, the Proxy Holders will vote the proxies received by them for the eight nominees
named below, each of whom is currently a director of the Company. The proxies cannot be voted for more than
eight nominees. If any nominee of the Company should decline or be unable to serve as a director as of the time
of the Annual Meeting, the proxies will be voted for any substitute nominee designated by the present Board of
Directors to fill the vacancy. The Company is not aware of any nominee who will be unable, or will decline, to
serve as a director. If additional people are nominated for election as directors, the Proxy Holders intend to vote
all proxies in accordance with cumulative voting, and in a manner that will result in the election of as many of
the nominees listed below as possible. The Proxy Holders will determine the specific nominees for whom their
votes will be cast.

The individuals shown in the table below have been nominated for election to the Board of Directors in

accordance with the criteria and procedures discussed below in “Corporate Governance.”

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH BELOW.

The following table sets forth certain information concerning the nominees, which is based on information

furnished by them:

Nominee Name and
Current Board Role(s)

James W. Bagley, age 70

Executive Chairman

David G. Arscott, age 65

Audit Committee member

Principal Occupation and Business Experience

Mr. Bagley is the Executive Chairman of the Board of Directors, a position he
has held since 2005. He served as Chairman from 1998 to 2005. From 1997 until
2005, Mr. Bagley also served as Lam’s Chief Executive Officer.

Mr. Bagley joined Lam’s Board following the 1997 merger of Lam Research
and OnTrak Systems, Inc., a supplier of silicon chip cleaning equipment
where Mr. Bagley served as Chairman and Chief Executive Officer prior to
the merger. He was formerly Chief Operating Officer and Vice Chairman of
the Board of Applied Materials, Inc., where he also served in other executive
positions during his 15-year tenure.

Mr. Bagley serves on the boards of directors of Micron Technology, Inc. and
Teradyne Inc., both of which are publicly traded companies. He holds M.S. and
B.S. degrees in electrical engineering from Mississippi State University.

Mr. Arscott has been a director of the Company since 1980, and was
Chairman of the Board of Directors from 1982 to 1984. In 1988, Mr. Arscott
co-founded Compass Technology Group, an investment management firm,
where he has been General Partner since 1988. Prior to that, Mr. Arscott
co-founded Arscott, Norton & Associates, a venture capital firm, where he
served as Managing General Partner.

Mr. Arscott serves on the boards of director of Dragnet Solutions, Inc.,
Percutaneous Systems, Inc., and Toolwire, Inc., each of which is a privately
held company. He earned his B.A. degree from the College of Wooster in
Wooster, Ohio and his M.B.A. from the University of Michigan.

Nominee Name and
Current Board Role(s)

Robert M. Berdahl, age 72

Lead Independent Director

Compensation Committee
member

Nominating/Governance
Committee Chair

Richard J. Elkus, Jr., age 74

Audit Committee member

Nominating/Governance
Committee member

Grant M. Inman, age 67

Compensation Committee
member

Nominating/Governance
Committee member

Principal Occupation and Business Experience

Dr. Berdahl has been a director of the Company since 2001. He has been the
President of the Association of American Universities since 2006. From 1997
to 2004, Dr. Berdahl served as Chancellor of the University of California,
Berkeley. From 2004 to 2006, he was a history professor at UC Berkeley and a
professor of public policy at UC Berkeley’s Goldman School of Public Policy.

Prior to serving as Chancellor at UC Berkeley, Dr. Berdahl held several
academic leadership positions, including President of The University of
Texas at Austin and Vice Chancellor of Academic Affairs at the University
of Illinois at Urbana-Champaign.

Dr. Berdahl has received numerous honors and awards, including a Fulbright
Research Fellowship, and election to the American Academy of Arts and
Sciences. He received his B.A. from Augustana College in Sioux Falls,
South Dakota, his M.A. from the University of Illinois, and his Ph.D. from
the University of Minnesota.

Mr. Elkus has been a director of Lam Research since 1997. He joined the
Board following Lam’s 1997 acquisition of OnTack Systems, Inc., where he
was a board member.

From 1994 to 2005, Mr. Elkus was Vice Chairman and Executive Vice
President of Tencor Instruments and, following its merger with KLA, a
director of KLA-Tencor. Before joining Tencor, Mr. Elkus was founder,
Chairman and CEO of Prometrix Corporation, a semiconductor equipment
company that merged with Tencor Instruments in 1994.

Mr. Elkus’ extensive semiconductor industry experience has also included
service on the boards of directors of SOPRA, S.A. and Cameca, S.A.,
both French suppliers of manufacturing equipment for the semiconductor
industry. He recently authored Winner Take All, a book about international
competitiveness.

Mr. Elkus is a member of the Board of Trustees of The Scripps Research
Institute. He received his undergraduate degree from Stanford University
and his M.B.A. in production and finance from the Tuck School of Business
Administration at Dartmouth College.

Mr. Inman has been a director of the Company since 1981. He is currently
General Partner of Inman Investment Management, a venture investment
firm that he founded in 1998. He also co-founded and served as general
partner of Inman & Bowman, a venture capital firm formed in 1985.
Mr. Inman was a general partner of the investment banking firm Hambrecht
& Quist from 1980 to 1985.

Mr. Inman has served on the board of directors of Paychex, Inc., a publicly
traded company, since 1983. In addition, he serves on the board of directors
of AlphaCard Systems, a privately held company. He holds a B.A. degree
in economics from the University of Oregon and an M.B.A. from the
University of California, Berkeley. Mr. Inman now serves as a trustee of
foundations at both institutions.

Nominee Name and
Current Board Role(s)

Catherine P. Lego, age 53

Audit Committee Chair

Stephen G. Newberry, age 56

Board member

Patricia S. Wolpert, age 59

Compensation Committee
Chair

Principal Occupation and Business Experience

Ms. Lego has been a director of the Company since 2006. She has been
General Partner of The Photonics Fund, LLP, a venture capital investment
firm that she founded, since 1999. Prior to forming The Photonics Fund, she
founded Lego Ventures LLC in 1992 to provide consulting services to early
stage electronics companies. Ms. Lego received her CPA in connection with
her work at Coopers & Lybrand earlier in her career.

Ms. Lego currently serves on the board of directors, and chairs the audit
committee, of SanDisk Corporation, a publicly traded company. She
received a B.A. from Williams College and an M.S. in Accounting from the
New York University Graduate School of Business.

Mr. Newberry has been a director of the Company since 2005. He
also serves as the Company’s President and Chief Executive Officer.
Mr. Newberry joined the Company in August 1997 as Executive Vice
President and Chief Operating Officer. He was appointed President and
Chief Operating Officer in July 1998, and President and Chief Executive
Officer in June 2005.

Prior to joining the Company, Mr. Newberry held various executive positions
at Applied Materials, Inc. during his 17-year tenure there, including Vice
President of Applied Materials Japan and Group Vice President of Global
Operations and Planning.

Mr. Newberry serves on the board of directors of Amkor Technology, Inc.,
a publicly traded company, and on the board of directors of SEMI, a global
semiconductor industry trade association. He is a member of the Advisory
Board of the Haas School of Business at the University of California,
Berkeley, and of the Dean’s Advisory Council at the Graduate School of
Management at the University of California, Davis. Mr. Newberry is a
graduate of the U.S. Naval Academy and the Harvard Graduate School of
Business.

Ms. Wolpert has been a director of the Company since 2006. She owns
Wolpert Consulting LLC, a sales and marketing consulting firm that
she founded in 2003. Ms. Wolpert held a variety of executive positions
during her 30-year career with IBM, including Vice President for Sales
Transformation, Americas and Vice President for the Central Region,
Americas. As a member of the CEO’s Senior Leadership Group, she held
both strategic and tactical leadership roles across all of IBM’s hardware,
software and services offerings.

Ms. Wolpert is currently Chairman of the Board of Teradyne, Inc., a publicly
traded company. She is a graduate of Western Kentucky University.

SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth the beneficial ownership of shares of Lam’s Common Stock by: (i) each person or
entity who the Company believes beneficially owned more than 5% of Lam’s Common Stock on June 30, 2009;
(ii) each current director of the Company; (iii) each named executive officer (“named executive”) identified
below in the “Executive Compensation and Other Information” section; and (iv) all current directors and current
executive officers as a group. The information for directors and officers reflects holdings as of September 30,
2009, which is the most recent practicable date for determining their holdings. The percent of the class owned is
calculated using 127,191,795 as the number of shares of Lam’s Common Stock outstanding on that date.

Name of Person or Identity of Group
5% or Greater Stockholders
Fidelity Management & Research Co. (FMR LLC) . . . . . . . . . . . . . . . . . .

1 Federal Street
Boston, Massachusetts 02110

Wellington Management Company LLP. . . . . . . . . . . . . . . . . . . . . . . . . . .

75 State Street
Boston, Massachusetts 02109

Directors
James W. Bagley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David G. Arscott . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert M. Berdahl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard J. Elkus, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jack R. Harris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grant M. Inman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Catherine P. Lego. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stephen G. Newberry (also an Executive Officer) . . . . . . . . . . . . . . . . . . .
Seiichi Watanabe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patricia S. Wolpert. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All current directors and current executive officers as a group

Shares
Beneficially
Owned (1)

Percent
of Class

18,357,066(2)

14.5%

7,010,000(2)

5.5%

183,000
123,983
50,948
111,618
96,578
122,248
22,248
15,900
14,513
19,748

17,291
30,945
6,109
4,708

*
*
*
*
*
*
*
*
*
*

*
*
*
*

(16 people) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

842,451

(1)

Less than 1%

Includes (a) shares subject to outstanding stock options that are now exercisable or will become exercisable
within 60 days after September 30, 2009 (by November 29, 2009), and (b) restricted stock units (“RSUs”)
that will vest by that date, as follows:

James W. Bagley
David G. Arscott

Robert M. Berdahl

Richard J. Elkus, Jr.

Jack R. Harris

Grant M. Inman

Catherine P. Lego

1,000 options
63,000 options
8,130 RSUs
33,000 options
8,130 RSUs
57,000 options
8,130 RSUs
63,000 options
8,130 RSUs
51,000 options
8,130 RSUs
8,130 RSUs

Stephen G. Newberry
Seiichi Watanabe

Patricia S. Wolpert

Martin B. Anstice

Richard A. Gottscho

Abdi Hariri

Ernest E. Maddock
All directors and executive
officers as a group

5,250 options
8,130 RSUs

8,130 RSUs

2,849 options

—

1,822 options

3,050 options
287,271 options
65,040 RSUs

(2)

Information regarding beneficial ownership by the 5% stockholders is based on their respective publicly
filed Schedule 13D, 13F, or 13G prior to June 30, 2009.

CORPORATE GOVERNANCE

Our Board of Directors and members of management are committed to responsible corporate governance
that will ensure that the Company is managed for the long-term benefit of its stockholders. To that end, the
Board of Directors and management periodically review and update, as appropriate, the Company’s corporate
governance policies and practices. As part of that process, the Board and management review published
guidelines and recommendations of institutional shareholder organizations; published guidelines of a selection
of other public companies; the requirements of the Sarbanes-Oxley Act of 2002 and other rules and regulations
of the SEC; and the listing standards for the NASDAQ Global Select Market (“NASDAQ”).

Corporate Governance Policies

We have instituted a variety of policies and procedures to foster and maintain responsible corporate

governance, including the following:

Corporate Governance Guidelines. We adhere to written Corporate Governance Guidelines, adopted by
the Board and reviewed from time to time by the Nominating/Governance Committee. Selected provisions of
the Guidelines are discussed below, including in the “Board Nomination Policies and Procedures,” “Director
Independence Policies” and “Other Governance Practices” sections below.

Code of Ethics. We maintain a Code of Ethics that applies to all employees, officers and members of the
Board. The Code of Ethics contains standards reasonably designed to deter wrongdoing and to promote (1)
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in the
periodic reports we file with the SEC and in other public communications; (3) compliance with applicable
governmental laws, rules and regulations; (4) the prompt internal reporting of violations of the Code of Ethics
to an appropriate person or persons identified in the Code of Ethics; and (5) accountability for adhering to the
Code of Ethics. We will promptly disclose to the public any amendments to, or waivers from, any provision of
the Code of Ethics, to the extent required by applicable laws. We intend to make this public disclosure by posting
the relevant material on our website. A copy of the Code of Ethics is available on the investors’ page of Lam’s
web site at http://investor.lamresearch.com.

Global Standards of Business Conduct Policy. Lam Research maintains written standards of appropriate
business conduct in a variety of business situations that applies to employees worldwide. The policy addresses,
among other topics, conflicts of interest, the safeguarding of Company assets, certain aspects of insider trading
and communication with the investment community.

Board Committee Charters. Each of the Board’s standing committees — Audit, Compensation and
Nominating/Governance Committees — has a written charter adopted by the Board that establishes practices
and procedures for the committee in accordance with applicable corporate governance rules and regulations.
Each committee reviews its charter periodically and recommends changes to the Board, as appropriate. The
committee charters are available on the investors’ page of Lam’s website at http://investor.lamresearch.com.
Please also refer to “Board Meetings and Committees,” below, for a description of responsibilities of the Board’s
standing committees.

Board Nomination Policies and Procedures

Board Membership Criteria. Under our Corporate Governance Guidelines, nominees for director are
evaluated on the basis of a range of criteria, including (but not limited to) experience, wisdom, integrity, the
ability to make independent analytical inquiries, the ability to understand Lam’s business environment and
willingness to devote adequate time to Board duties. We also consider the appropriate balance of experience,
skills, and perspectives desirable for the full Board. In addition, Board members may serve on no more than four
boards of public companies (including Lam’s Board); and Board nominees must be under the age of 75 years.

Nomination Procedure. The Nominating/Governance Committee identifies, evaluates and recommends
qualified candidates for election to the Board. The Committee considers recommendations from a variety of
sources, including other Board members, executive officers and stockholders. Formal nominations are made
by the independent members of the Board, or they may delegate nomination authority to the Nominating/
Governance Committee. Additional information regarding the nomination procedure is provided in the section
above captioned “Stockholder-Initiated Proposals and Nominations for 2010 Annual Meeting.”

On May 15, 2009, we amended and restated our Bylaws to make the following changes relating to the

nomination or recommendation of candidates by a stockholder:

•

In the case of an annual meeting, the stockholder is required to provide advance notice of the
nomination between 75 and 45 days prior to the anniversary of the mailing of the previous year’s
proxy statement;

In the case of a special meeting, the stockholder is required to provide advance notice of the nomination
by the later of 90 days prior to the special meeting or the tenth day following the announcement of the
date of the special meeting; and

A stockholder is required to provide additional disclosure regarding, among other things, derivative
instruments and short positions in the Company’s stock held by the stockholder.

Director Independence Policies

Board Independence Requirements. Our Corporate Governance Guidelines require that at least a majority
of the Board members be independent in accordance with NASDAQ rules and other applicable criteria for
independence. In addition, no non-employee director may serve as a consultant or service provider to the
Company without the approval of a majority of the independent directors.

Current Board Member Independence. The Board has determined that the following current directors are
independent in accordance with NASDAQ criteria for director independence: David Arscott, Robert Berdahl,
Richard Elkus, Jr., Jack Harris, Grant Inman, Catherine Lego, Seiichi Watanabe, and Patricia Wolpert.

Board Committee Independence. All members of the Board’s three standing committees - Audit,
Compensation and Nominating/Governance committees - must be independent in accordance with NASDAQ
and other applicable rules and regulations. See “Board Meetings and Committees” below for a description of the
responsibilities of the Board’s standing committees.

Lead Independent Director. Our Corporate Governance Guidelines authorize the Board to designate a
Lead Independent Director from among the independent Board members. The Lead Independent Director is
responsible for coordinating the activities of the independent members of the Board and acting as the principal
liaison between the independent directors and our management directors (the Executive Chairman and the CEO).
Director Robert Berdahl has served as the Lead Independent Director since 2004.

Executive Sessions of Independent Directors. The Board and its standing committees periodically hold

meetings of the independent directors or Committee members, without management present.

Board Access to Independent Advisors. The Board as a whole, and each of the Board committees separately,
may retain, at Lam’s expense, and terminate, in their discretion, any independent consultants, counselors, or
advisors as they deem necessary or appropriate to fulfill their obligations as Board and committee members.

Other Governance Practices

In addition to the principal policies and procedures described above, we have established a variety of other

practices to enhance our corporate governance, including the following.

Board Continuing Education. Under the Corporate Governance Guidelines, directors are expected to
attend one or more educational sessions or conferences to enhance their ability to fulfill their responsibilities as
Board members. Each director who served during fiscal 2009 fulfilled this expectation.

Board and Committee Assessments. At least bi-annually, the Nominating/Governance Committee conducts

a review of the functioning of the Board and reports its evaluation to the Board for assessment.

Director Resignation or Notification of Change in Executive Officer Status. Under our Corporate
Governance Guidelines, any Lam Research director who is also an executive officer of the Company must offer
to submit his or her resignation as a director to the Board if the director ceases to be an executive officer of Lam
Research. The Board may accept or decline the offer, in its discretion. The Corporate Governance Guidelines
also require a non-employee director to notify the Nominating/Governance Committee if the director changes
his or her executive positions at another company. The Nominating/Governance Committee will review the
appropriateness of the director’s continued Board membership under the circumstances, and the director will be
expected to act in accordance with the Nominating/Governance Committee’s recommendations.

Director and Executive Stock Ownership. Under the Corporate Governance Guidelines, each director
is expected to own at least 5,000 shares of Lam Research Common Stock by the later of five years after
commencing service on the Board or November 2010. We also have guidelines for stock ownership by other
members of the executive management team, including the Chief Executive Officer, the Chief Financial Officer,
and other officers designated by the Compensation Committee. These executives are expected to own a number
of shares of Lam Research Common Stock equal in value to a multiple of each executive’s base annual salary
or a specified minimum number of shares, whichever is lower. The salary multiple or specific number of shares
varies according to the seniority of the office.

In February 2009, we amended our stock ownership guidelines to bring them in line with the practices of
companies comparable to Lam Research, as well as to recognize the limitations of our stock ownership guideline
structure in a cyclical business. Specifically, the guidelines are expressed as the lesser of a dollar amount or a
share amount, to allow for changes in the trading price of Lam’s stock. As amended, each designated executive
is expected to acquire and maintain ownership of shares of our common stock, in the quantities indicated below,
by the later of December 31, 2011, or the fifth anniversary of the executive officer’s hire or promotion date:

Position
Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesser of three times base salary, or 65,000 shares
Lesser of two times base salary, or 25,000 shares
Chief Operating Officer; Chief Financial Officer . . . . . . . .
Lesser of two times base salary, or 20,000 shares
Other designated executives . . . . . . . . . . . . . . . . . . . . . . . . .

Stock Ownership Guideline

Insider Trading Restrictions. We maintain an Insider Trading Policy that applies to all employees, officers
and directors. The policy primarily addresses trading in Lam Research securities when a covered individual
possesses material non-public information. In addition, our Global Standards of Business Conduct Policy
prohibits employees from engaging in “short sales” of Lam Research securities and purchasing “put” or “call”
options for Lam Research securities (other than through our equity incentive plans or employee stock purchase
plans). These measures help to ensure that our employees will not benefit from a decline in Lam’s stock price,
but will remain focused on our business success.

Communications with Board Members. Any stockholder who wishes to communicate directly with the
Board of Directors, any Board Committee or with any individual director regarding the Company may write
to the Board or the director c/o George M. Schisler, Jr., Office of the Secretary, Lam Research Corporation,
4650 Cushing Parkway, Fremont, CA 94538. The Office of the Secretary will forward all such communications
to the appropriate director(s).

Any stockholder, employee, or other person may communicate any complaint regarding any accounting,
internal accounting control, or audit matter to the attention of the Board’s Audit Committee by sending written
correspondence to: Lam Research Corporation, Attention: Board Audit Committee, P.O. Box 5010, Fremont,
CA 94537. The Audit Committee has established procedures to ensure that employee complaints or concerns
regarding audit or accounting matters will be received and treated anonymously (if the complaint or concern is
submitted anonymously) and confidentially.

We expect our directors to attend the annual meeting of stockholders each year and to respond to appropriate

questions. All our directors attended the 2008 annual meeting.

Board Meetings and Committees

Meeting Attendance. Our Board of Directors held a total of twelve meetings during fiscal 2009. All of the
directors who served for the entire fiscal year attended at least 75% of the aggregate number of Board meetings
that they were entitled to attend and meetings of Board committees on which they served during fiscal 2009.
The Board of Directors has as standing committees an Audit Committee, a Compensation Committee, and a
Nominating/Governance Committee.

Audit Committee. The purpose of the Audit Committee is to oversee Lam’s accounting and financial
reporting processes and the audits of our financial statements. The Audit Committee is not, however, responsible
for planning or conducting our audits, or determining whether our financial statements are complete and accurate
or in accordance with generally accepted accounting principles.

During fiscal 2009, the Audit Committee consisted of Board members Arscott, Lego and Watanabe
(who served the entire fiscal year), Mr. Inman (who served from July 2008 to February 2009), and Mr. Elkus
(who joined the Committee in February 2009). The Audit Committee held eight meetings during fiscal 2009.
The Board concluded that all Audit Committee members are non-employee directors who are independent in
accordance with the NASDAQ criteria for audit committee member independence. The Board also determined
that Ms. Lego, the chair of the committee during fiscal 2009, is a “financial expert” as defined in SEC rules.

The Audit Committee’s responsibilities include (but are not limited to) the following:

•

Appoint and provide for the compensation of Lam’s independent registered public accounting firm (the
“Firm”), and approve, in accordance with and in a manner consistent with the laws, rules and regulations
applicable to the Company, all professional services to be provided to Lam Research by the Firm

Oversee the work of, and evaluate the performance of, the Firm

•
• Meet with management and the Firm to discuss the annual financial statements and the Firm’s report

on them, and to discuss the adequacy of internal control over financial reporting

• Meet quarterly with management and the Firm to discuss the quarterly financial statements prior to

the filing of the Company’s Form 10-Q with the SEC

Review and approve all related party transactions

•
Compensation Committee. The purpose of the Compensation Committee is to discharge certain
responsibilities of the Board relating to executive compensation, to oversee incentive, equity-based and other
compensatory plans in which Lam’s executive officers and directors participate and to produce an annual report
on executive compensation for inclusion as required in the Company’s proxy statement.

During fiscal 2009, the Compensation Committee consisted of Board members Berdahl, Harris, and
Wolpert (each of whom served the entire fiscal year), Mr. Elkus (who served from July 2008 until February 2009)
and Mr. Inman (who joined the Committee in February 2009). The Board concluded that all members of the
Compensation Committee are non-employee directors who are independent in accordance with the NASDAQ
criteria for director independence. The Compensation Committee held ten meetings during fiscal 2009.

The Compensation Committee’s responsibilities include (but are not limited to) the following:

•

Develop and from time to time review compensation policies and practices applicable to Lam’s
executive officers, including the criteria upon which executive compensation is based and the
composition of executive compensation in terms of base salary, deferred compensation, incentive- or
equity-based compensation and other benefits

Establish and review corporate goals and objectives as relevant to the Chief Executive Officer and
the Executive Chairman, evaluate their performance in light of these goals and objectives and based
on this evaluation recommend the CEO’s and Executive Chairman’s compensation packages for
approval by the independent members of the Board

Determine compensation packages for other executive officers consistent with policies approved by
the independent members of the Board

Review and recommend to the Board for final approval all cash, equity-based or other compensation
arrangements applicable to the independent members of the Board

Review and approve, subject to stockholder or Board approval as required, the creation or amendment
of any equity-based compensatory plans and other compensatory plans as the Board designates

Nominating/Governance Committee. The purpose of the Nominating/Governance Committee is to identify
individuals qualified to serve as members of the Board of the Company; recommend nominees for election as
directors of the Company; evaluate the Board’s performance; develop and recommend to the Board corporate
governance guidelines; and provide oversight with respect to corporate governance and ethical conduct.

During fiscal 2009, the Nominating/Governance Committee consisted of Board members Berdahl, Elkus,
and Inman. The Board concluded that all Nominating/Governance Committee members are non-employee
directors who are independent in accordance with the NASDAQ criteria for director independence. The
Nominating/Governance Committee held eight meetings during fiscal 2009.

The Nominating/Governance Committee’s responsibilities include (but are not limited to) the following:

•

Recommend to the independent members of the Board nominees for election as directors of the
Company at the next annual or special meeting of stockholders at which directors are to be elected;
and identify, evaluate and recommend individuals to fill any vacancies or newly created directorships
that may occur between meetings

• Make recommendations to the Board annually after consultation with the Chairman of the Board and
the Lead Independent Director, if any, with respect to assignment of Board members to committees
and for committee chairs

•

Recommend to the Board the adoption of corporate guidelines, and from time to time review and
assess the guidelines and recommend changes for approval by the Board

Conduct from time to time a review of the Board and the Board committees in accordance with the
Company’s Corporate Governance Guidelines and the committee charters, and report the evaluation
to the Board.

The Nominating/Governance Committee, upon duly delegated authority from the Board, recommended
the slate of nominees for director set forth in Proposal No. 1 above. The independent members of the Board
approved the recommendations and nominated the proposed slate of nominees.

The Nominating/Governance Committee will consider for nomination persons properly nominated
by stockholders in accordance with the Company’s Bylaws and other procedures described above in the
section captioned “Stockholder-Initiated Proposals and Nominations for 2010 Annual Meeting.” Stockholder
nominations for director will be evaluated by Lam’s Nominating/Governance Committee in accordance with
the same criteria as are applied to candidates identified by the Board, its Nominating/Governance Committee,
or other sources.

DIRECTOR COMPENSATION

Board members who are also employees do not receive any additional compensation for service on the
Board. The compensation of our non-employee directors is reviewed and determined annually by the Board,
upon recommendation from the Compensation Committee. All non-employee directors currently receive a
base cash retainer and equity compensation in the form of RSUs. In addition, committee chairs and the lead
independent director receive additional cash retainers. The Board endeavors to maintain forms and amounts of
director compensation that will attract and retain directors of the caliber desired by the Company and that align
director interests with those of stockholders.

Our director compensation plans run on a calendar-year basis. However, SEC rules require us to report
compensation in this Proxy Statement on a fiscal-year basis. For calendar year 2009 (the first half of which is part
of fiscal year 2009), each of the Company’s non-employee directors received an annual retainer of $42,000. An
additional $7,500 fee was paid to the lead independent director and to the chairs of the Compensation Committee
and the Nominating/Governance Committee, and an additional $10,000 to the chair of the Audit Committee.

In addition, each non-employee director is eligible to receive an annual equity grant with a targeted grant
date value equal to $200,000 (calculated as the fair market value of a share of the Company’s common stock on
the grant date, times the number of shares granted). For calendar year 2009, due to the economic environment, the
Board decided to reduce the dollar value of the awards by 20%, to $160,000. Each non-employee director received
a grant of 8,130 RSUs for services during calendar year 2009. Each RSU grant was issued on February 2, 2009,
and, subject to a director’s continued service on the Board, vests in full on November 1, 2009, with receipt
deferred until January 29, 2010.

Director cash compensation for calendar year 2008 (the second half of which is part of fiscal year 2009)

was the same as for calendar year 2009.

The following table shows cash and equity compensation for fiscal 2009:

Director Compensation

Fees Earned
or Paid
in Cash
($)
$42,000
$57,000
$42,000
$42,000
$42,000
$52,000
$42,000
$49,500

Stock
Awards (1)
(2) (3)
($)
$222,483
$222,483
$222,483
$222,483
$222,483
$222,483
$222,483
$222,483

Option
Awards
($)
$0
$0
$0
$0
$0
$0
$0
$0

Non-Equity
Incentive Plan
Compensation
($)
$0
$0
$0
$0
$0
$0
$0
$0

Nonqualified
Deferred
Compensation
Earnings
($)
$0
$0
$0
$0
$0
$0
$0
$0

All Other
Compensation
$0
$0
$0
$0
$0
$0
$0
$0

Total
$264,483
$279,483
$264,483
$264,483
$264,483
$274,483
$264,483
$271,983

Name
David G. Arscott . . . . . .
Robert M. Berdahl . . . .
Richard J. Elkus, Jr . . . .
Jack R. Harris . . . . . . . .
Grant M. Inman . . . . . .
Catherine P. Lego . . . . .
Seiichi Watanabe . . . . .
Patricia S. Wolpert . . . .

(1) On May 2, 2008, each Director was granted 4,678 restricted stock units based on the closing price of the
Company’s Common Stock of $42.75, for a target value of $200,000. The units vested on November 1, 2008,
with receipt deferred until January 31, 2009.

(2) On February 2, 2009, each Director was granted 8,130 restricted stock units based on the closing price of the
Company’s Common Stock of $19.68, for a target value of $160,000. The units vest on November 1, 2009,
with receipt deferred until January 29, 2010.

(3) Amounts shown do not reflect the target values described in notes 1 and 2. Instead, the amounts shown
are the compensation expenses recognized by Lam Research in the fiscal year for restricted stock
units as determined pursuant to Statement of Financial Accounting Standards (“SFAS”) 123(R). These
compensation expenses reflect restricted stock units expensed in the fiscal year.

In addition, members of Lam’s Board of Directors who have retired from the Board can participate in the
Company’s Executive Retirement Medical and Dental Plan if they meet certain eligibility requirements. The
most recent valuation of Lam Research’s accumulated post-retirement benefit obligation under SFAS No. 106, as
of June 2009, for the current directors who may become eligible is shown below:

Name*
David G. Arscott . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert M. Berdahl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard J. Elkus, Jr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jack R. Harris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grant M. Inman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Catherine P. Lego . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seiichi Watanabe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patricia S. Wolpert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FY 2009
$54,000
$44,000
$40,000
$52,000
$50,000
$46,000
$38,000
$36,000

Excludes Board members who are also eligible to participate based on their employment as executives of
Lam Research.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers, directors, and people who own more than
10% of a registered class of our equity securities to file an initial report of ownership (on a Form 3) and reports
on subsequent changes in ownership (on Forms 4 or 5) with the SEC by specified due dates. Our executive
officers, directors, and greater-than-10% stockholders are also required by SEC rules to furnish Lam Research
with copies of all Section 16(a) forms they file. We are required to disclose in this Proxy Statement any failure
to file any of these reports on a timely basis. Based solely on our review of the copies of the forms that we
received from the filers, and on written representations from certain reporting persons, we believe that all of
these requirements were satisfied during fiscal 2009.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

COMPENSATION DISCUSSION & ANALYSIS

Overview

This Compensation Discussion and Analysis (“CD&A”) describes the Company’s executive compensation
program and discusses how we made executive compensation decisions for our executive officers during fiscal 2009.

For fiscal 2009, our “named executive officers” (as defined in SEC rules) were:

Stephen G. Newberry, our President and Chief Executive Officer;

Ernest E. Maddock, our Senior Vice President and Chief Financial Officer;

Richard A. Gottscho, our Group Vice President and General Manager, Etch Businesses;

•
•
•
• Martin B. Anstice, our Executive Vice President and Chief Operating Officer; and
•
We refer to these individuals collectively in this CD&A as the “Named Executive Officers” or “NEOs.”

Abdi Hariri, our Group Vice President, Global Operations.

The compensation tables included in this CD&A report the compensation of the Named Executive Officers
for fiscal 2009. However, our executive compensation program is designed and evaluated on a calendar-year
basis rather than a fiscal-year basis to correspond with our annual business planning, performance goal-setting,
pay, and benefit cycles. Therefore, the discussion of our compensation programs and our compensation decisions
reflects this calendar year orientation.

Our standard compensation program for NEOs includes five primary components: base salary, annual
incentive awards, long-term incentive awards, participation in benefit programs, and eligibility for certain
post-termination employment benefits. Each of these compensation components is reviewed periodically
by the Compensation Committee of our Board of Directors (“Committee”). Compensation for NEOs other
than Mr. Newberry is determined by the Committee. Mr. Newberry’s compensation is recommended by the
Committee to the independent members of the Board for approval.

We design and operate our executive compensation program to achieve specific objectives including: market
competitiveness to attract, retain and motivate our executives, pay-for-performance, long-term orientation, and
cost-effectiveness (further described in the section entitled “Compensation Objectives” below). In the cyclical
environment in which Lam Research operates, applying these objectives leads to changes in our program from
time to time. For example, prior to the economic downturn, our variable incentive programs focused primarily
on operating profit performance. In response to the downturn we experienced in fiscal 2009, we modified
our programs to focus on other important business objectives and strategic initiatives that will position the
Company for long-term success once the recovery occurs. Throughout the business cycle, we believe that our
compensation programs reward behaviors aligned with our Compensation Objectives and promote retention of
our executives.

The following bullet points highlight the key actions related to the compensation of our NEOs in fiscal

2009. Each of these items is discussed in greater detail in the applicable section of this CD&A.

•

In light of the difficult business environment at the start of calendar 2009, the CEO recommended
and the Committee approved a temporary reduction in the base salaries for each of our NEOs of
between 10% and 17.5%, effective in February 2009. Base salaries for NEOs have not yet been
restored to their prior levels.

In September 2008, increased the base salaries for Mr. Anstice and for Mr. Maddock in connection
with their promotions to their current positions. Their base salaries were subsequently reduced by
12.5% as part of the temporary reduction noted above.

Approved payments under our Annual Incentive Program (“AIP”) for calendar year (sometimes
referred to as “CY”) 2008 that were on average equal to less than half of the target award amounts for
the NEOs. These payments were reduced from what would otherwise have been earned because our
CEO recommended and the Committee approved reducing the corporate performance portion of the
payout to zero in the second half of CY 2008 in light of business conditions.

Approved payments under the 2007 Multi-Year Incentive Program (“MYIP”), which covered
performance for CY 2007 and CY 2008, that were on average equal to slightly above the target
award amounts. The performance factor under the 2007 MYIP was based on ongoing operating
income and provided for payments as high as 2.5 times target. Strong operating profit performance
in CY 2007 and early CY 2008 offset poor performance in late CY 2008. As with the 2008 AIP, our
CEO recommended and the Committee approved reducing the amount that otherwise would have
been earned for the last quarter of the 2007 MYIP to zero.

Also in light of the difficult business environment, the Committee made several changes to the AIP
and long-term incentive program to focus our executives on actions that will position the Company
for long-term success once the recovery occurs and to help retain executives:

•

Modified the long-term incentive program by adding equity components to what had been an
all-cash program and by changing the performance factor from ongoing operating profit to a
metric related to ongoing operating cash flow.

Modified the AIP performance factors to align with business strategies for the downturn,
reduced the amount of potential incentive payments, and provided for payment in stock rather
than cash (in whole or in part) at the option of the Committee.

• Modified the executive stock ownership guidelines to better align with market norms and reflect the

cyclicality of the industry in which we operate.

We also conducted a comprehensive review of our employment contract and change of control practices
in relation to market practices in our industry and among other comparable companies. We entered into the
following agreements effective July 1, 2009:

•

•
•

A new employment agreement with Mr. Newberry that, unlike his prior agreement, does not include
a tax gross-up for Internal Revenue Code Section 280G excise taxes.

Employment agreements with Messrs. Anstice and Maddock.

Change of control agreements with other executive officers, including our NEOs.

Governance of Executive Compensation Program

Role of the Compensation Committee. The Committee discharges certain responsibilities of the Board
relating to executive compensation and oversees the incentive, equity-based and other compensation plans
in which executive officers (including the NEOs) participate, pursuant to a charter that can be viewed at
http://investor.lamresearch.com. The Committee’s key responsibilities with respect to executive compensation
include the following:

•

Determine compensation packages for other executive officers (including the NEOs) consistent with
policies approved by the independent members of the Board

Review and approve, subject to stockholder or board approval as required, the creation or amendment
of any equity-based compensatory plans of the Company

Within this framework, the Committee receives and reviews information, analysis, and compensation

proposals provided by management and by the Committee’s compensation consultant and other advisors.

Role of Executive Officers. Mr. Newberry, assisted by specialists from our Human Resources, Finance,
and Legal Departments, develops recommendations for the compensation of our executive officers, including
our NEOs. Typically, these recommendations cover the base salaries, annual incentive award opportunities,
and long-term incentive award opportunities for our executive officers, as well as the criteria upon which these
award opportunities may be earned.

The Committee considers Mr. Newberry’s recommendations in light of competitive compensation data,
the Committee’s pay philosophy and objectives, and current business conditions, and obtains advice from
outside advisors as noted below. At the request of the Committee, our Executive Chairman provides input to the
Committee on Mr. Newberry’s compensation and compensation recommendations.

Mr. Newberry generally attends Compensation Committee meetings as requested by the Committee. He

leaves the meeting for any discussion of his own compensation.

Role of Committee Advisors. The Committee is authorized to engage its own advisors to assist in carrying
out its responsibilities. In November 2008, the Committee engaged the services of Compensia, Inc., a national
compensation consulting firm (“Compensia”). Compensia provides the Committee and our Board of Directors
with guidance regarding the amount and types of compensation that we provide to our executive officers and how
these compare to other compensation practices. Compensia also provides advice regarding other compensation-
related matters.

Representatives of Compensia attend meetings of the Committee as requested and also communicate with
the Committee Chair outside of meetings. Compensia reports to the Committee rather than to management,
although Compensia meets with members of management, including Mr. Newberry, for purposes of gathering

The independent members of our Board of Directors, upon recommendation from the Committee,
approve the elements of Mr. Newberry’s compensation package. For purposes of this CD&A, a reference
to a compensation action or decision by the Committee with respect to the NEOs means, in the case
of Mr. Newberry, an action or decision by the independent members of our Board of Directors, unless
otherwise expressly noted.

information on proposals that management may make to the Committee. During fiscal 2009, Compensia met
with various executives to collect data and obtain management’s perspective on our compensation practices for
executive officers. The Committee may replace Compensia or hire additional advisors at any time. Compensia
has not provided any other services to the Committee or to management, and has received no compensation other
than with respect to the services described above.

Executive Compensation Philosophy

Compensation Objectives. We design and operate our executive compensation program to achieve the

following principal objectives:

• Maintain plans to attract, retain, and motivate high-caliber senior executives by developing
compensation arrangements for our executive officers that are competitive with similarly-situated
executives in technology companies;

•

Pay for performance, by appropriately rewarding our senior executives for their achievement of both
short-term and long-term business objectives;

Establish a long-term orientation by focusing the efforts of our senior executives on our long-term
financial performance, customer relationships and stockholder value creation; and

Structure cost-effective compensation plans to take into account the accounting treatment and tax
deductibility of compensation expense.

Compensation Elements. Our executive compensation program consists of several principal elements
intended to achieve the objectives described above. We consider each element to be appropriate to meet one or
more of the principal objectives of our executive compensation philosophy.

Compensation Element
Base salary . . . . . . . . . . . . . . . . . . . . Market competitiveness to attract,

Objective(s)

retain and motivate

Annual incentive awards . . . . . . . . . Market competitiveness to attract,

retain and motivate
Pay for performance by rewarding
executives for achieving shorter-term
corporate and individual performance
objectives

Long-term incentives, including
MYIP and equity awards . . . . . . . . . Market competitiveness to attract,

Retirement benefits . . . . . . . . . . . . . .

Deferred compensation benefits . . . .

retain and motivate
Pay for performance
Long-term/stockholder orientation
Cost-effectiveness

Provide competitive benefits
Promote executive retention

Target Market Position*
50th – 60th percentile
of Peer Group

50th – 75th percentile
of Peer Group, depending on
performance results

50th – 75th percentile
of Peer Group, depending
on performance results

50th percentile of Peer Group

N/A

Severance and change of
control benefits . . . . . . . . . . . . . . . . . Market competitiveness to attract,

retain and motivate
Long-term/stockholder orientation

50th – 60th percentile
of Peer Group

Other benefit programs . . . . . . . . . . . Market competitiveness to attract,

50th percentile of Peer Group

retain and motivate

See “Peer Group of Comparable Companies” and “Benchmarking and Target Pay Positioning,” below, for
further explanation of the information in this column.

In setting individual pay, the Committee considers a variety of factors, such as job performance, job scope
and responsibilities, skill set, prior experience, the executive officer’s time in his or her position with us, internal
equity regarding pay levels for similar skill levels or positions, external pressures to attract and retain executive
talent, and general market conditions. In general, the differences in total compensation, as well as differences
in the amounts of individual compensation elements among our executive officers, reflect these factors. We
believe that these differences are consistent with the pay differentials among similar positions at comparable
companies.

Peer Group of Comparable Companies. The Committee considers compensation data from a group of
comparably-sized companies in the technology industry (the “Peer Group”) as one element in establishing
the compensation levels of our executive officers, including the NEOs, as well as the mix and weighting of
individual compensation elements. Typically, the companies constituting our Peer Group are selected for their
comparability to us based on annual revenues, market capitalization, lines of business, and industry, and because
we believe we are likely to compete with them for executive talent. Based on these criteria, the Peer Group may
be modified from year to year. For calendar year 2008, the Peer Group consisted of the following companies:

• Analog Devices, Inc.
• Applied Materials, Inc.
• Cypress Semiconductor Corporation
• Fairchild Semiconductor International, Inc.
• KLA-Tencor Corporation
• LSI Corporation
• MEMC Electronic Materials, Inc.
For calendar year 2009, the Committee, with input from its outside consultant, approved the addition
of the following companies to our Peer Group as these companies were also determined to meet the criteria
described above:

• Molex Incorporated
• National Semiconductor Corporation
• Novellus Systems, Inc.
• NVIDIA Corporation
• SanDisk Corporation
• Xilinx, Inc.

• Altera Corporation
• Atmel Corporation
• First Solar, Inc.
• Marvell Technology Group Ltd.
• Maxim Integrated Products, Inc.
In addition to this Peer Group data, our Human Resources Department analyzed survey data on base
salary, bonus targets, equity awards, and total compensation drawn from the Radford 2009 Executive Survey
(which includes data from over 700 technology companies).

• SunPower Corporation
• Varian Semiconductor Equipment

Associates, Inc.
• Teradyne, Inc.

Benchmarking and Target Pay Positioning. The Compensation Committee reviews compensation practices
at Peer Group companies and companies that participate in the Radford Survey as one factor for determining
whether the Company’s total compensation is within a reasonably competitive range. Generally, the Committee
targets the total direct compensation (defined as base salary plus target annual incentive awards plus target
long-term incentive awards) of our executive officers, including the NEOs, near the 50th percentile of the Peer
Group. However, our programs are designed to provide our executive officers with the opportunity to receive
higher levels of compensation (up to and above the 75th percentile of the Peer Group) if warranted by superior
company and/or individual performance, or lower levels of compensation for below-target company or individual
performance.

Calendar Year 2008/2009 Compensation Decisions

Base Salary. Base salaries represent one of the primary “fixed” components of our executive compensation
program. We view the purpose of base salary is to fairly and competitively compensate our executive officers,
including the NEOs, with a fixed amount of salary for the jobs they perform. Accordingly, we seek to ensure
that our base salary levels are competitive and consistent with industry practice. Adjustments to base salary are
generally considered by the Committee each year in February.

For CY 2008, the base salaries of the NEOs were determined by the Committee in February 2008. In
September 2008, the Committee approved an increase to Mr. Anstice’s annual base salary from $400,000 to
$450,000 in connection with his promotion to Executive Vice President and Chief Operating Officer. At the
same time and in connection with his promotion to Senior Vice President and Chief Financial Officer, the
Committee approved an increase to Mr. Maddock’s base salary from $416,000 to $440,000. The salary increases
for both executives were based on a market review of comparable positions in our Peer Group completed by our
Human Resources Department and Mr. Newberry’s recommendation to the Committee.

For CY 2009 and in view of the uncertainty in the global economy and potential impact to our business, the
Committee approved (upon the recommendation of Mr. Newberry) a temporary reduction in the base salaries of
our NEOs, beginning in February 2009. The reductions ranged from 10% to 17.5% and were part of a broader
salary reduction program applicable to all of our employees. The Committee has not yet restored NEO salaries to
their original levels, although salaries for most other employees were restored in October 2009. The Committee
will continue to evaluate economic and business conditions and, with input from Mr. Newberry, determine when
restoration of NEO salaries is appropriate.

The base salaries of the NEOs for calendar years 2008 and 2009 are as follows:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CY 2009
CY 2008
$ 800,000
$ 660,000
$ 440,000 * $ 385,000
$ 324,000
$ 360,000
$ 450,000 * $ 393,750
$ 283,500
$ 315,000

Base salary effective upon promotion in September 2008

Annual Incentive Program. Our Annual Incentive Program (or “AIP”) provides for annual cash incentive
awards to our NEOs based on the achievement of corporate and individual performance objectives during the
calendar year. For the AIP, the Committee establishes: (i) the corporate performance objectives and individual
performance objectives that will apply to each executive officer, which may be six- or twelve-month objectives;
(ii) the target levels of performance for the corporate and individual objectives; and (iii) the individual target
award opportunities. By reviewing certain performance objectives with six-month periods, the Committee retains
the ability to make adjustments as necessary to reflect changing business conditions and corporate objectives.

The specific performance objectives and their relative weightings are selected based upon the
recommendations of Mr. Newberry and the determinations of the Committee to reflect important measures of
Company performance during the applicable calendar year.

The Committee establishes the target levels for the corporate and individual performance objectives so that
they will be challenging but achievable based on expected levels of performance from our executive officers, and
so that below-expected performance will reduce the amount of an executive officer’s incentive payments. Target
levels are set such that very strong performance is required to earn payments above the target award opportunity.
For example, for CY 2006, AIP payments ranged from 1.9 to 2.05 times target amounts and for CY 2007, they
ranged from 1.61 to 1.8 times target amounts. In both of these years, Company performance was exceptional. By
contrast, for CY 2008, AIP payments averaged 0.4 times target amounts, reflecting the Company’s performance
in the deteriorating economy. Even if Company and individual performance against specific objectives are
strong, payments at or above target are not automatic. The Committee may exercise its discretion to reduce (but
not increase) the amount of any incentive payment.

For calendar year 2008, AIP awards were determined for the NEOs using the framework of:

Target AIP
Award
(A)

Corporate
Factor
(B)

Individual
Factor
(C)

Incentive
Payment
(D)

where:

(A) The target AIP award represents a percentage of each executive officer’s annual eligible base earnings
translated to a dollar amount. In February 2008, the Committee approved the following target AIP
award opportunities for CY 2008 for the NEOs:

Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125 %
80 %
75 %
81 %*
70 %

Target AIP award was increased from 80% to 85% upon promotion to Executive Vice President
and COO. This amount reflects the prorated target for 2008.

The maximum potential AIP incentive payment was capped at 2.25 times the target. The differences in
target annual cash incentive award opportunities among the NEOs were determined based on job scope
and responsibilities, as well as an assessment of competitive compensation data from the Peer Group.

(B) The CY 2008 corporate performance factor was set in February 2008 for the first half of the year. The
factor was based on ongoing operating income as a percentage of revenue. The minimum percentage
required to earn any incentive payment was 8%, and no additional incentive payment was earned
for performance over 34%. Between those levels, the corporate performance factor varied from
0 to 1.5, based on actual results. The corporate performance factor was reviewed by the Committee
in August 2008, and was set to be the same for the second half of the year as for the first half.

(C)

Individual performance factors were measured on the basis of quantitative and qualitative metrics that
varied by each NEO with a payment factor of 0 to 1.5 times target based on the actual performance
level. Individual performance factors were set in February 2008 for the entire year. The metrics for
Mr. Newberry’s individual performance were:

Achieve Etch Market Share
(25% Weight)

A sliding scale from 0 to 150% depending
on an internal market share calculation.

Achieve New Market and New
Product Revenue (10% weighting)

Achieve Revenue and Gross Margin
(30% weighting)

Achieve Cash from Operations
(35% weighting)

A sliding scale from 0 to 150% depending
on the revenue received in certain new
markets and on certain new products.

A sliding scale from 0 to 150% with the
50% point at $2.35 billion in revenue and
a 44% gross margin, and the 150% point at
$3 billion in revenue and 48% gross
margin.

A sliding scale from 0 to 150% with the
50% point at 17.5% of revenue converting
into cash from operations and the 150%
point at 25% of revenue converting into
cash from operations.

The metrics for the other NEOs fall into the following categories and weightings, which focus on
the performance of their functional organizations, and which determined each NEO’s individual
performance factor:

Category
Organization Financial Performance . . . . . . . . . . . . .
Business Process Improvement . . . . . . . . . . . . . . . . .
Etch Market Share Gain . . . . . . . . . . . . . . . . . . . . . . .
Organizational Capability . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . .

Anstice
45.0 %
35.0 %
N/A
20.0 %
N/A

Maddock
27.5 %
62.5 %
N/A
10.0 %
N/A

Gottscho
20.0 %
N/A
20.0 %
N/A
60.0 %

Hariri
50.0 %
42.5 %
N/A
7.5 %
N/A

(D) Incentive payments are based on performance against the corporate and individual factors and, as

approved by the Committee in February 2009, were as follows for the NEOs:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . .

Target AIP
Award ($)
$ 1,000,000
$ 334,400
$ 267,115
$ 330,469
$ 218,481

Corporate
Factor Result
0.40
0.40
0.40
0.40
0.40

Individual
Factor Result
0.75
1.06
1.07
1.02
1.00

Annual
Incentive
Payment
$ 300,000
$ 141,786
$ 114,325
$ 134,831
$ 87,392

The Committee exercised its discretion to reduce the corporate performance factor result for
CY 2008. The ongoing operating income as a percentage of revenue result was 21.8% and 9.5%
for the first and second halves of the calendar year, respectively. This resulted in a corporate
performance factor of 0.80 for the first half of the year and 0.15 for the second half of the year. The
average of the two factors equals a corporate performance factor of 0.48 for the entire year. Due
to the economic climate at the end of CY 2008, Mr. Newberry recommended, and the Committee
approved, reducing the corporate performance factor for the second half of CY 2008 to zero; thus,
the corporate performance factor for the full calendar year was reduced to 0.40.

For purposes of the individual factor, Mr. Newberry evaluated each NEO’s performance (other
than his own) against their individual goals and made a recommendation to the Committee. The
Committee evaluated Mr. Newberry’s achievement of his individual performance goals, as follows,
and this recommendation was reviewed and adopted by the independent members of the Board:

Metric
Etch Market Share . . . . . . . . . . . . . . . . . . . . . . . .
New Market and New Product Revenue . . . . . . .
Revenue and Gross Margin . . . . . . . . . . . . . . . . .
Cash from Operations . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighting
25 %
10 %
30 %
35 %
100 %

Performance Result Weighted Result

100 %
50 %
67 %
70 %

0.25
0.05
0.20
0.25
0.75

For calendar year 2009, in February 2009, the Committee reviewed the AIP structure in light of then-
current economic conditions. The objective of the review was to provide our NEOs with appropriate incentives
to achieve corporate and individual performance goals that focused on actions that will benefit the Company
when the business environment improves. For CY 2009, there are no changes to NEO target award opportunities
from CY 2008, except that the AIP award opportunities are applied to base earnings as affected by the salary
reductions noted earlier.

The Committee approved the following changes to the AIP structure for CY 2009:

•

Corporate and individual performance factors are calculated independently of each other. The corporate
factor is weighted 100% for Messrs. Newberry and Anstice. For the other NEOs, the corporate
performance factor is weighted 50% and individual performance factors are weighted 50%.

•

The corporate performance factor consists of four measures: a metric related to ongoing operating
cash flow (“ongoing operating cash flow”); Etch products market share; Clean products market share;
and Customer Support Business Group (“CSBG”) contributed profit.

The weighting of each measure varies by executive depending on the executive’s area of responsibility
and degree of influence with respect to each metric, as follows (table also includes weighting of
individual factors):

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . .

Ongoing
Operating
Cash Flow
50 %
25 %
25 %
50 %
25 %

Corporate Factor
Clean
Etch
Market
Market
Share
Share
15 %
25 %
7.5 %
12.5 %
0 %
20 %
15 %
25 %
7.5 %
12.5 %

CSBG
Contributed
Profit
10 %
5 %
5 %
10 %
5 %

Individual
Factor
0 %
50 %
50 %
0 %
50 %

Total
100 %
100 %
100 %
100 %
100 %

•

The individual factor category metrics and weightings for Messrs. Maddock, Gottscho and Hariri are
as follows:

Category
Organization Financial Performance . . . . . . . . . . . . . . . . . . . . . . . .
Business Process Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Etch Market Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Organizational Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Maddock
15 %
60 %

N/A

Gottscho
35 %

N/A

Hariri
35 %
40 %

30 %

N/A

25 %

N/A

25 %

N/A

35 %

N/A

•

For purposes of determining the incentive payments, the corporate and individual performance
factors may range from 0 to 1.2, reduced from 1.5 in 2008.

The maximum total incentive payment is capped at 1.0 times the target award opportunity, reduced
from 2.25 in CY 2008.

The Committee reserves the right to settle any AIP payments for CY 2009 either in cash, Company
stock, or any combination of cash and Company stock.

Long-Term Incentive Program (LTIP). We believe that long-term incentive awards are an important element
of our executive compensation program. From CY 2006 through CY 2008, we used cash-based awards as our
primary long-term incentive compensation vehicle under the Multi-Year Incentive Program. The structure of the
MYIP, which is described in more detail below, is intended to provide competitive levels of cash compensation
to our senior executives while:

•

•
•

Allowing us to accrue compensation expense during the period in which performance objectives
are met;

As a non-equity program, minimizing the dilution of our stockholders; and

Encouraging the retention of our senior executives by generally requiring continuous employment
through the award determination date under the program (“Award Determination Date”), which,
typically, is approximately two years following the start of the performance period.

In addition to the MYIP, the Committee, in its discretion, occasionally used equity awards under our
2007 Stock Incentive Plan for our executive officers, including the NEOs. Awards have historically been stock
options or RSUs, and have been granted on an individual basis to provide competitive long-term incentives and
to reward behaviors that result in long-term stockholder value growth. For example in 2008, the Committee
granted Dr. Gottscho an RSU award covering a total of 13,000 shares of our common stock that will vest in 2010.
Of this total amount, 8,000 shares vest subject to the achievement of defined performance criteria relating to

Etch products market share and his continued employment with us through that date. The remaining 5,000 shares
were awarded to enhance the retention of Dr. Gottscho and thus vest subject only to his continued employment.
No other NEO received an equity award in calendar year 2008.

In February 2009, management recommended, and the Committee approved, a change to how long-term
incentive compensation would be delivered. The Committee established the Long-Term Incentive Program and
made awards for CY 2009 as follows:

•

50% of the target long-term incentive award was granted as a cash award to be earned under the
MYIP;

50% of the target long-term incentive award was granted in equity, a mix of RSUs and stock
options.

These changes were made based on the Committee’s desire to enhance the link between our executive
officers’ interests and those of our stockholders, conserve Company cash reserves, promote the retention of
our executives through the downturn and into a recovery, and reflect Peer Group practices, which include a
substantial equity component in their long-term incentive compensation programs.

Multi-Year Incentive Program. The MYIP is a long-term cash incentive program designed to reward our
senior executives for performance and stock price appreciation over a performance period. The Committee
establishes individual target award opportunities at the beginning of each MYIP cycle based on job scope and
responsibilities, an evaluation of the executive’s performance, and an assessment of competitive compensation
data from the Peer Group. The performance objectives and metrics are established every six months during the
MYIP cycle. By reviewing performance objectives and metrics every six months, the Committee retains the
ability to make adjustments as necessary to reflect changing business conditions and corporate objectives and to
allow for potential payments to be appropriately aligned with performance. For example, the performance factor
for the 2007 and 2008 MYIP cycles was ongoing operating income, and it was changed to a metric related to
ongoing operating cash flow for the 2009 MYIP in response to changing business conditions.

The MYIP operates over a two-year performance cycle. For example, the 2008 MYIP covers performance
over calendar years 2008 and 2009. A new MYIP cycle typically commences at the beginning of each calendar
year and lasts for two calendar years, as illustrated below:

MYIP Performance Periods

2007 MYIP

Fiscal 2009

2008 MYIP

2009 MYIP

1/1/2007

1/1/2008

1/1/2009

1/1/2010

1/1/2011

Three MYIP cycles affected NEO compensation during fiscal year 2009, as shown in the following table:

MYIP Cycle
2007 . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . .

Performance Period
January 2007 – December 2008
January 2008 – December 2009
January 2009 – December 2010

Award Determination Date
February 2009
February 2010
February 2011

Eligible NEOs
All (except Gottscho)*
All
All

Dr. Gottscho received an RSU award in January 2007 covering 8,400 shares in lieu of participation in the
2007 MYIP cycle.

Calculated award amounts may be increased (but may not be decreased) if our stock price exceeds a
benchmark level set at the beginning of the respective MYIP cycle. This is intended to allow our executives to
participate along with our investors in stock price appreciation resulting from strong financial and operating
performance results. The specific formula is described in subparagraph (C) below.

The Committee measures actual performance under the performance factor metrics on a quarterly basis and
computes the potential payment attributable to that fiscal quarter’s performance at the end of each quarter during
a MYIP cycle. To receive a payment under a MYIP cycle, generally an executive officer must be continuously
employed by us through the Award Determination Date, the date on which the Committee determines the actual
award amounts under the applicable cycle. The Award Determination Date is typically in February of the year
following completion of the MYIP cycle; e.g., in February 2009 for the 2007 MYIP with covered performance
in calendar years 2007 and 2008.

The 2007 MYIP can be summarized by the following formula:

Target Award
as % of
Operating
Income Target
(A)

Ongoing
Operating
Income
(B)

Stock Price
Modifier
(C)

Quarterly
Accrual
(D)

where:

(A) The individual target award percentage is the percentage of ongoing operating income each participant
is targeted to receive under the program. To determine this percentage, the Committee established
a target dollar opportunity at the beginning of the cycle for each participant. One-half of this target
dollar amount was divided into the operating income target for each year of the MYIP cycle. For the
2007 cycle, the target dollar amounts and target awards as a percent of ongoing operating income
were as follows, based on an ongoing operating income target of $562,500,000 and $528,750,000 for
calendar years 2007 and 2008, respectively:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . .

Target Dollar
Amount
$ 3,575,000
$ 1,347,500
N/A
$ 1,485,000
$ 1,100,000

Target Award as % of
CY07 Operating
Income Target
0.32 %
0.12 %
N/A
0.13 %
0.10 %

Target Award as % of
CY08 Operating
Income Target
0.34 %
0.13 %
N/A
0.14 %
0.10 %

The maximum potential MYIP incentive payment for the 2007 MYIP cycle was capped at 2.5 times the
target dollar amount.

(B) Ongoing operating income is the Company’s ongoing operating income as a percentage of revenue
for the performance period. For 2008, it represents ongoing operating income as a percentage of
Company revenues for the total Company for Mr. Newberry and ongoing operating income as a
percentage of Company revenues without the inclusion of the partial-year results from the Company’s
acquisition of SEZ Holdings AG for the rest of the NEOs.

(C) The stock-price modifier is a ratio of the market price of our common stock over the 50 trading day
trailing average as of the end of each fiscal quarter to the 200 trading day trailing average as of the
end of the year preceding the beginning of the respective MYIP cycle; however, the modifier cannot
be less than 1.0.

(D) The quarterly accrual is the product of the individual target MYIP award percentage, ongoing operating
income and stock-price modifier. This determination is made each quarter of the MYIP cycle with
payout occurring at the end of the cycle if approved by the Committee, subject to the NEO’s continued

employment. In February 2009, the Committee reviewed the calculated amounts and authorized
payments to our executive officers, including the NEOs, under the 2007 MYIP. The individual target
award opportunities for and amounts earned by the NEOs under the 2007 MYIP were:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Target Award
Opportunity
$ 3,575,000
$ 1,347,500
$ 1,485,000
$ 1,100,000

Award Payout
$ 3,680,964
$ 1,437,183
$ 1,583,835
$ 1,173,211

Award Payout as a
Percentage of Award
Opportunity
103.0 %
106.7 %
106.7 %
106.7 %

Mr. Newberry’s award payout percentage is less than the other NEOs’ awards because, as described
above, for purposes of determining his MYIP award, the SEZ business was included in the
determination of ongoing operating income results and for the other NEOs it was not.

During CY 2007, the stock-price modifier positively affected the amounts calculated and accrued for
payment under the 2007 MYIP. The stock-price modifier did not affect the amounts calculated and
accrued under the 2007 MYIP during CY 2008. In addition, while the last quarter of the 2007 cycle
would have resulted in an accrual under the terms of the MYIP, Mr. Newberry recommended, and the
Committee approved, reducing the accrual to zero due to the economic climate at the end of CY 2008.

In February 2008, the Committee approved the 2008 MYIP cycle covering calendar years 2008 and 2009.
For the CY 2008 portion of the 2008 MYIP, the MYIP operated in the same manner as the 2007 MYIP, except
that the target dollar amounts for the 2008 cycle were modified as follows, based on the factors described in the
first paragraph of “Multi-Year Incentive Program,” above.

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Target Dollar
Amount
$ 4,000,000
$ 1,352,000
$ 1,260,000
$ 1,500,000
$ 1,102,500

Target Award as % of
CY 08 Operating
Income Target*
0.38 %
0.13 %
0.12 %
0.14 %
0.10 %

Based on operating income target of $528,750,000 for CY 2008.

For the CY 2009 portion of the 2008 MYIP, the Committee approved the following changes in

February 2009:

•

The performance factor was changed to ongoing operating cash flow (in the same manner as the
performance factor was changed for the AIP, as described earlier) as the Committee believes that this
metric represents the best indicator of our corporate performance given the economic uncertainties
and their impact on our business, the Company’s goal of conserving cash reserves and the Committee’s
desire to reward our executives for achieving objectives in the current year that position the Company
for long-term success. The Committee approved use of this metric for the first half and the second
half of calendar year 2009.

The determination of the quarterly accrual was changed to the following formula:

Prorated
Target MYIP
Award
(A)

Ongoing
Operating
Cash Flow
Pay Factor
(B)

Stock Price
Modifier
(C)

Quarterly
Accrual
(D)

where:

(A) The prorated target MYIP award is each executive officer’s target MYIP dollar amount for the 2008

MYIP cycle divided by eight.

(B) The ongoing operating cash flow pay factor is the percentage to be applied to the prorated target MYIP
award. The payout factor is a sliding scale from 0% to 120% based on the Company’s performance
against the ongoing operating cash flow goal for calendar year 2009.

MYIP cycle.

(D) The quarterly accrual is the product of the prorated target MYIP award, ongoing operating cash flow
pay factor and stock-price modifier. This determination is made each quarter of the MYIP cycle with
payout occurring at the end of the cycle, subject to the NEO’s continued employment.

In February 2009, the Committee approved the 2009 MYIP cycle covering calendar years 2009 and 2010.
For calendar year 2009, the MYIP operates in the same manner as the calendar year 2009 portion of the 2008
MYIP, except that the target dollar amounts for the 2009 cycle were modified as follows, based on the factors
described in the first paragraph of “Multi-Year Incentive Program,” above:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Target Dollar
Amount
$ 2,000,000
$ 800,000
$ 630,000
$ 875,000
$ 625,000

These amounts represent one-half of the total long-term incentive award opportunity for calendar year
2009 because of the change in approach to deliver long-term incentive compensation awards to our executive
officers, including the NEOs, as follows: 50% of the total target award was granted pursuant to the MYIP and
50% of the total target award was granted in stock options and RSUs.

2009 Equity Awards. Each NEO received, on February 26, 2009, a grant of RSUs and a stock option grant.
The number of RSUs granted equals one-half of the target dollar amount shown in the table below divided by
$20.21, the closing price of the Company’s common stock on the grant date. Each NEO also was granted a stock
option covering 2.5 shares of the Company’s common stock for each RSU granted. The stock options have an
exercise price equal to $20.21, the closing price of the Company’s common stock on the grant date, and have a
five-year term. The RSUs and options will vest on the second anniversary of the grant date.

The equity awards for the NEOs were as follows:

Named Executive Officer
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Target Dollar
Amount
$ 2,000,000
$ 800,000
$ 630,000
$ 875,000
$ 625,000

Stock Option
Awards
123,700
49,480
38,965
54,120
38,658

Restricted Stock
Units Award
49,480
19,792
15,586
21,648
15,463

Employment/Change of Control Arrangements

We entered into an employment agreement with Mr. Newberry (the “2003 Newberry Agreement”)
effective January 1, 2003, which continued in effect until July 2009 pursuant to an automatic one-year renewal
provision. The change of control arrangements under the agreement are described in “Potential Payments upon
Termination of Employment or Change of Control” below.

We entered into the 2003 Newberry Agreement to: (i) document the terms and conditions of Mr. Newberry’s

employment and (ii) encourage the retention of our Chief Executive Officer.

In July 2009, and in furtherance of the objectives stated above, the independent members of our Board of
Directors, upon the recommendation of the Committee, authorized the Company to enter into a new employment
agreement with Mr. Newberry (the “2009 Newberry Agreement”). The Committee also asked Compensia to
review Peer Group practices with respect to employment agreements with other executive officers. As a result
of that review, the Committee also approved employment agreements with Messrs. Anstice and Maddock and
change of control agreements with our other executive officers, including Dr. Gottscho and Mr. Hariri.

Employment Agreements. The Company and Mr. Newberry entered into the 2009 Newberry Agreement
effective July 1, 2009. The agreement provides that Mr. Newberry shall serve as the Company’s President
and Chief Executive Officer for a term commencing on July 1, 2009 and ending on June 30, 2012, subject to
the right of the Company or Mr. Newberry, under certain circumstances, to terminate the agreement prior to
June 30, 2012, and provided that Mr. Newberry’s employment will terminate immediately upon his death or
disability (as defined in the 2009 Newberry Agreement).

Under the agreement, Mr. Newberry will receive a base salary of $800,000 per year ($660,000 per year
while the Company’s current executive salary reduction program remains in effect), subject to annual adjustment
at the discretion of the independent members of the Board. Mr. Newberry is also entitled to participate in
any short-term or long-term variable compensation programs offered by the Company to its executive officers
generally, subject to the applicable terms and conditions of those programs and the approval of the independent
members of the Board, and to participate in the Company’s Elective Deferred Compensation Plan. Mr. Newberry
receives other benefits, such as health insurance, vacation, and benefits under other plans and programs generally
applicable to executive officers of the Company.

If an Involuntary Termination (as defined in the 2009 Newberry Agreement) of Mr. Newberry’s employment
occurs, other than in connection with a change of control (as defined in the agreement), Mr. Newberry will be
entitled to:

(1) a lump-sum cash payment equal to 18 months of his then-current base salary (without giving effect
to any salary reduction program currently in effect), plus an amount equal to the average of the last
five annual payments made to Mr. Newberry under the Company’s Annual Incentive Program or any
predecessor or successor programs (the “Short Term Program,” and such average, the “Short Term
Program Average”), plus an amount equal to the amount that he would have earned under the Short
Term Program for the calendar year in which his employment is terminated multiplied by the number
of full months worked in that calendar year divided by 12 (the “Pro-Rated Short Term Program
Amount”);

(2) payment of any amounts accrued as of the date of termination under any long-term cash-based
variable compensation programs of the Company (the “Long Term Cash Programs”), the payment
of which generally occurs during February of a calendar year with respect to incentive programs
relating to the prior calendar year;

(3) certain medical benefits; and

(4) vesting, as of the date of termination, of a pro rata portion (based on time of service) of the
unvested stock option or RSU awards granted to Mr. Newberry at least twelve months prior to the
termination date.

If a change of control of the Company (as defined in the agreement) occurs during the period of
Mr. Newberry’s employment, and if there is an Involuntary Termination of Mr. Newberry’s employment
either in contemplation of or within the 12 months following the change of control, Mr. Newberry will be
entitled to:

(1) a lump-sum cash payment equal to 18 months of Mr. Newberry’s then-current base salary (without
giving effect to any salary reduction program currently in effect), plus an amount equal to the Short
Term Program Average, plus an additional amount equal to the Pro-Rated Short Term Program
Amount;

(2) certain medical benefits;

(3) vesting, as of the date of termination, of the unvested stock option or RSU awards granted to

Mr. Newberry prior to the change of control; and

(4) payment of any amounts accrued as of the change of control under the Long Term Cash Programs,

plus an amount equal to the remaining target amount under the Long Term Cash Programs.

If Mr. Newberry’s employment is terminated due to disability or in the event of his death, Mr. Newberry

(or his estate) will be entitled to:

(1) a lump-sum cash payment equal to 12 months of his then-current base salary (without giving effect
to any salary reduction program currently in effect) less, in the case of his death, certain insurance
payments, plus the Pro-Rated Short Term Program Amount;

(2) payment of any amounts accrued as of the date of termination under the Long Term Cash Programs
(the payment of which generally occurs during February of a calendar year with respect to incentive
programs relating to the prior calendar year);

(3) certain medical benefits (in the case of Mr. Newberry’s death, benefits to which his dependents are

entitled); and

(4) vesting, as of the date of termination, of at least 50% of the unvested stock option or RSU awards
granted to Mr. Newberry prior to the date of termination (or a pro rata amount, based on period of
service, if greater than 50%).

If Mr. Newberry voluntarily resigns, he will be entitled to no additional benefits, and stock options and
RSUs will cease to vest on the termination date and, for stock options, will be cancelled unless they are exercised
within ninety days after the termination date.

The 2009 Newberry Agreement also subjects Mr. Newberry to customary confidentiality and non-
competition obligations during the term of the agreement, and non-solicitation obligations for a period of six
months following the termination of his employment. The agreement also requires Mr. Newberry to execute a
release in favor of the Company to receive the payments described above.

The terms of Mr. Anstice’s agreement are substantively similar to those of the 2009 Newberry Agreement,
with the following material differences: Mr. Anstice shall serve as an Executive Vice President of the Company
and will receive a base salary of $450,000 ($393,750 per year while the Company’s executive salary reduction
program remains in effect), subject to annual adjustment at the discretion of the Committee.

The severance terms of Mr. Anstice’s agreement are generally similar to those of the 2009 Newberry
Agreement, provided that (1) Mr. Anstice will receive 12 months of base salary instead of 18 months in the
event of his Involuntary Termination; (2) instead of a payment of the full Short Term Program Average, he
will receive a payment of 50% of the Short Term Program Average; and (3) in the event of death or disability,
Mr. Anstice will not be entitled to any payment based on his base salary. The change of control terms of Mr.
Anstice’s agreement are generally similar to those of the 2009 Newberry Agreement, provided that Mr. Anstice
will receive 12 months of base salary instead of 18 months in the event of his Involuntary Termination.

The terms of Mr. Maddock’s agreement are substantively similar to those of Mr. Anstice’s agreement, with
the following material differences: Mr. Maddock shall serve as a Senior Vice President of the Company and will
receive a base salary of $440,000 ($385,000 per year while the Company’s executive salary reduction program
remains in effect), subject to annual adjustment at the discretion of the Committee.

Change of Control Agreements. We entered into change of control agreements with Mr. Hariri and
Dr. Gottscho, which provide that, if a change of control (defined as in the 2009 Newberry Agreement) of the
Company occurs during the period of employment of the applicable executive officer under the change of
control agreement, and there is an Involuntary Termination (defined as in the 2009 Newberry Agreement) of
the executive officer’s employment, the executive officer will be entitled to payments and benefits substantively
similar to those contained in the change of control provisions of Messrs. Anstice and Maddock’s agreements.

The change of control agreements contain confidentiality, non-competition, and non-solicitation terms
that are substantively similar to those of Messrs. Anstice and Maddock’s agreements, and require Mr. Hariri
and Dr. Gottscho to execute releases in favor of the Company to receive the payments described in the previous
paragraph.

Equity Plans. In addition to the above, certain of our stock plans provide for accelerated benefits after
certain events. While the applicable triggers under each plan vary, these events generally include: (i) a merger
or consolidation in which Lam Research is not the surviving entity, (ii) a sale of substantially all of Lam’s
assets, including a liquidation or dissolution of the Company, or (iii) a change in the ownership of more than
50% of our outstanding securities by tender offer or similar transaction. After a designated event, the vesting
of some or all of awards granted under these plans may be immediately accelerated in full, or certain awards
may be assumed, substituted, replaced or settled in cash by a surviving corporation or its parent. The specific
treatment of awards in a particular transaction will be determined by the Board and/or the terms of the applicable
transaction documents.

Potential Payments Upon Termination or Change of Control

2003 Newberry Agreement. The Company and Mr. Newberry entered into the 2009 Newberry Agreement
effective July 1, 2009, as described above. This agreement replaces the 2003 Newberry Agreement. In this
section, we are required to report amounts that would have been payable to Mr. Newberry assuming the
termination of his employment at our June 28, 2009 fiscal year end, which was just prior to the effective date of
the new agreement. Accordingly, the table below provides an estimate of the amount that would have been paid
out upon his termination as of June 28, 2009 per the 2003 Newberry Agreement.

The 2003 Newberry Agreement provided that in the event of a change of control of the Company followed
by either involuntary termination or the acceptance of a position of materially lesser authority or responsibility
offered to Mr. Newberry by the Company, or if the Company was acquired by another entity so that there was no
market for the Common Stock of the Company and the acquiring entity did not provide options comparable to
unvested stock options held by Mr. Newberry, all unvested stock options granted to Mr. Newberry would have
automatically accelerated in full so as to become fully vested. Mr. Newberry would have had two years from the
date of termination in which to exercise such options.

If Mr. Newberry’s employment was involuntarily terminated without cause, he would have been entitled
to receive a lump sum payment equal to 15 months of his then-annual base compensation, and he would receive
annually any benefits under the Executive Retirement Medical and Dental Plan for which he qualified following
the date of termination. If Mr. Newberry had resigned voluntarily, he would not have been entitled to receive any
severance benefits under the 2003 Newberry Agreement, with the exception of the benefits that he would have
qualified for under the Executive Retirement Medical and Dental Plan. In the event of Mr. Newberry’s death, his
estate would have been entitled to receive an amount equal to Mr. Newberry’s annual base salary payable in a
lump sum. If Mr. Newberry became disabled, he would have been entitled to receive his base salary for a period
of 12 months from the date disability was certified, as well as any annual incentive plan payments earned prior
to the effective date of disability. Additionally, in the event of Mr. Newberry’s death or if he became disabled,
any stock options granted before the effective date of termination would have accelerated such that 50% of the
unvested shares were immediately vested and exercisable. Mr. Newberry (or his estate) would have had two
years from the date of termination in which to exercise such options.

Potential Payments to Mr. Newberry upon Termination or Change of Control
as of June 28, 2009 (under 2003 Newberry Agreement)*

Executive Benefits and
Payments Upon Termination
Compensation
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term Incentive . . . . . . . . . . . . . . . . . . . . . . .
Long-term Incentives:
2007-2008 MYIP . . . . . . . . . . . . . . . . . . . . . . . . .
2008-2009 MYIP . . . . . . . . . . . . . . . . . . . . . . . . .
2009-2010 MYIP . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Options (Unvested and Accelerated) . . . . .
Restricted Stock Units

Voluntary
Termination

Disability or
Death

For
Cause

Not for
Cause

Change of
Control

Involuntary Termination

$ —
$ —

$ 800,000 $ — $ 1,000,000 $
— $
$

— $ — $

—
—

$ —
$ —
$ —
$ —

— $ — $
$
— $ — $
$
$
— $ — $
$ 322,636 $ — $

—
— $
—
— $
— $
—
— $ 807,253

(Unvested and Accelerated) . . . . . . . . . . . . . .

$ —

— $ — $

— $

—

Benefits and Perquisites
Health Benefit Continuation . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 78,000
$ 78,000

78,000 $ — $

$
78,000 $ 78,000
$ 1,200,636 $ — $ 1,078,000 $ 885,253

As noted previously, Mr. Newberry’s employment is now governed by the 2009 Newberry Agreement
described above under “Employment/Change of Control Arrangements.” That agreement provides different
termination benefits than the 2003 Newberry Agreement.

Medical and Dental Coverage. The Company provides post-retirement medical and dental insurance
coverage for eligible former executive officers and members of our Board of Directors under the Executive
Retirement Medical and Dental Plan as described elsewhere in this Proxy Statement. Annually, Lam Research has
an independent actuarial valuation of this post-retirement benefit conducted in accordance with the methodology
prescribed by the Statement of Financial Accounting Standards 106, “Employers’ Accounting for Postretirement
Benefits Other Than Pensions” (SFAS No. 106). The most recent valuation conducted in June 2009 valued Lam’s
accumulated post-retirement benefit obligation for the NEOs as shown in the table below:

Name
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FY 2009
$ 78,000
$ 86,000
$ 75,000
$ 28,000
$ 83,000

In addition, certain of our stock incentive plans and the Lam Research Corporation Employee Stock

Purchase Plan (the “ESPP”) provide for accelerated benefits after certain events as discussed above.

Other Executive Compensation Plans

Elective Deferred Compensation Plan. We maintain a non-qualified deferred compensation plan, the
Elective Deferred Compensation Plan (the “EDCP”), which allows eligible employees, including our executive
officers (and the NEOs), to voluntarily defer receipt of all or a portion of their base salary and all or a portion of
certain long- or short-term incentive compensation payments until the date or dates elected by the participating
employee, thereby allowing the employee to defer current taxation on such amounts. The EDCP is offered to
eligible employees to allow them to defer more compensation than they would otherwise be permitted to defer
under a tax-qualified retirement plan, such as Lam’s 401(k) Plan. Further, we offer the EDCP as a competitive
practice to enable us to attract and retain top talent.

Health and Welfare Benefits. Except as discussed in this section, our executive officers, including the
NEOs, are eligible to receive health and welfare benefits, including medical, disability, and life insurance
coverage, on the same basis as all of our employees. All of our employees, including the NEOs, are also eligible
to receive Company contributions that match a certain percentage of their contributions to the 401(k) Plan. In
addition, we provide a Company contribution to the EDCP in lieu of matching contributions to the 401(k) Plan
for our NEOs who participate in the EDCP.

We provide certain additional benefits to our executive officers, including the NEOs, that are not generally
available to our other employees, including the payment of premiums for supplemental long-term disability
insurance, executive dental insurance coverage, and an executive medical reimbursement program that reimburses
an executive officer’s payment of medical co-insurance and co-payments, and vision care expenses.

We also provide a program to pay for post-retirement medical and dental insurance coverage for eligible
former executive officers and members of our Board of Directors (“Executive Retirement Medical and Dental
Plan”). To be eligible, an individual must have served at the position of vice president or above or as a member
of the Board of Directors, be at least age 55 at the time of his or her retirement, and have at least five years of
continuous service with Lam Research. An executive officer or director must be enrolled in our United States
group medical and dental plans at the time of his or her retirement. When the retiree or spouse of a retiree reaches
age 65, he or she is required to enroll in Medicare (Parts A and B), which would be the primary payer for the
participant’s health insurance coverage. This benefit also covers the retiree’s spouse at the time of retirement for
his or her lifetime, as well as dependent children until the age of 19 (or 24 if a full-time student). This benefit
ceases if the retiree becomes employed by one of our competitors after leaving active service with us. We
provide this benefit to our executive officers and members of our Board of Directors to further the long-term
retention of their services and provide a disincentive to compete against us later.

Perquisites and Other Personal Benefits. Historically, we have not provided perquisites or other personal

benefits to our executive officers, including the NEOs, and we did not do so in fiscal 2009.

Tax and Accounting Considerations

Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended
(the “Code”), imposes limitations on the deductibility for federal income tax purposes of compensation in excess
of $1 million paid to our Chief Executive Officer and any of our three other most highly compensated executive
officers (other than our Chief Financial Officer) in a single tax year. Generally, compensation in excess of
$1 million may only be deducted if it is “performance-based compensation” within the meaning of the Code.

In determining which components of compensation are to be paid, and how they are weighted, we take into
account whether a particular form of compensation will be considered “performance-based” compensation for
purposes of Section 162(m).

In fiscal 2004, we adopted the Executive Incentive Plan (“EIP”) with a structure intended to provide for
the deductibility of awards granted under the EIP. Accordingly, during fiscal 2009, the annual incentive awards
and all MYIP awards to our NEOs were granted under the EIP in order to qualify for deductibility under
Section 162(m). However, salaries are not considered performance-based compensation for purposes of Section
162(m).

Compensation income realized upon the exercise of stock options or vesting of RSUs granted under our
stock incentive plans generally will be deductible if the awards are granted by a committee whose members are
non-employee directors and certain other conditions are satisfied. However, compensation associated with RSUs
will not be considered performance-based compensation for the purposes of Section 162(m) unless vesting is
based on specific performance goals rather than based on continued employment.

The Committee monitors the application of Section 162(m) and the associated Treasury regulations
on an ongoing basis and the advisability of qualifying our executive compensation for deductibility of such
compensation. The Committee’s policy is to qualify our executive compensation for deductibility under applicable
tax laws to the extent practicable and if the Committee believes it is in the best interests of the Company and its
stockholders.

Taxation of “Parachute” Payments. Sections 280G and 4999 of the Code provide that executive officers
or directors of a corporation who hold significant equity interests, and certain other service providers, may be
subject to significant additional taxes if they receive payments or benefits in connection with a change of control
of the corporation that exceeds certain prescribed limits. The corporation or its successor may also forfeit a
deduction on the amounts subject to this additional tax.

Pursuant to the 2003 Newberry Agreement, we agreed to provide Mr. Newberry with a “gross-up” tax
reimbursement payment if, as a result of a change of control of the Company, he incurred a tax liability as a
result of the application of Sections 280G and 4999. This provision was omitted from the employment agreement
that we entered into with Mr. Newberry in July 2009. Except as described above, we did not provide any of
our executive officers, including any NEO, any director, or any other service provider with a “gross-up” or
other reimbursement payment for any tax liability that the individual might owe as a result of the application of
Sections 280G or 4999 during fiscal 2009, and we have not agreed and are not otherwise obligated to provide
any individual with such a “gross-up” or other reimbursement.

Internal Revenue Code Section 409A. Section 409A of the Code imposes significant additional taxes on
an executive officer, director, or service provider that receives “deferred compensation” that is within the scope
of Section 409A. Among other things, Section 409A applies to the MYIP, the EDCP, certain equity awards, and
severance arrangements.

To assist our employees in avoiding additional taxes under Section 409A, we have structured the MYIP,
the EDCP, and our equity awards in a manner intended to qualify them for exclusion from Section 409A. In
this regard, in December 2008, the Committee amended the EDCP both with respect to the period ending on
December 31, 2004 and all periods ending thereafter, as well as the 2003 Newberry Agreement and other plans,
programs, policies, and arrangements that provide payments and benefits to our service providers, to remove
them from the scope of Section 409A.

Accounting for Stock-Based Compensation. Since fiscal 2006, we have followed Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”) for our stock options
and other stock-based awards. SFAS 123(R) requires companies to calculate the grant date “fair value” of their
stock option grants and other equity awards using a variety of assumptions. This calculation is performed for
accounting purposes and reported in the compensation tables below. SFAS 123(R) also requires companies
to recognize the compensation cost of its stock option grants and other stock-based awards in their income
statements over the period that an employee is required to render service in exchange for the option or other
equity award.

COMPENSATION COMMITTEE REPORT

The purposes of the Compensation Committee are to assist the Board in the discharge of its responsibilities
with respect to compensation for the Company’s executive officers and independent directors, report annually
to the Company’s stockholders on executive compensation matters, administer the Company’s equity-based
compensation plans, and take or cause to be taken such other actions and address such other matters as the Board
may from time to time authorize the Committee to undertake or assume responsibility.

The Compensation Committee has reviewed and discussed with management the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation
Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement and the Company’s Annual Report on Form 10-K.

COMPENSATION COMMITTEE
Robert M. Berdahl
Jack R. Harris
Grant M. Inman
Patricia S. Wolpert

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 2009, the Compensation Committee consisted of Board members Berdahl, Harris and
Wolpert (who served the entire fiscal year), Mr. Elkus (who served from July 2008 to February 2009) and
Mr. Inman (who joined the Committee in February 2009). None of the Committee members have ever been
officers or employees of Lam Research. No interlocking relationship exists or existed during fiscal 2009 between
any member of our Compensation Committee and any member of any other company’s board of directors or
compensation committee.

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

Name and Principal Position
Stephen G. Newberry . .
President and Chief
Executive Officer

Ernest E. Maddock . . . .
Senior Vice President and
Chief Financial Officer

Richard A. Gottscho . . .
Group Vice President and
General Manager,
Etch Business
Martin B. Anstice . . . . .
Executive Vice President
and Chief Operating Officer

Abdi Hariri . . . . . . . . . .
Group Vice President,
Global Operations

Salary
($)
746,154
800,000
759,039
412,846
405,231
383,174
346,154
346,538
327,692

$
$
$
$
$
$
$
$
$

Bonus
($)
$0
$0
$0
$0
$0
$0
$0
$0
$0

Stock
Awards
($) (1)
167,122
0
0
66,849
0
0
753,811
774,846
747,356

$
$
$
$
$
$
$
$
$

Option
Awards
($) (2)
161,982
0
3,013
64,793
0
2,681
51,024
0
1,194

$
$
$
$
$
$
$
$
$

$
$
$
$
$
$

415,865
386,538
353,077
302,885
304,904
283,173

$0
$0
$0
$0
$0
$0

$
$
$
$
$
$

73,117
0
0
52,227
0
0

$
$
$
$
$
$

70,869
0
479
50,622
0
1,028

Fiscal
Year
2009
2008
2007
2009
2008
2007
2009
2008
2007

2009
2008
2007
2009
2008
2007

(3)

(4)

Non-Equity
Incentive Plan
Compensation
($)
1,550,036
6,260,949
7,588,859
687,125
2,321,231
3,369,508
495,880
699,734
419,207

$
$
$
$
$
$
$
$
$

(8)
(9)

(5)

(6)

(7)

(10)
(11)

$
$
$
$
$
$

733,090
2,523,046
4,189,847
494,275
1,826,383
2,728,276

(12)

(13)

(14)

(15)

(16)

(17)

Nonqualified
Deferred
Compensation
Earnings
($) (18)
0
$
0
$
808
$
0
$
0
$
3
$
0
$
0
$
729
$

$
$
$
$
$
$

0
0
0
0
0
66

All Other
Compensation
($) (19) (20)
9,876
$
9,260
$
19,602
$
10,794
$
14,747
$
22,233
$
14,539
$
15,496
$
23,863
$

$
$
$
$
$
$

15,767
16,148
25,744
12,167
17,959
25,854

Total
($)
2,635,170
7,070,209
8,371,321
1,242,407
2,741,209
3,777,599
1,661,408
1,836,615
1,520,041

$
$
$
$
$
$
$
$
$

$
$
$
$
$
$

1,308,708
2,925,733
4,569,147
912,176
2,149,246
3,038,397

(1) Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown
are the compensation expenses recognized by Lam Research in the respective fiscal year for restricted
stock units as determined pursuant to SFAS 123(R). These compensation expenses reflect restricted stock
units expensed in the respective fiscal year.

(2) Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown
are the compensation expenses recognized by Lam Research in the respective fiscal year for option awards
as determined pursuant to SFAS 123(R). The assumptions used to calculate the fair value of the option
awards in fiscal year 2009 are set forth in Note 11 in Notes to Consolidated Financial Statements of the
Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2009.

(3) Represents $300,000 earned by Mr. Newberry pursuant to his 2008 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2008),
$122,723 accrued on Mr. Newberry’s behalf for performance during fiscal 2009 under the 2007 MYIP,
$797,313 accrued for performance during fiscal 2009 under the 2008 MYIP, and $330,000 accrued for
performance during fiscal 2009 under the 2009 MYIP. Mr. Newberry received the amounts accrued under
the 2007 MYIP and will be eligible to receive the 2008 and 2009 MYIPs if he remains employed by Lam
Research through the respective payment determination dates in February 2010 or February 2011.

(4) Represents $1,427,690 earned by Mr. Newberry pursuant to his 2007 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2007),
$1,783,440 accrued on Mr. Newberry’s behalf for performance during fiscal 2008 under the 2006 MYIP,

$2,173,227 accrued for performance during fiscal 2008 under the 2007 MYIP, and $876,592 accrued for
performance during fiscal 2008 under the 2008 MYIP. Mr. Newberry received the amounts accrued under
the 2006 and 2007 MYIPs and will be eligible to receive the 2008 MYIP if he remains employed by Lam
Research through the payment determination date in February 2010.

(5) Represents $1,485,716 earned by Mr. Newberry pursuant to his 2006 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2006),
$4,718,128 accrued on Mr. Newberry’s behalf for performance during fiscal 2007 under the 2006 MYIP
and $1,385,015 accrued for performance during fiscal 2007 under the 2007 MYIP. Mr. Newberry received
the amounts accrued under the 2006 and 2007 MYIPs.

(6) Represents $141,786 earned by Mr. Maddock pursuant to his 2008 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2008),
$74,545 accrued on Mr. Maddock’s behalf for performance during fiscal 2009 under the 2007 MYIP,
$338,794 accrued for performance during fiscal 2009 under the 2008 MYIP, and $132,000 accrued for
performance during fiscal 2009 under the 2009 MYIP. Mr. Maddock received the amounts accrued under
the 2007 MYIP and will be eligible to receive the 2008 and 2009 MYIPs if he remains employed by Lam
Research through the respective payment determination dates in February 2010 or February 2011.

(7) Represents $490,602 earned by Mr. Maddock pursuant to his 2007 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2007),
$672,220 accrued on Mr. Maddock’s behalf for performance during fiscal 2008 under the 2006 MYIP,
$840,595 accrued for performance during fiscal 2008 under the 2007 MYIP, and $317,815 accrued for
performance during fiscal 2008 under the 2008 MYIP. Mr. Maddock received the amounts accrued under
the 2006 and 2007 MYIPs, and will be eligible to receive the 2008 MYIP if he remains employed by Lam
Research through the payment determination date in February 2010.

(8) Represents $510,745 earned by Mr. Maddock pursuant to his 2006 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2006),
$558,348 earned for performance during fiscal 2007 (which was made under the EIP and pursuant to the
Company’s MYIP for calendar year 2006), $1,778,371 accrued on Mr. Maddock’s behalf for performance
during fiscal 2007 under the 2006 MYIP and $522,044 accrued for performance during fiscal year 2007
under the 2007 MYIP. Mr. Maddock received the amounts accrued under the 2006 and 2007 MYIPs.

(9) Represents $114,325 earned by Dr. Gottscho pursuant to his 2008 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2008), $277,605
accrued for performance during fiscal 2009 under the 2008 MYIP, and $103,950 accrued for performance
during fiscal 2009 under the 2009 MYIP. Dr. Gottscho received the amounts accrued under the 2007
MYIP and will be eligible to receive the 2008 and 2009 MYIPs if he remains employed by Lam Research
through the respective payment determination dates in February 2010 or February 2011.

(10) Represents $403,546 earned by Dr. Gottscho pursuant to his 2007 annual incentive award (which was
made under the EIP and pursuant to the Company’s annual incentive program for calendar year 2007)
and $296,188 accrued on Dr. Gottscho’s behalf for performance during fiscal 2008 under the 2008 MYIP.
Dr. Gottscho will be eligible to receive the 2008 MYIP if he remains employed by Lam Research through
the payment determination date in February 2010.

(11) Represents $419,207 earned by Dr. Gottscho pursuant to his 2006 annual incentive award (which was made

under the EIP and pursuant to the Company’s annual incentive program for calendar year 2006).

(12) Represents $134,831 earned by Mr. Anstice pursuant to his 2008 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2008), $82,152
accrued on Mr. Anstice’s behalf for performance during fiscal 2009 under the 2007 MYIP, $371,732
accrued for performance during fiscal 2009 under the 2008 MYIP, and $144,375 accrued for performance
during fiscal 2009 under the 2009 MYIP. Mr. Anstice received the amounts accrued under the 2007 MYIP
and will be eligible to receive the 2008 and 2009 MYIPs if he remains employed by Lam Research through
the respective payment determination dates in February 2010 or February 2011.

(13) Represents $503,258 earned by Mr. Anstice pursuant to his 2007 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2007), $740,813
accrued on Mr. Anstice’s behalf for performance during fiscal 2008 under the 2006 MYIP, $926,370
accrued for performance during fiscal 2008 under the 2007 MYIP, and $352,605 accrued for performance
during fiscal 2008 under the 2008 MYIP. Mr. Anstice received the amounts accrued under the 2006 and
2007 MYIPs and will be eligible to receive the 2008 MYIP if he remains employed by Lam Research
through the payment determination date in February 2010.

(14) Represents $447,212 earned by Mr. Anstice pursuant to his 2006 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2006), $1,207,483
earned for performance during fiscal 2007 (which was made under the EIP and pursuant to the Company’s
MYIP for calendar year 2006), $1,959,838 accrued on Mr. Anstice’s behalf for performance during fiscal
2007 under the 2006 MYIP and $575,314 accrued for performance during fiscal year 2007 under the 2007
MYIP. Mr. Anstice received the amounts accrued under the 2006 and 2007 MYIPs.

(15) Represents $87,392 earned by Mr. Hariri pursuant to his 2008 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2008), $60,853
accrued on Mr. Hariri’s behalf for performance during fiscal 2009 under the 2007 MYIP, $242,905 accrued
for performance during fiscal 2009 under the 2008 MYIP, and $103,125 accrued for performance during
fiscal 2009 under the 2009 MYIP. Mr. Hariri received the amounts accrued under the 2007 MYIP and
will be eligible to receive the 2008 and 2009 MYIPs if he remains employed by Lam Research through the
respective payment determination dates in February 2010 or February 2011.

(16) Represents $332,268 earned by Mr. Hariri pursuant to his 2007 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2007), $548,751
accrued on Mr. Hariri’s behalf for performance during fiscal 2008 under the 2006 MYIP, $686,200 accrued
for performance during fiscal 2008 under the 2007 MYIP, and $259,164 accrued for performance during
fiscal 2008 under the 2008 MYIP. Mr. Hariri received the amounts accrued under the 2006 and 2007
MYIPs and will be eligible to receive the 2008 MYIP if he remains employed by Lam Research through
the payment determination date in February 2010.

(17) Represents $328,354 earned by Mr. Hariri pursuant to his 2006 annual incentive award (which was made
under the EIP and pursuant to the Company’s annual incentive program for calendar year 2006), $522,032
earned for performance during fiscal 2007 (which was made under the EIP and pursuant to the Company’s
MYIP for calendar year 2006), $1,451,732 accrued on Mr. Hariri’s behalf for performance during fiscal
2007 under the 2006 MYIP, and $426,158 accrued for performance during fiscal year 2007 under the 2007
MYIP. Mr. Hariri received the amounts accrued under the 2006 and 2007 MYIPs.

(18) Reflects interest earned on deferred compensation, to the extent that the interest rate exceeded 120% of the

applicable federal long-term rate.

(19) Please refer to the “All Other Compensation” table which follows this table for additional information.

(20) The amounts listed in the “All Other Compensation” column for 2007 were adjusted to reflect corrected
amounts for Company Contribution to the Elective Deferred Compensation Plan in Lieu of Matching
Contributions to the Section 401(k) Plan.

Salary, variable compensation, and non-equity incentive plan compensation above includes amounts earned
in fiscal year 2009, fiscal year 2008 and fiscal year 2007 even if deferred at the election of the executive officer
under the Company’s deferred compensation plans and/or the Company’s 401(k) Plan.

All Other Compensation for Fiscal 2009

Company
Matching
Contribution to
the Company’s
Section 401(k)
Plan
0
$
$
0
$6,408
$6,168
$2,568

Company Paid
Long-Term
Disability
Insurance
Premiums (1)
$277
$697
$881
0
$
0
$

Fiscal
Year
2009
2009
2009
2009
2009

Company Paid
Healthcare
Insurance
Premiums (2)
$ 9,599
$ 6,647
$ 7,250
$ 9,599
$ 9,599

Name
Stephen G. Newberry . . . . . . . .
Ernest E. Maddock . . . . . . . . . .
Richard A. Gottscho . . . . . . . . .
Martin B. Anstice . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . .

Company
Contribution
to the Elective
Deferred
Compensation
Plan in Lieu
of Matching
Contributions
to the Section
401(k) Plan (3)

0
$
$ 3,450
0
$
0
$
0
$

Total
$ 9,876
$10,794
$14,539
$15,767
$12,167

(1) Represents the portion of supplemental long term disability insurance premiums paid by Lam Research.

(2) Represents the portion of executive dental and executive medical reimbursement insurance premiums paid

by Lam Research.

(3) Represents the amount that Lam Research credited to the Elective Deferred Compensation Plan, which is
equal to any matching contribution into the Section 401(k) Plan that an executive would have been entitled
to, but did not receive, as a result of compensation deferrals into the EDCP.

Grants of Plan-Based Awards for Fiscal 2009

Name
Stephen G. Newberry . . Annual Incentive Program N/A

Award Type

LTIP—Equity Component 2/26/2009
LTIP—MYIP Component N/A
Ernest E. Maddock . . . . Annual Incentive Program N/A

LTIP—Equity Component 2/26/2009
LTIP—MYIP Component N/A
Richard A. Gottscho . . . Annual Incentive Program N/A

LTIP—Equity Component 2/26/2009
LTIP—MYIP Component N/A
Performance-Based RSU (2) 8/26/2008
Service-Based RSU

Martin B. Anstice . . . . . Annual Incentive Program N/A

LTIP—Equity Component 2/26/2009
LTIP—MYIP Component N/A
Abdi Hariri . . . . . . . . . . Annual Incentive Program N/A

LTIP—Equity Component 2/26/2009
LTIP—MYIP Component N/A

Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards

0 $

Grant
Date

Approval
Date

Maximum
($)

Target
($) (1)
2/11/2009 $ 825,000 $ 825,000
2/11/2009 $
0
2/11/2009 $ 2,000,000 $ 5,000,000
2/11/2009 $ 308,000 $ 308,000
2/11/2009 $
0
2/11/2009 $ 800,000 $ 2,000,000
2/11/2009 $ 243,000 $ 243,000
0
2/11/2009 $
2/11/2009 $ 630,000 $ 1,575,000
0
8/25/2008 $
0
11/25/2008 11/18/2008 $
2/11/2009 $ 334,688 $ 334,688
2/11/2009 $
0
2/11/2009 $ 875,000 $ 2,187,500
2/11/2009 $ 198,450 $ 198,450
2/11/2009 $
0
2/11/2009 $ 625,000 $ 1,562,500

0 $
0 $

0 $

Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards
Target
(#)

All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)

All
Other
Option
Awards:
Number
of Shares
of Stock
or Units
(#)

0
0
0
0
0
0
0
0
0
8,000
0
0
0
0
0
0
0

0
49,480
0
0
19,792
0
0
15,586
0
0
5,000
0
21,648
0
0
15,463
0

0
123,700
0
0
49,480
0
0
38,965
0
0
0
0
54,120
0
0
38,658
0

Exercise
or Base
Price of
Option
Awards
($/sh)
$
0
$ 20.21
0
$
$
0
$ 20.21
0
$
$
0
$ 20.21
0
$
0
$
0
$
0
$
$ 20.21
0
$
$
0
$ 20.21
0
$

Grant
Date Fair
Value of
Stock and
Option
Awards
($)

$
0
$1,969,225
0
$
$
0
$ 787,690
0
$
$
0
$ 620,298
$
0
$ 298,720
95,200
$
0
$
$ 861,556
0
$
$
0
$ 615,406
0
$

(1) Base salary used to calculate the Annual Incentive Program target was salary as of February 2009. Actual

eligible base earnings under the AIP could be different.

(2) Represents awards granted under a performance-based RSU program with a single estimated payout.

Amount shown is for performance awards granted during fiscal year 2009.

Outstanding Equity Awards at 2009 Fiscal Year-End

Option Awards

Stock Awards

0
0

10/1/2011
2/26/2014

Option
Expiration
Date

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested ($)

Number
of
Shares or
Units of
Stock
That
Have Not
Vested (#)

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested (#)
0
0
0
0
0
0
0

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
N/A 49,480(5) $ 1,225,620
0
0
0
0
0
N/A 19,792(5) $ 490,248
0
0
0
0
0
0
0
0 8,000(7) $ 198,160
0
0
0
0
0
0
0
0
0
0
0

0
$
$ 16.64
$ 20.21
$
0
10/1/2011
$ 16.64
$ 20.21
2/26/2014
$ 24.19 12/24/2011
0
N/A
$
N/A 5,000(6) $ 123,850
0
$
N/A 15,586(5) $ 386,065
$
0
$ 20.21
0
N/A 21,648(5) $ 536,221
$
0
0
$ 16.64
0
$ 20.21
$ 24.25
0
N/A 15,463(5) $ 383,019
$
0
0
$ 16.14
0
$ 16.64
0
$ 20.21

10/1/2011
2/26/2014
3/19/2011

10/1/2011
10/1/2011
2/26/2014

0
0
0
0
0
0
0
0
0
0
0

2/26/2014

0
0
0
0

0
0
0

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

Option
Exercise
Price
($)

Name
Stephen G. Newberry . .

Ernest E. Maddock . . . .

Richard A. Gottscho . . .

Martin B. Anstice . . . . .

Abdi Hariri . . . . . . . . . .

Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
0
5,250(1)
0
0
2,050(1)
0
1,000(3)
0
0
0
0
0
849(1)
0
2,000(4)
0
1,000(1)
822(1)
0

0
0

123,700(2)

0
0

49,480(2)

0
0
0
0

38,965(2)

0
0

54,120(2)

0
0
0
0

38,658(2)

(1) These options were granted on October 1, 2001. 100% of the options vested on October 1, 2006.

(2) These options were granted on February 26, 2009. 100% of the options will vest on February 26, 2011

provided that the person remains an employee on such date.

(3) These options were granted on December 24, 2001. 100% of the options vested on December 24, 2006.

(4) 36,000 options were originally granted on March 19, 2001. These options vested 25% each on March 19,

2002, March 19, 2003, March 19, 2004 and March 19, 2005.

(5) These RSUs were granted on February 26, 2009. 100% of the RSUs will vest on February 26, 2011 provided

that the person remains an employee on such date.

(6) These RSUs were granted on November 25, 2008. 100% of these RSUs will vest on December 30, 2010

provided that the person remains an employee on such date.

(7) These RSUs were granted on August 26, 2008 and are subject to performance criteria and service period.
100% of the RSUs will vest on August 25, 2010 provided that the performance criterion has been met and
the person remains an employee on such date.

Option Exercises and Stock Vested for Fiscal 2009

Name
Stephen G. Newberry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Option Awards

Stock Awards

Number
of Shares
Acquired on
Exercise (#)
205,250
0
0
0
0

Value
Realized on
Exercise ($)
$383,359
0
0
0
0

$
$
$
$

Number
of Shares
Acquired on
Exercise (#)

0
0
37,600
0
0

Value
Realized on
Exercise ($)
0
$
$
0
$950,756
0
$
0
$

Non-Qualified Deferred Compensation for Fiscal 2009

Name
Stephen G. Newberry . . . . . . . . . . . . . . .
Ernest E. Maddock . . . . . . . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . . . . . . .
Martin B. Anstice . . . . . . . . . . . . . . . . . .
Abdi Hariri . . . . . . . . . . . . . . . . . . . . . . .

Executive
Contributions
in FY09 ($)
$
0
$1,665,964
$
92,656
$ 233,384
$1,057,999

Registrant
Contributions
in FY09 ($) (1)

$
0
$3,450
0
$
0
$
0
$

Aggregate
Earnings in
FY09 ($) (2)
$ 57,935
$ (659,843)
$ 65,211
$ (247,292)
$ (154,738)

Aggregate
Aggregate
Withdrawals/
Balance at
Distributions
FYE09 ($)
in FY09 ($)
0 $ 1,108,140
$
1,983 $ 7,174,001
$
0 $ 1,332,644
$
$
0 $ 937,890
$2,298,286 $ 1,895,424

(1) Represents the amount that Lam Research credited to the Elective Deferred Compensation Plan which is
equal to any matching contribution into the Section 401(k) Plan that an executive would have been entitled
to but did not receive as a result of compensation deferrals into the EDCP.

(2)

The NEOs did not receive above-market or preferential earnings in fiscal 2009.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS

The following table provides information as of June 28, 2009, regarding securities authorized for issuance
under the Company’s equity compensation plans. The equity compensation plans of the Company include the
1991 Stock Option Plan, the 1996 Performance-Based Restricted Stock Plan, the 1997 Stock Incentive Plan, the
1999 Stock Option Plan, the 1999 Employee Stock Purchase Plan, and the 2007 Stock Incentive Plan, each as
may be amended.

Number of
Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants, and
Rights
(a)

Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants, and
Rights (5)
(b)

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column
(a))
(c)

Plan Category

Equity compensation plans approved

by security holders . . . . . . . . . . . . . . . . . . . . . . . . . .

3,275,145 (1)(2)

$20.47

18,072,627 (3)

Equity compensation plans not approved

by security holders . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

835,234 (4)

4,110,379

$23.68
$22.10

0
18,072,627

(1)

(2)

(3)

Includes 283,162 shares issuable under the Company’s 1991 Stock Option Plan (“1991 Plan”), 1996
Performance-Based Restricted Stock Plan (“1996 Plan”), and 1997 Stock Incentive Plan (the “1997 Plan”),
all of which expired prior to June 28, 2009. While there are options still outstanding that were issued
pursuant to those plans, no additional grants may be made under them.

Includes 2,991,983 shares issuable under the Company’s 2007 Stock Incentive Plan, as amended (the
“2007 Plan”). The 2007 Plan was adopted by the Board in August 2006, approved by the stockholders in
November 2006, and amended by the Board in November 2006. The term of the 2007 Plan is ten years
from the latest date of any approval, amendment, or restatement of the Plan by the stockholders. The 2007
Plan reserves for issuance up to 15,000,000 shares of the Company’s Common Stock.

Includes 7,360,526 shares available for future issuance under the 1999 Employee Stock Purchase Plan
(“1999 ESPP”). This number does not include shares that may be added to the 1999 ESPP share reserve
in the future in accordance with the terms of the 1999 ESPP, as amended. The 1999 ESPP was adopted
by the Board in September 1998, approved by the stockholders in November 1998 and amended by
stockholder approval in November 2003. The term of the 1999 ESPP is twenty years from its effective date
of September 30, 1998, unless otherwise terminated or extended in accordance with its terms.

(4)

Includes shares issuable under the Company’s 1999 Stock Option Plan (the “1999 Option Plan”). The 1999
Option Plan expired in November 2008.

(5) Does not include RSUs.

PROPOSAL NO. 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO ELIMINATE CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS

In recent years, many companies have changed their voting standards for uncontested director elections
from plurality voting or cumulative voting to majority voting. We believe that implementing a majority voting
standard for uncontested elections is in the best interests of our stockholders. However, in order to implement a
majority voting standard, it will be necessary for us to amend our Certificate of Incorporation (“Charter”), which
currently provides for cumulative voting.

The Board has already approved an amendment to the Charter to eliminate cumulative voting, and declared
it to be advisable, subject to stockholder approval. A copy of the proposed amendment to the Charter is attached
as Exhibit A to the Proxy Statement.

The amendment to the Charter will eliminate the following paragraph from the Charter, which establishes

cumulative voting rights (subsequent paragraphs will be renumbered appropriately):

“ELEVENTH: At the election of directors of the Corporation, each holder of stock or of any class or classes
or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which
(except for such provision as to cumulative voting) he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the number to be voted for, or for
any two or more of them as he may see fit.”

We are seeking your vote to approve the Charter amendment.

Majority Voting

Majority voting applies in uncontested elections, which are elections in which the number of nominees for
directors is the same as the number of open seats. Under a majority voting standard, a nominee in an uncontested
director election is elected only if the nominee receives affirmative “for” votes from a majority of the shares
voted with respect to that director. In other words, the “for” votes must exceed the “withhold” votes. More
than two-thirds of the S&P 500 companies now conduct uncontested board elections under a majority voting
standard. We believe that a majority voting standard is in the best interests of our stockholders because it will
ensure that all of our directors will be elected with the support of a majority of shares voted.

Cumulative Voting

Cumulative voting is inconsistent with majority voting. It enables minority stockholders or groups of
stockholders to elect one or more directors without the approval of holders of a majority of the shares. Under
cumulative voting, a stockholder may cast a number of “for” votes equal to the number of directors to be elected
times the number of shares held. The stockholder may cast all votes for a single director, or spread them out
among two or more nominees. By cumulating votes for a single candidate, a stockholder or group of stockholders
holding less than 13% of a company’s outstanding shares can elect a director on an eight-person board, even
if no other stockholders support that director. We believe that cumulative voting is not in the best interests of
our stockholders because a director elected in this fashion may be focused on the special interests or agenda of
holders of a minority of our shares rather than on the broad interests of all of our stockholders.

It is important to note that even if cumulative voting is eliminated, a minority stockholder may still
submit a board nominee by following the procedures outlined in the section entitled “Corporate Governance—
Stockholder Nominations” elsewhere in the Proxy Statement.

Plurality Voting

When companies adopt a majority voting standard for uncontested elections, plurality voting applies in
contested elections, which are elections in which the number of nominees for directors is greater than the number
of open seats. Under plurality voting the nominees with the most number of votes are elected, up to the maximum
number of open director seats. For example, in an election for eight board seats, the eight nominees with the most
votes will be elected.

Implementation of Majority Voting

If the stockholders approve Proposal No. 2, we will first amend our Charter to eliminate cumulative voting.
Immediately following the Annual Meeting, we will file a Certificate of Amendment to our Charter setting forth
the approved amendment with the Secretary of State of the State of Delaware. The amendment to the Charter
will be effective when the Secretary of State of the State of Delaware accepts the filing.

Immediately after the Charter amendment is effective, the Board will take the following steps to implement

a majority voting standard in uncontested director elections:

• T

•

he Board will amend the Bylaws to provide for majority voting in uncontested elections, and to
provide for plurality voting in contested elections. The Board will also amend the Bylaws to remove
references to cumulative voting. These changes to the Bylaws do not require stockholder approval.

The Board will amend the Corporate Governance Guidelines to reflect the revised Bylaw provisions.
The amended Guidelines will also state substantially the following with respect to nominees who
receive insufficient votes to be elected under majority voting in an uncontested election:

“The Board expects a director to tender his or her irrevocable resignation if he or she fails to receive
the required number of votes for re-election in an uncontested election. The Board shall nominate for
election or re-election as director only candidates who agree to tender, promptly following the annual
meeting at which they are elected or re-elected as directors, irrevocable conditional resignations that
will be effective upon (i) the failure to receive the required majority vote at the next annual meeting at
which they face re-election and (ii) Board acceptance of such resignation. In addition, the Board shall
fill director vacancies and new directorships only with candidates who agree to tender, promptly
following their appointment to the Board, the same form of contingent resignation tendered by other
directors in accordance with these Guidelines.

If an incumbent director fails to receive the required majority vote for re-election, the Nominating/
Governance Committee will act on an expedited basis to determine whether to accept the director’s
resignation and will submit such recommendation for prompt consideration by the Board. The Board
expects the director whose resignation is under consideration to abstain from participating in any
decision regarding that resignation. The Nominating/Governance Committee and the Board may
consider any factors they deem relevant in deciding whether to accept a director’s resignation.”

Vote Required to Approve Proposal No. 2; Board Recommendation

Stockholder approval of Proposal No. 2 requires the affirmative vote of a majority of the issued and
outstanding shares of Lam’s Common Stock. This means that any shares that are not voted will have the same
effect as shares voted against this Proposal. It is, therefore, very important that you vote on this Proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2

PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR FISCAL 2010

Stockholders are being asked to ratify the appointment of Ernst & Young LLP as the Company’s independent
registered public accounting firm for fiscal 2010. Ernst & Young LLP has been the Company’s independent
registered public accounting firm (independent auditor) since fiscal year 1981. Each proxy received by the Proxy
Holders will be voted “FOR” the ratification of the appointment of Ernst & Young LLP unless the stockholder
provides other instructions. Approval of Proposal No. 3 will require the affirmative vote of a majority of the
outstanding shares of Common Stock present or represented and voting on the Proposal at the Annual Meeting.

The audit services of Ernst & Young LLP during fiscal 2009 included examining Lam’s consolidated
financial statements and its system of internal control over financial reporting, as well as providing services
related to Lam’s filings with the SEC and other regulatory bodies. Audit-related services during fiscal 2009
related primarily to review of international tax structures, goodwill accounting and implementation of new
accounting pronouncements.

Our Audit Committee meets periodically with Ernst & Young LLP to review both audit and non-audit
services performed by Ernst & Young LLP, as well as the fees charged for those services. Among other
things, the Committee examines the effect that the performance of non-audit services, if any, may have upon
the independence of the independent registered public accounting firm. All professional services provided by
Ernst & Young LLP, including non-audit services, if any, are subject to approval by the Audit Committee in
accordance with applicable securities laws, rules, and regulations. For more information, see the “Report of
the Audit Committee” and the “Relationship with Independent Registered Public Accounting Firm” sections
elsewhere in this Proxy Statement.

A representative of Ernst & Young LLP is expected to be present at the Annual Meeting and will have an
opportunity to make a statement if he or she so desires. The representative will also be available to respond to
appropriate questions from the stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NO. 3.

AUDIT COMMITTEE REPORT

The Company’s management, Audit Committee and independent registered public accounting firm
(Ernst & Young LLP) have specific but different responsibilities relating to Lam’s financial reporting. Lam’s
management is responsible for the financial statements and for the system of internal control and the financial
reporting process. Ernst & Young has the responsibility to express an opinion on the financial statements and
the system of internal control over financial reporting, based on the audit they conducted in accordance with
the standards of the Public Company Accounting Oversight Board (U.S.) (“PCAOB”). The Audit Committee is
responsible for monitoring and overseeing these processes.

In this context and in connection with the audited financial statements contained in the Company’s Annual

Report on Form 10-K for the fiscal year ended June 28, 2009, the Audit Committee took the following actions:

•
•

•

Reviewed and discussed the audited financial statements with Company management

Discussed with Ernst & Young LLP the matters required to be discussed by Statement of Auditing
Standards No. 61, “Communication with Audit Committees,” as most recently amended and as adopted
by the PCAOB in Rule 3200T

Reviewed the written disclosures and the letter from Ernst & Young LLP, required by Rule 3526
of the PCAOB, “Communication with Audit Committees Concerning Independence,” and discussed
with Ernst & Young LLP its independence

Based on the foregoing reviews and discussions, recommended to the Board of Directors that the
audited financial statements be included in the Company’s 2009 Annual Report on Form 10-K for the
fiscal year ended June 28, 2009 for filing with the SEC.

This Report of the Audit Committee shall not be deemed “filed” with the SEC for purposes of federal
securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s
past or future SEC filings. The Report shall not be deemed soliciting material.

AUDIT COMMITTEE
David G. Arscott
Richard J. Elkus, Jr.
Catherine P. Lego
Seiichi Watanabe

RELATIONSHIP WITH
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP has audited the Company’s consolidated financial statements since the Company’s

inception.

Fees Billed by Ernst & Young LLP

The table below shows the fees billed by Ernst & Young LLP for audit and other services provided to the

Company in fiscal years 2008 and 2009.

Services / Type of Fee
Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year 2009
$2,380,000
266,000
12,000
—
$2,658,000

Fiscal Year 2008
$2,623,000
3,188,000
—
—
$5,811,000

(1) Audit fees represent fees for professional services provided in connection with the audits of annual
financial statements, reviews of quarterly financial statements, and audit services related to other statutory
or regulatory filings or engagements. In addition, audit fees include those fees related to Ernst & Young
LLP’s audit of the effectiveness of the Company’s internal control over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act.

(2) Audit-related fees consist of assurance and related services that are reasonably related to the audit or
review of the Company’s financial statements and are not reported above under “Audit Fees.” For fiscal
2009, these fees related primarily to audit review of international tax structures, goodwill accounting and
implementation of new accounting pronouncements. For fiscal 2008, these fees related primarily to the
Company’s voluntary internal stock option review, synthetic lease issues, and the adoption of Financial
Accounting Standards Board Interpretation No. 48 relating to accounting for income taxes.

(3) Tax fees represent fees for services primarily related to international tax compliance.

The Audit Committee reviewed summaries of the services provided by Ernst & Young LLP and the related
fees during fiscal year 2009 and has determined that the provision of non-audit services was compatible with
maintaining the independence of Ernst & Young LLP as the Company’s independent registered public accounting
firm. The Audit Committee approved 100% of the services and related fee amounts for services provided by
Ernst & Young LLP during fiscal year 2009.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services

It is the responsibility of the Audit Committee to approve, in accordance with Sections 10A(h) and
(i) of the Exchange Act and the rules and regulations of the SEC, all professional services to be provided to
the Company by its independent registered public accounting firm, provided that the Audit Committee shall
not approve any non-audit services proscribed by Section 10A(g) of the Exchange Act in the absence of an
applicable exemption.

It is the policy of the Company that the Audit Committee pre-approves all audit and permissible non-audit
services provided by the Company’s independent registered public accounting firm, consistent with the criteria
set forth in the Audit Committee Charter and applicable laws and regulations. The Committee has delegated to
the Chair of the Committee the authority to pre-approve such services, provided that the Chair shall report any
decisions to pre-approve such services to the full Audit Committee at its next regular meeting. These services
may include audit services, audit-related services, tax services, and other services. The Company’s independent
registered public accounting firm and Company management are required to periodically report to the Audit
Committee regarding the extent of services provided by the Company’s independent registered public accounting
firm pursuant to any such pre-approval.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No family relationships exist or existed during fiscal 2009 among any of the Company’s directors and

executive officers. No related-party transactions occurred during fiscal 2009.

OTHER MATTERS

We are not aware of any other matters to be submitted to the Annual Meeting. If any other matters properly
come before the Annual Meeting, the Proxy Holders intend to vote the shares they represent as the Board of
Directors may recommend or, if the Board does not make a recommendation, as the Proxy Holders decide in
their reasonable judgment.

It is important that your stock holdings be represented at the meeting, regardless of the number of shares
you hold. We urge you to complete and return the accompanying proxy card in the enclosed envelope, or vote
your shares by telephone or Internet, as described in the materials accompanying this Proxy Statement.

By Order of the Board of Directors

Fremont, California
Dated: October 15, 2009

George M. Schisler, Jr.
Secretary

EXHIBIT A

CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
LAM RESEARCH CORPORATION

Lam Research Corporation, a corporation organized and existing under and by virtue of the General Corporation
Law of the State of Delaware (the “Company”), DOES HEREBY CERTIFY:

FIRST:

That the Board of Directors of the Company (the “Board”), duly adopted resolutions setting forth the
proposed amendment of the Certificate of Incorporation of the Company set forth below, declaring
said amendment to be advisable and authorizing and directing the officers and directors of the
Company to solicit the consent of the stockholders of the Company for consideration thereof:

RESOLVED, that Article “ELEVENTH” of the Certificate of Incorporation is hereby
deleted, in its entirety, and Articles “TWELFTH” and “THIRTEENTH” are hereby
renumbered to be Articles “ELEVENTH” and “TWELFTH”, respectively.

SECOND:

That, thereafter, the necessary number of shares of the Company’s capital stock, as required by the
General Corporation Law of the State of Delaware, voted in favor of the foregoing amendment at
a meeting of the Company’s stockholders;

THIRD:

That said amendment was duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment of Certificate of
Incorporation to be signed by __________, its ____________________, this _____ day of ___________, 2009.

LAM RESEARCH CORPORATION

____________________________________
By:

Its:

(This page intentionally left blank.)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(MARK ONE)

FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 2009
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO __________.
Commission file number: 0-12933
LAM RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
4650 Cushing Parkway
Fremont, California
(Address of principal executive offices)

94-2634797
(I.R.S. Employer
Identification No.)

94538
(Zip code)

Registrant’s telephone number, including area code: (510) 572-0200
Securities registered pursuant to Section 12(b) of the Act:

Title of class
Common Stock, Par Value $0.001 Per Share

Name of exchange on which registered
NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 
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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. 

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):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 
(Do not check if a smaller reporting company)

Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 
The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of December 28, 2008, the
last business day of the most recently completed second fiscal quarter with respect to the fiscal year covered by this Form 10-K, was $1,776,033,995. Common
Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock has been excluded from this computation
in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination of such status for other
purposes.

As of August 20, 2009, the Registrant had 126,636,886 outstanding shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held November 5, 2009 are incorporated by reference into Part III

of this Form 10-K. (However, the Reports of the Audit Committee and Compensation Committee are expressly not incorporated by reference herein.)

LAM RESEARCH CORPORATION

2009 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Part I.

Item 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 3.

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4.

Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II.

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7.

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . .

Item 8.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9.

Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III.

Item 10. Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . .

Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IV.

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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 to our future revenue, shipments, cost and margins, product development, demand,
acceptance and market share, competitiveness, market opportunities, levels of research and development
(R&D), the success of our marketing, sales and service efforts, outsourced activities and operating expenses,
anticipated manufacturing, customer and technical requirements, the ongoing viability of the solutions that
we offer and our customer’s success, tax expenses, our management’s plans and objectives for our current and
future operations and business focus, the levels of customer spending or R&D activities, general economic
conditions, the sufficiency of financial resources to support future operations, and capital 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 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 quarterly reports on Form 10-Q and
our current reports on Form 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. All references to fiscal years apply to our fiscal years, which
ended June 28, 2009, June 29, 2008, and June 24, 2007.

Item 1. Business

Lam Research Corporation (“Lam Research,” “Lam,” “we,” or the “Company”) is a leading supplier of wafer
fabrication equipment and services to the worldwide semiconductor industry. For more than twenty five years, our
wafer fabrication equipment, services, and extensive technical expertise have contributed to advancing semiconductor
manufacturing and producing some of the world’s most advanced semiconductor devices. We are recognized as the
market share leader in plasma etch and as a provider of innovative solutions in single-wafer clean.

We design, manufacture, market, and service semiconductor processing equipment used in the fabrication
of integrated circuits. Semiconductor wafers are subjected to 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 processing solutions which typically benefit our customers through reduced cost,
lower defect rates, enhanced yields, or faster processing time. Many of the technical advances that we introduce
in our newest products are also available as upgrades to our installed base of equipment, a benefit that can
provide customers with a cost-effective strategy for extending the performance and capabilities of their existing
wafer fabrication lines.

Our innovative etch and clean technologies enable customers to build some of the world’s highest-
performing integrated circuits. Our etch systems shape the microscopic conductive and dielectric layers into
circuits that define a chip’s final use and function. Our broad portfolio of single-wafer clean technologies allows
our customers to implement customized yield-enhancing solutions. With each new technology node, additional
requirements and challenges drive the need for advanced manufacturing solutions. We strive to consistently
deliver these advanced capabilities with cost-effective production performance, as we understand the close
relationship between customer trust and the timely delivery of new solutions that leads to shared success with
our customers.

Incorporated in 1980, Lam Research is headquartered in Fremont, California, and maintains a network of
facilities throughout the United States, Japan, Europe, and Asia Pacific in order to meet the needs of our global
customer base.

Additional information about Lam Research is available on our web site at http://www.lamresearch.com.

Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Form 8-K, and
any amendments to those reports are available on our website as soon as reasonably practicable after we filed
them with or furnish them to the Securities and Exchange Commission (“SEC”), and are also available online at
the SEC’s web site at http://www.sec.gov.

Etch Process

Etch processes, which are repeated numerous times during the wafer fabrication cycle, are required to
manufacture every type of semiconductor device produced today. Our etch products selectively remove portions
of various films from the wafer in the creation of semiconductor devices by utilizing various plasma-based
technologies to create critical device features at current and future technology nodes. Plasma consists of charged
and neutral particles that react with exposed portions of the wafer surface to remove dielectric or conductive
materials and produce the finely delineated features and patterns of an integrated circuit.

Dielectric Etch

For dielectric etch, new materials integration often requires etching multi-layer film stacks. In addition to
the challenges introduced by new materials and scaling, device manufacturers’ desire to reduce overall cost per
wafer has placed an increased emphasis on the ability to etch multiple films in the same chamber (in situ).

DFC Technology

Production-proven in high-volume manufacturing for nearly 15 years, our patented Dual Frequency
Confined™ technology has been extended to incorporate multi-frequency power with a physically confined
plasma. The application of power at different frequencies provides enhanced process flexibility and allows
different materials to be etched in the same chamber. Physical confinement of the plasma to an area directly
above the wafer minimizes chemical interaction with the chamber walls, eliminating potential polymer build-up
that could lead to defects on the wafer. Confinement also enables our proprietary in situ Waferless Autoclean™
technology to clean chamber components after each wafer has been etched. Used together, multi-frequency and
WAC™ technologies provide a consistent process environment for every wafer, preventing process drift and
ensuring repeatable process results wafer-to-wafer and chamber-to-chamber.

2300® Exelan® Flex™, 2300® Exelan® Flex45™, 2300® Flex™ D Series Dielectric Etch Systems

Our 2300 Flex dielectric etch product family represents a continuous evolution of the productivity and
performance benefits of DFC technology. The 2300 Flex family allows a single chamber design to meet the
requirements of a wide range of applications through multiple technology generations. Advances in system
design, such as multiple frequencies, higher power capabilities and tunable wafer temperature, meet the more
demanding uniformity and profile requirements for applications at the 32 nm node and beyond.

Conductor Etch

As the semiconductor industry continues to shrink critical feature sizes and improve device performance,
a variety of new etch challenges have emerged. For conductor etch, these challenges include processing smaller
features, new materials, and new transistor structures on the wafer. Due to decreasing feature sizes, the etch
process can now require atomic-level control across a 300 mm wafer. The incorporation of new metal gates and
high-k dielectric materials in the device stack requires advanced multi-film etching capability. Furthermore,
the adoption of double patterning techniques to address lithography challenges at the 45 nm node and beyond is
driving the etch process to define the feature on the wafer as well as to transfer the pattern into the film. All of
these challenges require today’s conductor etch systems to provide advanced capabilities, while still providing
high productivity.

TCP Technology

Introduced in 1992, our Transformer Coupled Plasma™ technology continues to provide leading-edge
capability for advanced conductor etch applications at the 32 nm node and beyond. By efficiently coupling radio
frequency (“RF”) power into plasma at low pressures, the TCP technology provides capability to etch nanoscale
features into silicon and metal films. The advanced TCP source design ensures a uniform, high-density plasma
across the wafer, without requiring magnetic enhancements that could cause device damage. With a wide process
window over a range of power, chemistry, and pressure combinations, TCP technology provides the flexibility
required to perform multiple etch steps in the same chamber.

2300® Versys® Kiyo® , 2300® Versys® Kiyo45™, 2300® Kiyo® C Series, 2300® Versys® Metal, 2300® Versys®
Metal45™ Conductor Etch Systems

Now in its third generation, the 2300 Kiyo product family combines iterative advances in technology to
provide critical dimension (“CD”) uniformity and productivity for a wide range of conductor etch applications.
The 2300 Versys Metal product family leverages Lam’s proprietary TCP technology to provide a flexible
platform for back-end-of-line metal etch processes. Our etch products perform production-proven in situ etch
of complex features. In addition, proprietary pre-coat and post-etch chamber clean techniques provide the same
environment for superior repeatability, as well as high uptime and yield wafer after wafer.

MEMS and Deep Silicon Etch

Micro-electromechanical systems (“MEMS”) devices are increasingly being used in consumer applications,
such as ink jet printer heads and inertial sensors. This is driving a number of MEMS applications to transition
into high-volume manufacturing, which requires the high levels of cost-effective production typically seen in
commodity semiconductor memory devices. To achieve high yield in mass production, the MEMS etch process
requires wafer-to-wafer repeatability.

TCP® 9400DSiE™ Deep Silicon Etch System

The TCP 9400DSiE system is based on our production-proven TCP 9400 silicon etch series. The system’s
patented high-density TCP plasma source provides a configuration to meet the challenges of silicon deep reactive
ion etch (“DRIE”), offering broad process capability and flexibility for a wide range of MEMS, advanced
packaging, and power semiconductor applications. Incorporation of our proprietary in situ chamber cleaning
technology provides etch rate stability.

Three-Dimensional Integrated Circuit Etch

The semiconductor industry is developing advanced, three-dimensional integrated circuits (“3-D ICs”) using
through-silicon vias (“TSVs”) to provide interconnect capability for die-to-die and wafer-to-wafer stacking. In
addition to a reduced form factor, 3-D ICs can enhance device performance through increased speed and decreased
power consumption. Manufacturers are currently considering a wide variety of 3-D integration schemes that present
an equally broad range of TSV etch requirements. Plasma etch technology, which has been used extensively for deep
silicon etching in memory devices and MEMS production, is well suited for TSV creation.

2300® Syndion® Through-Silicon Via Etch System

The 2300 Syndion etch system is based on our patented TCP technology and the production-proven 2300
Versys Kiyo conductor etch system. The Syndion system can etch multiple film stacks in the same chamber,
including silicon, dielectric, and conducting materials, thereby addressing multiple TSV etch requirements.

Clean Process

The manufacture of semiconductor devices involves a series of processes such as etch, deposition, and
implantation, which leave particles and residues on the surface of the wafer. The wafer must generally be cleaned
after these steps to remove particles and residues that could adversely impact the processes that immediately
follow them and degrade device performance. Common wafer cleaning steps include post-etch and post-strip
cleans and pre-diffusion and pre-deposition cleans, among others.

Specific challenges at the 45 nm node and beyond include efficient particle and residue removal while
minimizing substrate material loss, protecting structures with fragile new materials and smaller feature sizes,
and efficient drying. In addition, management of potential defect sources at the wafer edge becomes increasingly
challenging as new materials are introduced in the process flow.

Single-Wafer Wet Clean

As device geometries shrink and new materials are introduced, device flows become more complex and
the number of wafer cleaning steps increases. The need to increase overall clean efficiency and clean fragile
structures without causing damage are reasons why chipmakers are turning to single-wafer wet clean processing
technology for next-generation devices.

Over the past decade, a transition from batch to single-wafer processing has occurred for back-end-of-
line wet clean applications and a similar migration for front-end-of-line wet clean applications appears to be
occurring as the need for higher particle removal efficiency without device structure damage becomes more
critical. Single-wafer wet processing is particularly advantageous for those applications where improved defect
performance (removing particles without damaging the wafer pattern) or enhanced selectivity and CD control
can improve yield.

Single-Wafer Spin Clean Products: SP Series, Da Vinci®, DV-Prime™

With the acquisition of SEZ Holding AG (“SEZ”) in March 2008, we have expanded our portfolio to
include single-wafer spin systems, in addition to gaining more than 20 years of experience in clean technology
and a substantial installed customer base. This single-wafer SEZ® spin technology for cleaning and removing
films has assisted the industry transition from batch to single-wafer wet processing. By offering advanced dilute
chemistry and solvent solutions in our systems, our single-wafer spin clean systems address certain defectivity
and material integrity requirements.

Single-Wafer Linear Clean Product: 2300® Serene™

To meet the challenges of smaller critical dimensions, increasing aspect ratios, and new materials integration,
our 2300 Serene wet clean system is targeted at applications requiring high-selectivity residue removal without
damaging sensitive device structures. The system’s C3™ (Confined Chemical Cleaning™) technology combines
linear wafer motion with chemically-driven single-wafer cleaning to remove residues with chemical exposure
times as short as a few seconds. The cleaning exposure time is optimized for efficient removal of the target
materials, while limiting the impact on critical materials. This technology addresses applications that require
high-selectivity cleaning, such as high-k metal gate post-etch clean.

Plasma-Based Bevel Clean

Semiconductor manufacturers are paying increasing attention to the wafer edge as a source of yield limiting
defects. New materials like porous low-k and organic films often do not adhere as well as traditional silicon or
polymer-based films and have the potential to be significant defect sources. By including cleaning steps that
target the bevel region, the number of good die at the wafer’s edge can be increased to maximize yield.

2300® Coronus™ Plasma-Based Bevel Clean System

The 2300 Coronus plasma-based bevel clean system incorporates plasma technology to remove yield
limiting defect sources. The system combines the ability of plasma to selectively remove a wide variety of
materials with a proprietary confinement technology that protects the die area. Incorporating our Dynamic
Alignment technology on the production-proven 2300 platform, the Coronus system provides highly accurate
wafer placement for reproducible results and superior encroachment control and is designed to remove a wide
range of material types, in multiple applications, throughout the manufacturing process flow.

The Lam Research logo, Lam Research, and all product and service names used herein are either registered
trademarks or trademarks of Lam Research Corporation in the United States and/or other countries. All other
marks mentioned herein are the property of their respective holders.

Research and Development

The market for semiconductor capital equipment is characterized by rapid technological change and product
innovation. Our ability to obtain and maintain our competitive advantage depends in part on our continued
and timely development of new products and enhancements to existing products. Accordingly, we devote a
significant portion of our personnel and financial resources to R&D programs and seek to maintain close and
responsive relationships with our customers and suppliers.

Our R&D expenses during fiscal years 2009, 2008, and 2007 were $288.3 million, $323.8 million, and
$285.3 million, respectively. The majority of R&D spending is targeted at etch and plasma-based technology
applications, with an increasing proportion focused on adjacent markets including single-wafer clean and pre- and
post-etch step opportunities. We believe current challenges for customers in the pre- and post-etch applications
present opportunities for us.

We expect to continue to make substantial investments in R&D to meet our customers’ product needs,

support our growth strategy, and enhance our competitive position.

Marketing, Sales, and Service

Our marketing, sales, and service efforts are focused on building long-term relationships with our customers
and targeting product and service solutions designed to meet their needs. These efforts are supported by a team
of product marketing and sales professionals as well as equipment and process engineers who work closely
with individual customers to develop solutions for their wafer processing needs. We maintain ongoing service
relationships with our customers and have an extensive network of service engineers in place throughout the
United States, Europe, Taiwan, Korea, Japan, and Asia Pacific. We believe that comprehensive support programs
and close working relationships with customers are essential to maintaining high customer satisfaction and our
competitiveness in the marketplace.

We offer standard warranties for our systems that generally run for a period of 12 months from system
acceptance. The warranty provides that systems shall be free from defects in material and workmanship and
conform to agreed-upon specifications. The warranty is limited to repair of the defect or replacement with new
or like-new equivalent goods and is valid when the buyer provides prompt notification within the warranty
period of the claimed defect or non-conformity and also makes the items available for inspection and repair. We
also offer extended warranty packages to our customers to purchase as desired.

International Sales

A significant portion of our sales and operations occur outside the United States and, therefore, may be
subject to certain risks, including but not limited to tariffs and other barriers, difficulties in staffing and managing
non-U.S. operations, adverse tax consequences, foreign currency exchange rate fluctuations, changes in currency
controls, compliance with U.S. and international laws and regulations, including U.S. export restrictions, and
economic and political conditions. Any of these factors may have a material adverse effect on our business,
financial position, and results of operations and cash flows. Revenue by region was as follows:

June 28,
2009

Revenue:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . .

$ 171,359
121,178
141,375
208,053
239,911
234,070
$1,115,946

Year Ended
June 29,
2008
(in thousands)

$ 417,807
235,191
308,984
502,683
554,924
455,322
$2,474,911

June 24,
2007

408,631
237,716
451,487
573,875
531,310
363,557
$ 2,566,576

Customers

Our customers include many of the world’s leading semiconductor manufacturers. Customers continue
to establish joint ventures, alliances and licensing arrangements which have the potential to positively or
negatively impact our competitive position and market opportunity. In fiscal year 2009, revenues from Samsung
Electronics Company, Ltd. and Toshiba Corporation accounted for approximately 19% and 11%, respectively, of
total revenues. In fiscal year 2008, revenues from Samsung Electronics Company, Ltd. and Toshiba Corporation
accounted for approximately 19% and 13%, respectively, of total revenues. In fiscal year 2007, revenues from
Hynix Semiconductor and Samsung Electronics Company, Ltd., each accounted for approximately 14% of total
revenues.

A material reduction in orders from our customers in the semiconductor industry could adversely affect
our results of operations and projected financial condition. Our business depends upon the expenditures of
semiconductor manufacturers. Semiconductor manufacturers’ businesses, in turn, depend on many factors,
including their economic capability, the current and anticipated market demand for integrated circuits and the
availability of equipment capacity to support that demand.

Backlog

Our unshipped orders backlog includes orders for systems, spares, and services where written customer
requests have been accepted and the delivery of products or provision of services is anticipated within the next
12 months. Our policy is to revise our backlog for order cancellations and to make adjustments to reflect, among
other things, spares volume estimates and customer delivery date changes. In general, we schedule production
of our systems based upon purchase orders in backlog and our customers’ delivery requirements. Included in
our systems backlog are orders for which written requests have been accepted, prices and product specifications
have been agreed upon, and shipment of systems is expected within one year. The spares and services backlog
includes customer orders for products that have not yet shipped and for services that have not yet been provided.
Where specific spare parts and customer service purchase contracts do not contain discrete delivery dates, we
use volume estimates at the contract price and over the contract period, not exceeding 12 months, in calculating
backlog amounts.

As of June 28, 2009 and June 29, 2008, our backlog was approximately $391 million and $410 million,
respectively. Generally, orders for our products and services are subject to cancellation by our customers with
limited penalties. Because some orders are received and shipped in the same quarter and due to possible customer
changes in delivery dates and cancellations of orders, our backlog at any particular date is not necessarily
indicative of business volumes nor actual revenue levels for succeeding periods.

Manufacturing

Our manufacturing operations consist mainly of assembling and testing components, sub-assemblies, and
modules that are then integrated into finished systems prior to shipment to or at the location of our customers.
Most of the assembly and testing of our products is conducted in cleanroom environments.

We have agreements with third parties to outsource certain aspects of our manufacturing, production
warehousing, and logistics functions. We believe that these outsourcing contracts provide us more flexibility to
scale our operations up or down in a more timely and cost effective manner, enabling us to respond to the cyclical
nature of our business. We believe that we have selected reputable providers and have secured their performance
on terms documented in written contracts. However, 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 and have a negative effect
on our operating results and financial condition. Overall, we believe we have effective mechanisms to manage
risks associated with our outsourcing relationships. Refer to Note 13 of our Consolidated Financial Statements,
included in Item 15 herein, for further information concerning our outsourcing commitments.

Certain components and sub-assemblies included in our products are only obtained from a single supplier.
We believe that, in many cases, alternative sources could be obtained and qualified to supply these products.
Nevertheless, a prolonged inability to obtain these components could have an adverse effect on our operating
results and could unfavorably impact our customer relationships.

Environmental Matters

We are subject to a variety of governmental regulations related to the management of hazardous materials.
We are currently not aware of any pending notices of violation, fines, lawsuits, or investigations arising from
environmental matters that would have a material effect on our business. We believe that we are in general
compliance with these regulations and that we have obtained (or will obtain or are otherwise addressing) all
necessary environmental permits to conduct our business. Nevertheless, the failure to comply with present or
future regulations could result in fines being imposed on us, suspension of production, and 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.

Employees

As of August 20, 2009, we had approximately 2,711 regular employees.

Each of our employees is required to comply with our policies relating to maintaining the confidentiality of
our proprietary information and with our statement of standards of business conduct. In the semiconductor and
semiconductor equipment industries, competition for highly skilled employees is intense. Our future success
depends, to a significant extent, upon our continued ability to attract and retain qualified employees particularly
in the R&D and customer support functions.

Competition

The semiconductor capital equipment industry is characterized by rapid change and is highly competitive
throughout the world. To compete effectively, we invest significant financial resources to continue to strengthen
and enhance our product and services portfolio and to maintain customer service and support locations globally.
Semiconductor manufacturers evaluate capital equipment suppliers in many areas, including, but not limited to,
process performance, productivity, customer support, defect control, and overall cost of ownership, which can
be affected by many factors such as equipment design, reliability, software advancements, etc. Our ability to
succeed in the marketplace will depend upon our ability to maintain existing products and introduce product
enhancements and new products on a timely basis. In addition, semiconductor manufacturers must make a
substantial investment to qualify and integrate new capital equipment into semiconductor production lines.
As a result, once a semiconductor manufacturer has selected a particular supplier’s equipment and qualified
it for production, the manufacturer generally maintains that selection for that specific production application
and technology node provided that there is demonstrated performance to specification by the installed base.
Accordingly, we may experience difficulty in selling to a given customer if that customer has qualified a
competitor’s equipment. We must also continue to meet the expectations of our installed base of customers
through the delivery of high-quality and cost-efficient spare parts in the presence of third-party spare parts
provider competition. We face significant competition with all of our products and services. Certain of our
existing and potential competitors have substantially greater financial resources and larger engineering,
manufacturing, marketing, and customer service and support organizations than we do. In addition, we face
competition from a number of emerging companies in the industry. We expect our competitors to continue to
improve the design and performance of their current products and processes and to introduce new products and
processes with enhanced price/performance characteristics. If our competitors make acquisitions or enter into
strategic relationships with leading semiconductor manufacturers, or other entities, covering products similar
to those we sell, our ability to sell our products to those customers could be adversely affected. There can be
no assurance that we will continue to compete successfully in the future. Our primary competitors in the etch
market are Tokyo Electron, Ltd. and Applied Materials, Inc. Our primary competitor in the single-wafer wet
clean market is Dainippon Screen Manufacturing Co. Ltd.

Patents and Licenses

Our policy is to seek patents on inventions relating to new or enhanced products and processes developed
as part of our ongoing research, engineering, manufacturing, and support activities. We currently hold a number
of United States and foreign patents covering various aspects of our products and processes. We believe that the
duration of our patents generally exceeds the useful life of the technologies and processes disclosed and claimed
therein. Our patents, which cover material aspects of our past and present core products, have current durations
ranging from approximately one to twenty years. We believe that, although the patents we own and may obtain
in the future will be of value, they alone will not determine our success, which depends principally upon our
engineering, marketing, support, and delivery skills. However, in the absence of patent protection, we may
be vulnerable to competitors who attempt to imitate our products, manufacturing techniques, and processes.
In addition, other companies and inventors may receive patents that contain claims applicable or similar to
our products and processes. The sale of products covered by patents of others could require licenses that may
not be available on terms acceptable to us, or at all. For further discussion of legal matters, see Item 3, “Legal
Proceedings,” of this Annual Report on Form 10-K as of and for the year ended June 28, 2009 (the “2009
Form 10-K”).

Other Cautionary Statements

See the discussion of risks in the section of this 2009 Form 10-K entitled Item 1A, “Risk Factors” and

elsewhere in this report.

EXECUTIVE OFFICERS OF THE COMPANY

As of August 26, 2009, the executive officers of Lam Research were as follows:

Name
Stephen G. Newberry
Martin B. Anstice

Ernest E. Maddock
Abdi Hariri
Richard A. Gottscho
Thomas J. Bondur
Sarah A. O’Dowd

Age
55
42

51
47
57
41
59

Title

President and Chief Executive Officer
Executive Vice President, Chief Operating Officer
Senior Vice President, Chief Financial Officer

and Chief Accounting Officer

Group Vice President, Global Operations
Group Vice President and General Manager, Etch Business
Vice President and General Manager, Sales and Marketing
Group Vice President, Human Resources and Chief Legal Officer

Stephen G. Newberry was appointed President and Chief Executive Officer of Lam Research in June
2005. He joined Lam Research in August 1997 as Executive Vice President and Chief Operating Officer and was
promoted to the position of President and Chief Operating Officer in July 1998. Mr. Newberry currently serves
as a director of Lam Research, Amkor Technology, and Semiconductor Equipment and Materials International
(SEMI), the industry’s trade association. He also serves as a member of the Haas Advisory Board, Haas School
of Business, University of California at Berkeley and as a member of the Dean’s Advisory Council, University of
California at Davis Graduate School of Management. Prior to joining Lam Research, Mr. Newberry was Group
Vice President of Global Operations and Planning at Applied Materials, Inc. Mr. Newberry served five years in
naval aviation prior to joining Applied Materials. He is a graduate of the U.S. Naval Academy and the Harvard
Graduate School of Business.

Martin B. Anstice joined Lam Research in April 2001 as Senior Director, Operations Controller, was
promoted to the position of Managing Director and Corporate Controller in May 2002, and was promoted to
Group Vice President, Chief Financial Officer, and Chief Accounting Officer in June 2004, was named Senior
Vice President, Chief Financial Officer and Chief Accounting Officer in March 2007, and was promoted to
Executive Vice President, Chief Operating Officer, in September 2008. Mr. Anstice began his career at Raychem
Corporation where, during his 13-year tenure, he held numerous finance roles of increasing responsibility in
Europe and North America. Subsequent to Tyco International’s acquisition of Raychem in 1999, he assumed
responsibilities supporting mergers and acquisition activities of Tyco Electronics. Mr. Anstice is an associate
member of the Chartered Institute of Management Accountants in the United Kingdom.

Ernest E. Maddock was appointed Senior Vice President and Chief Financial Officer of Lam Research
in September 2008. Additionally, Mr. Maddock heads Silfex Incorporated (formerly Bullen Semiconductor
Corporation), a division of Lam Research. Since October 2003, Mr. Maddock held the position of Senior
Vice President of Global Operations at Lam Research, overseeing Information Technology, Global Supply
Chain, Production Operations, Corporate Quality, Global Security, and Global Real Estate & Facilities.
Mr. Maddock also held the position of Vice President of the Customer Support Business Group (CSBG) with the
Company. Mr. Maddock joined the Company in November 1997. Prior to his employment with Lam Research,
Mr. Maddock was Managing Director, Global Logistics and Repair Services Operations, and Chief Financial
Officer, Software Products Division, of NCR Corporation. He has also held a variety of executive roles in
finance and operations in several industries ranging from commercial real estate to telecommunications.

Abdi Hariri was named Group Vice President, Global Operations in April of 2009. Prior to his current
position, Mr. Hariri had been Group Vice President of the Customer Support Business Group since March 2007
and Vice President and General Manager of the Customer Support Business Group since August 2004. Mr. Hariri
previously served as the General Manager of Lam Research Co. Ltd. (Japan) for approximately 18 months and
has served in a number of different assignments with the Field Sales and Product Groups. His experience prior to
his appointment in Japan included over 13 years at the Company with various responsibilities, including global
business development and engineering. Prior to his employment at Lam Research, Mr. Hariri served as a Process
Engineer at Siliconix, Inc. He holds a Masters Degree in Chemical Engineering from Stanford University.

Richard A. Gottscho, Group Vice President and General Manager, Etch Business since March 2007,
joined the Company in January 1996 and has served at various Director and Vice President levels in support
of etch products, CVD products, and corporate research. Prior to joining Lam Research, Dr. Gottscho was a
member of Bell Laboratories for 15 years where he started his career working in plasma processing. During his
tenure at Bell, he headed research departments in electronics materials, electronics packaging, and flat panel
displays. Dr. Gottscho is the author of numerous papers, patents, and lectures in plasma processing and process
control. He is a recipient of the American Vacuum Society’s Peter Mark Memorial Award and is a fellow of
the American Physical and American Vacuum Societies, has served on numerous editorial boards of refereed
technical publications, program committees for major conferences in plasma science and engineering, and was
vice-chair of a National Research Council study on plasma science in the 1980s. Dr. Gottscho earned Ph.D. and
B.S. degrees in physical chemistry from the Massachusetts Institute of Technology and the Pennsylvania State
University, respectively.

Thomas J. Bondur, Vice President and General Manager, Sales and Marketing, since April 2009 and
previously Vice President, Global Field Operations since March 2007, joined Lam Research in August 2001 and
has served in various roles in business development and field operations in Europe and the United States. Prior
to joining Lam Research, Mr. Bondur spent eight years in the semiconductor industry with Applied Materials
in various roles in Santa Clara and France including Sales, Business Management and Process Engineering.
Mr. Bondur holds a degree in Business from the State University of New York.

Sarah A. O’Dowd joined Lam Research in September 2008 as Group Vice President and Chief Legal
Officer, and was appointed Group Vice President, Human Resources and Chief Legal Officer in April 2009.
Prior to joining Lam Research, Ms. O’Dowd served as Vice President and General Counsel for FibroGen, Inc.
from February 2007 until September 2008. Until February 2007, Ms. O’Dowd was a shareholder in the law firm
of Heller Ehrman LLP for more than twenty years.

Item 1A. Risk Factors

In addition to the other information in this 2009 Form 10-K, 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, nor 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 global economic conditions have impacted customer demand for our products and 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:

•
•

•
•
•
•
•

•

•
•

an increase in reserves on accounts receivable due to our customers’ inability to pay us;

an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our
inability to sell such inventory;

additional valuation allowances on deferred tax assets;

additional restructuring charges;

asset impairments including the potential impairment of goodwill and other intangible assets;

our investments may decrease in value;

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

the value of certain facilities we lease may ultimately be less than our residual value guarantee with
the lessor;

we may have problems maintaining reliable and uninterrupted sources of supply; and

demand for our products may continue to fall.

Our Quarterly Revenues and Operating Results Are Unpredictable

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:

•

•
•
•
•
•
•

•
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•

economic conditions in the electronics and semiconductor industries generally and the equipment
industry specifically;

the extent that customers use our products and services in their business;

timing of customer acceptances of equipment;

the size and timing of orders from customers;

customer cancellations or delays in our shipments, installations, and/or acceptances;

changes in average selling prices, customer mix, and product mix;

our ability in a timely manner to develop, introduce and market new, enhanced, and competitive
products;

our competitors’ introduction of new products;

legal or technical challenges to our products and technology;

changes in import/export regulations;

•

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;

legislative, tax, accounting, or regulatory changes or changes in their interpretation;

•
•
procurement shortages;
• manufacturing difficulties;
•

the failure of our suppliers or outsource providers to perform their obligations in a manner consistent
with our expectations;

foreign currency exchange rate fluctuations.

changes in our estimated effective tax rate; and

•
•
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 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 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:

•
•
•

•

a decline in demand for even a limited number of our products;

a failure to achieve continued market acceptance of our key products;

export restrictions or other regulatory or legislative actions which could limit our ability to sell those
products to key customer or market segments;

an improved version of products being offered by a competitor in the market in which we
participate;

increased pressure from competitors that offer broader product lines;

technological change that we are unable to address with our products; or

a failure to release new or enhanced versions of our products on a timely basis.

•
•
•
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 could
have a larger impact on our business than it would on the business of our less concentrated competitors.

We Have a Limited Number of Key Customers

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.

Strategic Alliances May Have Negative Effects on Our Business

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 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 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.

We are Dependent Upon a Limited Number of Key Suppliers

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 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.

Our Outsource Providers May Fail to Perform as We Expect

Outsource providers have played and will continue to play a key 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. 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% in fiscal year 2009, 83% in fiscal year 2008 and 84% in
fiscal year 2007 of our total revenue. 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

including, but not limited to:

trade balance issues;

changes in currency controls;

economic and political conditions;

our ability to develop relationships with local suppliers;

fluctuations in interest and foreign currency exchange rates;

compliance with U.S. and international laws and regulations, including U.S. export restrictions;

differences in the enforcement of intellectual property and contract rights in varying jurisdictions;

•
•
•
•
•
•
•
•
•
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 materially adverse
impact on our future revenue and profits.

our ability to secure and retain qualified people for the operation of our business.

the need for technical support resources in different locations; and

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. However, we are exposed to foreign
currency exchange rate fluctuations related to certain of our revenues denominated in Japanese yen and 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 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 on net intercompany liability exposures denominated in Swiss francs, Euros and
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 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 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 the need for) all 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. 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 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:

•
•
•
•

•

general market, semiconductor, or semiconductor equipment industry conditions;

global economic fluctuations;

variations in our quarterly operating results;

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;

government regulations;

liquidity of Lam Research;

disruptions with key customers or suppliers; or

success or failure of our new and existing products;

developments in, or claims relating to, patent or other proprietary rights;

•
•
•
•
•
•
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.

political, economic, or environmental events occurring globally or in any of our key sales regions.

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 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 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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our executive offices and principal operating and R&D facilities are located in Fremont, California, and
are held under operating leases expiring from fiscal years 2010 to 2015. These leases generally include options
to renew or purchase the facilities. In addition, we lease properties for our service, technical support and sales
personnel throughout the United States, Europe, Taiwan, Korea, Japan, and Asia Pacific and own manufacturing
facilities located in Eaton, Ohio and Villach, Austria. Our fiscal year 2009 rental expense for the space occupied
during that period aggregated approximately $9 million. Our facilities lease obligations are subject to periodic
increases, and we believe that our existing facilities are well-maintained and in good operating condition.

Item 3. Legal Proceedings

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 to negotiate necessary licenses on commercially reasonable terms, or at all, or that any
litigation resulting from such claims would not have a materially adverse effect on our consolidated financial
position, liquidity, operating results, or our consolidated financial statements taken as a whole. Aspect Systems,
Inc. (“Aspect”) sued us for breach of contract and various business torts arising out of a transaction in which we
licensed Aspect to sell certain of our legacy Autoetch and Drytek products. The case went to trial in the United
States District Court for the District of Arizona in December of 2008, resulting in a jury verdict in favor of
Aspect. We filed an appeal from the ensuing judgment, which is now pending. We recorded the amount of the
legal judgment of $4.6 million in our consolidated statement of operations for the year ended June 28, 2009.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

The information required by this Item with respect to the market price of the Company’s Common Stock,
number of holders thereof, and payment of dividends is incorporated by reference from Item 6, “Selected
Financial Data” below.

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, discontinued or reinstated
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 the December 2008 quarter.

Share repurchases under the repurchase program were as follows (in thousands except per share data):

Period
As of June 29, 2008 . . . . . . . . . . . . . . . . .
Authorization of up to $250 million —
September 2008 . . . . . . . . . . . . . . . .
Quarter Ending September 28, 2008 . . .
Quarter Ending December 28, 2008 . . .
Quarter Ending March 29, 2009 . . . . . . .
March 30 — April 19, 2009 . . . . . . . . . .
April 20, 2009 — May 24, 2009 . . . . . .
May 25, 2009 — June 28, 2009 . . . . . . .

Total Number
of Shares
Repurchased (1)

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Remaining Amount
Available Under the
Repurchase Programs

—

84
1,128
29
78
47
1
1,367

$ 32.71
$ 21.71
$ 20.28
$ 22.81
$ 25.29
$ 25.76
$ 22.54

1
1,053
—
—
—
—
1,054

$250,000
$249,985
$226,942
$226,942
$226,942
$226,942
$226,942
$226,942

(1)

Included in the table above are 312,213 shares which the Company withheld through net share settlements
upon the vesting of restricted stock unit awards under the Company’s equity compensation plans to cover
tax withholding obligations. All repurchases during fiscal year 2009 fell into this category.

The graph below matches Lam Research Corporation’s cumulative 5-year total shareholder return on
common stock with the cumulative total returns of the NASDAQ Composite index and the Research Data Group,
Incorporated (“RDG”) Semiconductor Composite index. The graph tracks the performance of a $100 investment
in our common stock and in each of the indexes (with the reinvestment of all dividends) from June 30, 2004 to
June 30, 2009.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG LAM RESEARCH CORPORATION , THE NASDAQ COMPOSITE INDEX
AND THE RDG SEMICONDUCTOR COMPOSITE INDEX

$250

$200

$150

$100

$50

6/04

6/05

6/06

6/07

6/08

6/09

Lam Research Corporation

NASDAQ Composite

RDG Semiconductor Composite

$100 invested on 6/30/04 in stock or index, including reinvestment of dividends.

Fiscal year ending June 30.

Lam Research Corporation . . . . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . . . . . . . . . .
RDG Semiconductor Composite . . . . . . . . . . .

6/04
100.00
100.00
100.00

6/05
108.02
101.09
91.81

6/06
174.33
109.49
91.03

6/07
191.79
132.47
107.45

6/08
134.89
117.33
91.20

6/09
97.01
92.91
67.58

Item 6.

Selected Financial Data (derived from audited financial statements)

June 28,
2009 (1)

Year Ended
June 25,
June 24,
June 29,
2008 (1)
2006
2007
(in thousands, except per share data)

June 26,
2005

OPERATIONS:
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,115,946
388,734
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment (2) . . . . . . . . . . . . . . . .
96,255
Restructuring charges and asset

$ 2,474,911 $ 2,566,576 $ 1,642,171 $ 1,502,453
763,464
—

1,305,054
—

1,173,406
—

827,012
—

impairments, net (3) . . . . . . . . . . . . . . . . .
409A expense (4) . . . . . . . . . . . . . . . . . . . . . .
Legal judgment . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . .
Operating income (loss) (5) . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share:

44,513
3,232
4,647
—
(281,243)
(302,148)

6,366
44,494
—
2,074
509,431
439,349

—
—
—
—
778,660
685,816

—
—
—
—
404,768
335,210

14,201
—
—
—
388,142
297,252

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(2.41) $
(2.41) $

3.52 $
3.47 $

4.94 $
4.85 $

2.42 $
2.33 $

2.16
2.09

BALANCE SHEET:
Working capital . . . . . . . . . . . . . . . . . . . . . . . . $ 855,064
1,951,871
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
158,019
Long-term obligations, less current portion . .

$ 1,280,028 $ 743,563 $ 1,138,720 $ 837,370
1,472,349
2,786

2,806,755
385,132

2,327,382
350,969

2,101,605
252,487

(1) Fiscal year 2009 and 2008 amounts include the operating results of SEZ from the acquisition date of
March 11, 2008. The acquisition was accounted for as a business combination in accordance with Statement
of Financial Accounting Standards No. 141, “Business Combinations”. See Note 15 of Notes to Consolidated
Financial Statements for additional information.

(2) A combination of factors, including the current economic environment, a sustained decline in our market
valuation and a decline in our operating results were indicators of possible impairment of our goodwill.
We conducted an analysis and concluded, in accordance with Statement of Financial Accounting Standards
Number 142, “Goodwill and Other Intangible Assets”, that the fair value of our Clean Product Group had
been reduced below its carrying value. As a result, we recorded a non-cash goodwill impairment charge of
approximately $96.3 million during fiscal year 2009.

(3) Restructuring charges and asset impairments, exclude restructuring charges included in cost of goods
sold and reflected in gross margin of $21.0 million and $12.6 million for fiscal years 2009 and 2008,
respectively. Restructuring amounts included in cost of goods sold and reflected in gross margin during
fiscal year 2009 primarily relate to the Company’s alignment of its cost structure with the outlook for the
current economic environment and future business opportunities. The restructuring amounts in fiscal
year 2008 primarily relate to the integration of SEZ. Fiscal year 2005 restructuring charges consist only of
additional liabilities related to prior restructuring plans.

(4) 409A expense excludes the expense included in cost of goods sold and reflected in gross margin of
$6.4 million during fiscal year 2008. Following a voluntary independent review of its historical stock
option granting process, the Company considered whether Section 409A of the Internal Revenue Code of
1986, as amended (“IRC”), and similar provisions of state law, apply to certain stock option grants as to
which, under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,”
intrinsic value was deemed to exist at the time of the options’ measurement dates. If, under applicable tax
principles, an employee stock option is not considered as granted with an exercise price equal to the fair
market value of the underlying stock on the grant date, then the optionee may be subject to federal and
state penalty taxes under Section 409A (collectively, “Section 409A liabilities”). On March 30, 2008, the

Board of Directors authorized the Company (i) to assume potential Section 409A Liabilities, inclusive of
applicable penalties and interest, of current and past employees arising from the exercise in 2006 or 2007
of Company stock options that vested after 2004, and (ii) if necessary, to compensate such employees for
additional tax liability associated with that assumption. The Company is presently engaged in discussions
with the Internal Revenue Service regarding the application of Section 409A to Company stock options.

(5) Operating income (loss) during the fiscal years ended June 28, 2009, June 29, 2008, June 24, 2007 and
June 25, 2006 includes $53.0 million, $42.5 million, $35.6 million and $24.0 million, respectively, of equity-
based compensation expense as a result of the adoption of Statement of Financial Accounting Standards
No. 123R, “Share-Based Payment” at the beginning of fiscal year 2006.

UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

Stock and Dividend Information:

QUARTERLY FISCAL YEAR 2009:
Total revenue . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset impairments —
cost of goods sold. . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment —

operating expenses. . . . . . . . . . . . . . .
Restructuring and asset impairments —
operating expenses. . . . . . . . . . . . . . .
409A expense — operating expenses . . .
Legal judgment — operating expenses . .
Operating income . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . .
Net income per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . .
Price range per share . . . . . . . . . . . . . . . .
Number of shares used in per share

calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . .

Three Months Ended (1)

June 28,
2009 (2)

March 29,
2009 (2)

December 28,
2008 (2)

September 28,
2008 (2)

(in thousands, except per share data)

$217,764

$174,412

$283,409

$440,361

—
67,757

7,179

5,396
982
4,647
(65,186)
(88,490)

10,217
36,515

89,076

13,028
646
—
(195,184)
(198,359)

7,728
101,352

—

10,121
843
—
(37,392)
(24,172)

3,048
183,110

—

15,968
761
—
16,519
8,873

$ (0.70)
$ (0.70)
$22.01-$29.23

$ (1.58)
$ (1.58)
$18.24-$25.47

$ (0.19)
$ (0.19)
$14.72-$31.98

$ 0.07
$ 0.07
$30.00-$40.42

126,273
126,273

125,566
125,566

125,084
125,084

125,527
126,819

QUARTERLY FISCAL YEAR 2008:
Total revenue . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset impairments —
cost of goods sold. . . . . . . . . . . . . . . .
409A expense — cost of goods sold . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset impairments —
operating expenses. . . . . . . . . . . . . . .
409A expense — operating expenses . . .
In-process research and development —
operating expenses. . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . .
Net income per share

calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . .

Three Months Ended (1)

June 29,
2008 (2)

March 30,
2008 (2)

December 23,
2007

September 23,
2007

(in thousands, except per share data)

$566,160

$613,810

$610,320

$684,621

12,610
—
234,650

6,366
710

—
63,928
72,178

—
6,401
287,208

—
43,784

2,074
86,283
103,524

—
—
307,661

—
—

—
161,334
115,059

—
—
343,887

—
—

—
197,886
148,588

$ 0.58
$ 0.57
$35.98-$44.73

$ 0.83
$ 0.82
$36.15-$46.19

$ 0.92
$ 0.91
$42.67-$57.66

$ 1.20
$ 1.18
$49.48-$60.82

125,046
126,657

124,768
126,549

124,685
126,653

124,057
126,358

(1) Our reporting period is a 52/53-week fiscal year. The fiscal years ended June 28, 2009 and June 29, 2008
included 52 and 53 weeks, respectively. The quarter ended March 30, 2008 included 14 weeks while all
other quarters presented above included 13 weeks.

(2)

Includes the operating results of SEZ from the acquisition date of March 11, 2008. The acquisition was
accounted for as a business combination in accordance with Statement of Financial Accounting Standards
No. 141, “Business Combinations”. Please see Note 15 “Acquisitions” of Note to Consolidated Financial
Statements for additional information.

Our Common Stock is traded on the Nasdaq Global Select Market under the symbol LRCX. The price
range per share is the highest and lowest bid prices, as reported by The NASDAQ Stock Market, Inc., on any
and all trading days during the respective quarter. As of August 20, 2009 we had 371 stockholders of record. In
fiscal years 2009 and 2008 we did not declare or pay cash dividends to our stockholders. We currently have no
plans to declare or pay cash dividends.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations contains forward-looking
statements, which are subject to risks, uncertainties and changes in condition, significance, value and effect.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result
of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this 2009
Form 10-K and other documents we file from time to time with the Securities and Exchange Commission.
(See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this 2009 Form 10-K ).

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 (generally and in the semiconductor industry), supply,
demand, prices for semiconductors, customer capacity requirements, and our ability to develop, acquire, and
market competitive products. For these and other reasons, our results of operations for fiscal years 2009, 2008,
and 2007 may not necessarily be indicative of future operating results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
provides a description of our results of operations and should be read in conjunction with our Consolidated
Financial Statements and accompanying Notes to Consolidated Financial Statements included in this 2009 Form
10-K. MD&A consists of the following sections:

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

management’s assessment of material trends and uncertainties relevant to our business

Results of Operations provides an analysis of operating results

Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant

judgments and estimates used in the preparation of our consolidated financial statements

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

position

Executive Summary

We design, manufacture, market, and service semiconductor processing equipment used in the fabrication
of integrated circuits and are recognized as a major provider of such equipment to the worldwide semiconductor
industry. Semiconductor wafers are subjected to 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 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 and dependent on overall world
economic conditions. Recent adverse conditions in the global economy have significantly reduced customer
demand for our products. 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 a result, we remain cautious about forecasting any
significant resumption in equipment spending in the near term.

The following summarizes certain key annual financial information for the periods indicated below (in

thousands, except percentages and per share amounts):

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin as a percent of total revenue . . . . . . . .
Net income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income (loss) per share . . . . . . . . . . . . . .

June 28,
2009

Year Ended
June 29,
2008

June 24,
2007

(in thousands, except per share data and percentages)
$ 2,566,576
$ 2,474,911
$1,115,946
1,305,054
1,173,406
388,734

34.8%

47.4%

50.8%

(302,148)
(2.41)

439,349
3.47

685,816
4.85

Fiscal year 2009 results compared with fiscal year 2008 results reflect declines in customer demand,
consistent with the deterioration in the general economic outlook and, specifically, the downturn in the
semiconductor industry which has been impacted by a decline in consumer spending for electronic goods. Fiscal
year 2009 shipments were approximately $1.0 billion and decreased 59% compared to fiscal year 2008. Fiscal
year 2009 revenues decreased 55% compared to fiscal year 2008.

Gross margin as a percent of revenue was 34.8% for fiscal year 2009 and decreased sequentially compared to
fiscal year 2008 gross margin of 47.4%. This reduction was primarily due to customer concentration, product mix,
and decreased factory and field utilization as a result of reduced shipment volumes on declining customer demand,
partially offset by favorable warranty performance. Included in gross margin were charges for restructuring and
asset impairments of $21.0 million and $12.6 million in fiscal years 2009 and 2008, respectively.

Fiscal year 2009 operating expenses include goodwill impairment of $96.3 million, restructuring and asset
impairments of $44.5 million, a legal judgment of $4.6 million, and $3.2 million of expenses associated with the
assumption of Section 409A employee liabilities. Fiscal year 2008 operating expenses include the assumption of
Section 409A employee liabilities of $44.5 million and $6.4 million of restructuring and asset impairments. We
continue to invest significantly in research and development focused on leading-edge plasma etch, single-wafer
clean, and other new products and technologies.

Although there are near-term pressures on business from declining customer demand, we are targeting the
longer term benefits of our product development activities. These factors, along with decreasing revenues and
lower gross margins noted above, contributed to the fiscal year 2009 operating loss of 25.2% compared to fiscal
year 2008 operating margin of 20.6%.

In both the etch and clean markets, we believe there are opportunities for market share expansion as we
have placed a significant number of joint development projects and evaluation units at our customers’ locations
to enable penetration of new applications while defending and growing our existing market share.

We anticipate that while there are opportunities to add to our leading etch market share position, significant
market share growth opportunities will be in single-wafer clean. We intend to increase the penetration of various
applications at our existing single wafer clean customers, as well as at customers who will be introducing single
wafer cleaners into their fabs.

Our key positions of strength in single-wafer clean have historically been in the back-end-of-line foundry and
logic markets, and spending for new equipment in those markets has recently been low, resulting in temporarily
exacerbated reductions in revenue and market share for our equipment. When new capacity is added in the
foundry and logic markets, we expect our market share will increase with our current tool of record positions.

Due to the current high volume of idled capacity potentially requiring remanufacture and upgrade, we
anticipate that installed base upgrade and conversion activity will represent a meaningful revenue opportunity for
us over the next few years. This opportunity is particularly substantial in etch, where new technology capability
is typically required to meet leading edge requirements at the next technology node.

We recently established our Reliant™ System Business in order to increase our focus on and capabilities in
the refurbishment and upgrades business opportunities that we expect in etch. We have also recently added clean
refurbishment and upgrades capabilities in order to support our customers’ needs in respect of the installed base
of single wafer cleaners. In today’s etch market, our customers have idled equipment available for refurbishment
or upgrade that has temporarily reduced the total demand for new equipment purchases at the leading edge. This
is particularly the case at our memory customers. Once demand accelerates and capacity utilization rises, we
anticipate that our customers’ requirements for refurbishment or upgrade will diminish and most leading edge
wafer start additions will be filled by new equipment.

Some older installed base tools cannot be refurbished or upgraded for reuse on the leading edge, but they
can be utilized in trailing edge foundries where 300-millimeter tool sets are needed. We intend to be very active
in the used 300-millimeter tool set market as it develops in the coming quarters.

In this period of reduced customer spending, we have continued to make major investments in product
portfolios, as we believe they represent a significant growth opportunity when the upturn comes. We do, however,
remain focused on balancing the need to invest in next generation technologies with carefully managing the cash
expenditures of the Company.

Results of Operations

Shipments and Backlog

Shipments (in millions) . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended

June 28,
2009
$976

June 29,
2008
$2,367

16%
11%
12%
20%
21%
20%

16%
9%
13%
20%
22%
20%

Shipments for the fiscal year 2009 decreased sequentially by 59% reflecting the industry and economic
environment noted above. During fiscal year 2009, 300 millimeter applications represented approximately 90%
of total systems shipments and 87% of total systems shipments were for applications at less than or equal to
the 65 nanometer technology node. We classify systems shipments market segmentation for fiscal year 2009 as
Memory at approximately 58%, Integrated Device Manufacturers and Logic at 21% and Foundry at 21%.

Unshipped orders in backlog as of June 28, 2009 were approximately $391 million and decreased from
approximately $410 million as of June 29, 2008 consistent with reduced spending commitments from our
customers. The basis for recording new orders is defined in our backlog policy. Please refer to “Backlog” in Part
I Item 1, “Business” of this 2009 Form 10-K for additional information on our backlog policy. Our unshipped
orders backlog includes orders for systems, spares, and services where written customer requests have been
accepted and the delivery of products or provisions of services is anticipated within the next 12 months. Our
policy is to revise our backlog for order cancellations and to make adjustments to reflect, among other things,
spares volume estimates and customer delivery date changes.

Revenue

Revenue (in thousands) . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

Year Ended
June 29,
2008

June 24,
2007

$ 1,115,946

$ 2,474,911

$ 2,566,576

15%
11%
13%
19%
21%
21%

17%
10%
13%
20%
22%
18%

16%
9%
18%
22%
21%
14%

The sequential revenue decline during fiscal year 2009 reflects the industry and economic environments
noted above. Our revenue levels are correlated to the amount of 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 to $64.7 million as of June 28, 2009 compared to $193.6 million as of
June 29, 2008, consistent with the decline in customer spending levels during fiscal year 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 $13 million as
of June 28, 2009 compared to $52 million as of June 29, 2008.

Gross Margin

Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of total revenue . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

Year Ended
June 29,
2008

June 24,
2007

(in thousands, except percentages)
$ 1,173,406

$ 1,305,054

$388,734

34.8%

47.4%

50.8%

Gross margin as a percent of revenue during fiscal year 2009 was 34.8%. The decrease in gross margin as
a percent of revenue for fiscal year 2009 compared with fiscal year 2008 was primarily due to decreased factory
and field utilization as a result of reduced shipment volumes on declining customer demand, changes in our
product mix, customer concentration, and $21.0 million of one-time restructuring and asset impairment expenses,
partially offset by favorable warranty performance. The decrease in gross margin as a percent of revenue for
fiscal year 2008 compared with fiscal year 2007 was primarily due to decreased factory utilization as a result of
reduced shipment volumes, as well as customer concentration and product mix challenges, $12.6 million of one-
time restructuring and asset impairment expenses related to the streamlining of our combined Clean Product
Group following the acquisition of SEZ, and $6.4 million of expense associated with the assumption of the
employee tax liabilities as a result of the determinations from our voluntary independent stock option review.

Research and Development

June 28,
2009

Year Ended
June 29,
2008

June 24,
2007

Research & Development (R&D) . . . . . . . . . . . . . . . .
Percent of total revenue . . . . . . . . . . . . . . . . . . . . . . .

(in thousands, except percentages)
$323,759

$288,269

$285,348

25.8%

13.1%

11.1%

We continue to make significant investments in R&D focused on plasma etch, single wafer clean and
new products. The decline in R&D spending during fiscal year 2009 compared to fiscal year 2008, includes
approximately $8 million of lower salary and benefits related to cost savings measures, $11 million in lower other
employee compensation on lower profits and a $26 million decrease in outside services and supplies, partially
offset by $5 million in depreciation and amortization mainly related to the inclusion of SEZ. Approximately 91%
and 74% of fiscal years 2009 and 2008 systems revenues, respectively, were derived from products introduced
over the previous two years, which is reflective of our continued investment in new products and technologies.

The growth in R&D spending during fiscal year 2008 compared to fiscal year 2007 included approximately
$22 million in salary and benefits costs for increases in headcount and employee base compensation, $9 million
in engineering material supplies and outside services targeting etch and new product growth objectives, the
inclusion of SEZ operations for approximately four months of fiscal year 2008, and a $3 million decrease in
incentive-based compensation driven by reduced profit levels.

Selling, General and Administrative

June 28,
2009

Year Ended
June 29,
2008

June 24,
2007

Selling, General & Administrative (SG&A) . . . . . . .
Percent of total revenue . . . . . . . . . . . . . . . . . . . . . . .

(in thousands, except percentages)
$287,282

$233,061

$241,046

20.9%

11.6%

9.4%

The decrease in SG&A expenses during fiscal year 2009 compared to fiscal year 2008 was driven by
reductions of approximately $34 million in other employee compensation as a result of lower company
profitability and $7 million in salaries and benefits related to cost savings measures, $19 million in cost incurred

as a result of the voluntary stock option reviews completed in fiscal year 2008, and $5 million in outside services
and supplies, partially offset by a $7 million charge to increase the reserves against our receivables balance for
distressed customers.

The increase in SG&A expenses during fiscal year 2008 compared to fiscal year 2007 was driven by
increases of approximately $24 million in salary and benefits costs for increases in headcount, $19 million
in legal and accounting cost incurred as a result of the voluntary stock option review, the inclusion of SEZ
operations for approximately four months, and $3 million in equity-based compensation partially offset by a
decrease of $5 million in incentive-based compensation triggered by lower profit levels.

Goodwill Impairment

A combination of factors, including the current economic environment, a sustained decline in our market
valuation and a decline in our operating results were indicators of possible impairment of our goodwill. We
performed an impairment analysis and concluded, in accordance with Statement of Financial Accounting
Standards Number 142, “Goodwill and Other Intangible Assets”, that the fair value of our Clean Product Group
has been reduced below its carrying value. As a result, we recorded a non-cash goodwill impairment charge of
approximately $96.3 million during fiscal year 2009.

The calculation of the goodwill impairment charge is based on estimates of future operating results. If
our future operating results do not meet current forecasts or if we experience a sustained decline in our market
capitalization that is determined to be indicative of a reduction in fair value of our Clean Product Group, an
additional impairment analysis may be required which may result in further impairment charges.

Restructuring and Asset Impairments

During the June 2008 quarter, we incurred 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 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.

During the March 2009 quarter, we incurred 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 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.

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, the
December 2008 Plan, and the 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 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 2009 of approximately
$65.5 million, consisting of severance and benefits for involuntarily terminated employees of $52.0 million,
charges for the write-off of certain assets totaling $10.2 million, and charges for the present value of remaining
lease payments, net of sublease income, on vacated facilities of $3.3 million. Of the total $65.5 million in charges,
$21.0 million was recorded in cost of goods sold and $44.5 million was recorded in operating expenses in our
fiscal year 2009 consolidated statement of operations.

We recorded net restructuring charges and asset impairments during fiscal year 2008 of approximately
$19.0 million, consisting of severance and benefits for involuntarily terminated employees of $5.5 million,
charges for the present value of remaining lease payments, net of sublease income, on vacated facilities of
$0.9 million, the write-off of related fixed assets of $1.9 million, and 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 million was recorded in operating expenses in our fiscal year 2008 consolidated
statement of operations.

As a result of the June 2008, September 2008, December 2008, March 2009, and June 2009 quarters’
restructuring activities, we expect annual savings in total expenses, relative to the cost structure immediately
preceding the activities, of approximately $179 million to $189 million. The 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.

Below is a table summarizing activity relating to the June 2008 Plan:

Fiscal year 2008 expense . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges . . . . . . . . . . . . . . . . . . . .
Balance at June 29, 2008 . . . . . . . . . . . . . .
Fiscal year 2009 expense . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges . . . . . . . . . . . . . . . . . . . .
Balance at June 28, 2009 . . . . . . . . . . . . . .

Severance
and
Benefits

5,513
(927)
—
4,586
12,554
(13,155)
(3,418)
567

Facilities

$ 899
—
—
899
—
(873)
—
$ 26

Abandoned
Assets

(in thousands)
$ 1,893
—
(1,893)
—
3,395
—
(3,395)
$ —

Inventory

Total

$ 10,671
—
(10,671)
—
3,067
—
(3,067)
—

$ 18,976
(927)
(12,564)
5,485
19,016
(14,028)
(9,880)
593

Below is a table summarizing activity relating to the December 2008 Plan:

Severance
and
Benefits

Fiscal year 2009 expense . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges . . . . . . . . . . . . . . . . . . . .
Balance at June 28, 2009 . . . . . . . . . . . . . .

$ 16,412
(15,728)
—
684

Facilities

$ 618
—
(618)
$ —

Abandoned
Assets

(in thousands)
$ —
—
—
$ —

Inventory

Total

$ 819
—
(819)
$ —

$ 17,849
(15,728)
(1,437)
684

Below is a table summarizing activity relating to the March 2009 Plan:

Fiscal year 2009 expense . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges . . . . . . . . . . . . . . . . . . . . .
Balance at June 28, 2009 . . . . . . . . . . . . . . .

Severance
and
Benefits

$ 23,038
(18,647)
(466)
$ 3,925

Facilities

$ 2,265
(1,828)
—
437

Abandoned
Assets
(in thousands)
$ 3,008
—
(3,008)
$ —

Inventory

Total

$ 330
—
(330)
$ —

$ 28,641
(20,475)
(3,804)
$ 4,362

The severance and benefits-related balance is 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 2015.

409A Expense

Following the voluntary independent review of our historical option grant process, we considered whether
Section 409A of the Internal Revenue Code and similar provisions of state law would apply to stock options that
were found, under APB No. 25, to have intrinsic value at the time of their respective measurement dates. If a
stock option is not considered as issued with an exercise price of at 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, our Board of Directors authorized us to assume potential tax
liabilities of certain employees, including our Chief Executive Officer and certain executive officers, relating
to options that might be subject to Section 409A and similar provisions of state law. Those liabilities totaled
$50.9 million; $44.5 million was recorded in operating expenses and $6.4 million in cost of goods sold in our
consolidated statements of operations for fiscal year 2008. We incurred $3.2 million of expense during fiscal
year 2009 consisting of interest and legal fees. We are presently discussing with the Internal Revenue Service
the application of Section 409A to Company stock options. 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 and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Item 7 of our 2007 Form 10-K.

Legal Judgment

Aspect Systems, Inc. (“Aspect”) sued us for breach of contract and various business torts arising out of a
transaction in which we licensed Aspect to sell certain of our legacy Autoetch and Drytek products. The case
went to trial in the United States District Court for the District of Arizona in December of 2008, resulting in
a jury verdict in favor of Aspect. We filed an appeal from the ensuing judgment, which is now pending. We
recorded the amount of the legal judgment of $4.6 million in our consolidated statement of operations for the
year ended June 28, 2009.

Other Income (Expense), Net

Other income (expense), net, consisted of the following:

June 28,
2009

$24,283
(6,497)
922
—
(558)
$18,150

Year Ended
June 29,
2008

(in thousands)
$ 51,194
(12,674)
31,070
—
(2,045)
$ 67,545

June 24,
2007

$ 71,666
(17,817)
(1,512)
15,834
892
$ 69,063

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses) . . . . . . . . . . . . . . . . .
Favorable legal judgment . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The decrease in interest income during fiscal year 2009 compared with fiscal year 2008 is primarily due
to a decrease in our average balances of cash, cash equivalents, short-term investments, and restricted cash and
investments throughout fiscal year 2009 and, to a lesser extent, decreases in interest rate yields. The decrease in
average balances was primarily related to payment of the outstanding principal balance of $250.0 million of our
existing long-term debt with ABN AMRO Bank N.C. (“ABN AMRO”) during fiscal year 2009. The sequential
decrease in interest income during fiscal year 2008 as compared with fiscal year 2007 is primarily related to
decreases in average balances of cash, cash equivalents and short-term investments, primarily driven by the
acquisition of SEZ.

The decrease in interest expense during fiscal year 2009 as compared with the prior year was due to
our $250.0 million loan payment to ABN AMRO and to a lesser extent, decreases in interest rate yields. The
sequential decrease in interest expense in fiscal year 2008 as compared with fiscal year 2007 is primarily related
to the $100 million repayment on our long-term debt during fiscal year 2007 and a decline in interest rates.

Foreign exchanges gains in fiscal year 2009 are due to forecast variances and are related to un-hedged
portions of the balance sheet exposures, primarily in the Japanese yen, Taiwanese dollar and Euro and were
partially offset by $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 twelve months ended
June 28, 2009. Included in foreign exchange gains during fiscal year 2008 are gains associated with the acquisition
of SEZ of $42.7 million relating primarily to the settlement of a hedge of the Swiss franc. These acquisition-
related net foreign exchange gains were partially offset by other foreign exchange losses of approximately $11.6
million during fiscal year 2008 which were primarily due to our foreign currency denominated liabilities with
non-U.S. dollar functional subsidiaries where the U.S. dollar weakened against certain currencies, primarily the
Euro and Taiwan dollar resulting in the foreign exchange loss. In fiscal year 2009, we implemented a balance sheet
hedging program to manage Swiss franc, Euro and Taiwanese dollar foreign currency exchange rate fluctuations
and the impact of those fluctuations on our Consolidated Statements of Operations. These exposures are related
to the net intercompany liability positions in these currencies. A description of our exposure to foreign currency
exchange rates can be found in the Risk Factors section of this 2009 Form 10-K under the heading “Our Future
Success Depends on International Sales and Management of Global Operations.”

The favorable legal judgment of $15.8 million during fiscal year 2007 was obtained in a lawsuit filed by us
alleging breach of purchase order contracts by one of our customers. The Supreme Court of California denied
review of lower and appellate court judgments in our favor during the quarter ended September 24, 2006.

Income Tax Expense

Our annual income tax expense was $39.1 million, $137.6 million, and $161.9 million in fiscal years 2009,
2008, and 2007, respectively. Our effective tax rate for fiscal years 2009, 2008, and 2007 was (14.8%), 23.9%, and
19.1%, respectively. The decrease in the effective tax rate in fiscal year 2009 is primarily due to the Company’s
loss position. In fiscal year 2009 there were certain events that resulted in a net tax expense. These events
included favorable adjustments for previously estimated tax liabilities upon the filing of our U.S. and certain
foreign income tax returns and the R&D credit reinstatement offset by tax expense for a change in California
law, and a valuation allowance placed on certain foreign deferred tax assets.

The fiscal year 2008 effective tax rate was 23.9%, compared to the fiscal year 2007 effective tax rate of
19.1%. The increase in the effective tax rate in fiscal year 2008 is primarily due to the application of certain
foreign tax rulings, a decrease in the proportion of income in low tax jurisdictions, as well as the expiration of
the federal research tax credit which expired on December 31, 2007. The increase was partially offset by certain
events resulting in a net tax benefit of $11.6 million. These events included favorable adjustments for previously
estimated tax liabilities upon the filing of our U.S. and certain foreign income tax returns, and the reversal of tax
reserves with respect to certain transfer pricing items now settled.

Deferred Income Taxes

Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our gross
deferred tax assets, primarily comprised of reserves and accruals that are not currently deductible and tax credit
carryforwards, were $157.0 million and $173.0 million at the end of fiscal years 2009 and 2008, respectively.
These gross deferred tax assets were offset by deferred tax liabilities of $41.9 million and $53.1 million at the
end of fiscal years 2009 and 2008, respectively, and a valuation allowance of $35.5 million and $3.4 million at
the end of fiscal years 2009 and 2008, respectively.

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 $35.5 million relates to certain California and foreign deferred tax assets and
our fiscal year 2008’s valuation allowance of $3.4 million relates to certain 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 for which management believes it is
not more likely than not to be realized.

We evaluate the realizability of the deferred tax assets quarterly and will continue to assess the need for

additional valuation allowances, if any.

FIN 48

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes (FIN 48). FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial statements. FIN 48 also provides guidance on de-
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. On June 25, 2007, upon adoption of FIN 48, the cumulative effect of applying FIN 48 was reported as
an increase of the beginning balance of retained earnings of approximately $17.6 million.

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.

Critical Accounting Policies and Estimates

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 our estimates and assumptions on historical experience and on
various other assumptions believed 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.

The significant accounting policies used in the preparation of our financial statements are described in
Note 2 of our Consolidated Financial Statements. Some of these significant accounting policies are considered
to be critical accounting policies. 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.

We believe that the following critical accounting policies reflect the more significant judgments and

estimates used in the preparation of our consolidated financial statements.

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. 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. 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. 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 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 other stock plans under the provisions of Statement of Financial
Accounting Standards No. 123R (“SFAS No. 123R”). SFAS No. 123R 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.

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 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.

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.

In July 2006, the FASB issued FASB Interpretation 48, “Accounting for Income Tax Uncertainties”
(“FIN 48”). FIN 48 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
de-recognition, measurement and classification of income tax uncertainties, along with any related interest and
penalties. FIN 48 also includes guidance 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.

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 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.

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 goodwill and identifiable intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually. SFAS No. 142 also requires that intangible
assets with estimable useful lives 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”.

We review goodwill at least annually for impairment. Should certain events or indicators of impairment
occur between annual impairment tests, we would perform 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 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.

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 judgment involved in determining the
cash flows attributable to a reporting 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.

Recent Accounting Pronouncements

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, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position No. (“FSP”) 157-2, delaying the effective date
of SFAS No. 157 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 SFAS 157-3, “Determining the Fair Value
of a Financial Asset in a Market That Is Not Active,” which clarifies the application of Statement 157 when the
market for a financial asset is inactive. Specifically, FSP SFAS 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 SFAS 157-3 is effective immediately and we adopted its provisions with respect
to our financial assets and liabilities since 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 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 also establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.
SFAS No. 141R is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008.
We will adopt SFAS No. 141R in the beginning of fiscal year 2010. The accounting treatment of tax benefits
from acquired companies will change when SFAS No. 141R becomes effective. At such time, any changes to the
tax benefits associated with the valuation allowance recorded in the SEZ acquisition 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.

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. We
expect to adopt SFAS No. 160 in the beginning of fiscal year 2010 and we do not believe the adoption of SFAS
No. 160 will have a material impact on our results of operations or 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 which requires expanded and enhanced disclosure for derivative instruments, including those
used in hedging activities. See Note 4 of Notes to 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. The
adoption of FSP SFAS 142-3 did not have a material impact on our results of operations or 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 is effective for interim and annual periods
ending after June 15, 2009. We adopted FSP SFAS 157-4 during the quarter ended June 28, 2009. The adoption
did not have a material impact on our consolidated results of operations or 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 and APB 28-1 is effective for interim periods ending after
June 15, 2009. The adoption of FSP SFAS 107-1 and APB 28-1 will result in expanded disclosures but will not
have a material impact on our consolidated results of operations or financial condition.

In April 2009, the FASB issued FASB Staff Position Statement of Financial Accounting Standards 115-2
and 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2”). This
FSP amends the requirements for the recognition and measurement of other-than-temporary impairments for
debt securities by modifying the pre-existing “intent and ability” indicator. Under FSP SFAS 115-2, for impaired
debt securities, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is
more likely than not that the security will be required to be sold before recovery, or the security is not expected
to recover the entire amortized cost basis of the security. Additionally, FSP SFAS 115-2 changes the presentation
of other-than-temporary impairments in the income statement for those impairments attributed to credit losses.
FSP SFAS 115-2 is effective for interim and annual reporting periods ending after June 15, 2009. We adopted
FSP SFAS 115-2 on March 30, 2009 and the adoption did not have a material impact on our consolidated results
of operations or financial condition. See Note 4 of Notes to Consolidated Financial Statements for the disclosures
required by FSP SFAS 115-2.

that is, whether the date represents the date the financial statements were issued or were available to be issued.
The provisions of SFAS No. 165 are effective for interim and annual reporting periods ending after June 15, 2009.
In accordance with SFAS No. 165, we evaluated subsequent events through August 26, 2009, the date of issuance
of the consolidated financial statements. During the periods from June 28, 2009 to August 26, 2009, we did not
have any material recognizable subsequent events.

Liquidity and Capital Resources

Total gross cash, cash equivalents, short-term investments, and restricted cash and investments balances
were $757.8 million at the end of fiscal year 2009 compared to $1.2 billion at the end of fiscal year 2008. This
decrease was primarily due to our payment of the outstanding principal balance of our long-term debt with
ABN AMRO Bank N.V. of $250 million during fiscal year 2009, cash used for operations of $(78.1) million, and
capital expenditures of $44.3 million.

Cash Flows from Operating Activities

Net cash used for operating activities of $(78.1) million during fiscal year 2009 consisted of (in millions):

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . .
Net tax benefit on equity-based compensation plans . . . . . .
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating asset accounts. . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(302.1)

72.4
53.0
96.3
65.5
(8.0)
30.5
(95.1)
9.4
$ (78.1)

Significant changes in operating asset and liability accounts included the following uses of cash: a decrease
in accrued expenses and other liabilities of approximately $177.3 million primarily related to decreases in taxes
payable, accrued compensation and installation and warranty liabilities. Additional uses of cash included
decreases in accounts payable and deferred profit. All of these changes were primarily attributable to lower
business volume. These uses of cash were partially offset by decreases in accounts receivable of $152.1 million,
inventories of $46.1 million and prepaid expenses and other assets of $5.9 million, which were also primarily
due to lower business volume.

Cash Flows from Investing Activities

Net cash provided by investing activities during fiscal year 2009 was $6.0 million which was primarily
due to net sales/maturities of investments of $173.8 million, partially offset by a transfer of restricted cash
and investments of $92.2 million, capital expenditures of $44.3 million and acquisitions of businesses of
$19.5 million.

Cash Flows from Financing Activities

Net cash used for financing activities during fiscal year 2009 was $(260.8) million which was primarily
due to principal payments on long-term debt and capital leases of $256.0 million, which included our payment
of the outstanding principal balance of our long-term debt with ABN AMRO Bank N.V. of $250 million during
fiscal year 2009.

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, our levels of cash, cash equivalents, and short-term investments at
June 28, 2009 are expected to 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. Should 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, 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.

Off-Balance Sheet Arrangements and Contractual Obligations

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 discussed 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 relating to these agreements, and our guarantees are included in the following table. The
amounts in the table below exclude $103.0 million of liabilities under FIN 48 as we are unable to reasonably
estimate the ultimate amount or time of settlement. See Note 14, “Income Taxes” of Notes to Consolidated
Financial Statements for further discussion.

Operating
Leases

Capital
Leases

Purchase
Obligations

Long-term
Debt and
Interest Expense

Total

(in thousands)

Payments due by period:

Less than 1 year . . . . . . . . . . . . . . . . . . . . . .
1-3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3-5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,945 $ 1,940
3,788
14,053
3,560
16,276
12,252
145,917
$186,191 $21,540

$103,247
66,006
33,819
16,671
$219,743

$ 4,293
19,607
4,030
—
$27,930

$119,425
103,454
57,685
174,840
$455,404

Operating Leases

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 $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
us 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 were 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. On
December 1, 2008, we completed construction of one of the two Livermore properties. We completed construction
on the second property on June 1, 2009. Upon completion of construction, our occupation of each Livermore
property was no longer governed by its Construction Agreement, and was instead governed by the relevant
Operating Lease.

Under each Operating Lease, we may, at our 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 are required, pursuant to the terms of the Operating Leases and associated documents, to maintain
collateral in an aggregate of approximately $164.9 million in separate interest-bearing accounts as security for
our obligations under the Operating Leases. As of June 28, 2009, we had $164.9 million recorded as restricted
cash 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 $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 $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 us.

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

Capital 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

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 June 28, 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 June 28, 2009, vendor-owned inventories held at our locations and not reported as our inventory were
$13.4 million.

Long-Term Debt

During fiscal year 2009, we paid the outstanding principal balance of $250.0 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. 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 $27.1 million as of June 28, 2009 is the result of obligations assumed in
connection with the acquisition of SEZ, consisting of various bank loans and government subsidized technology
loans supporting operating needs.

Guarantees

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 June 28, 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.

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

Warranties

We offer standard warranties on our systems that generally run 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Investments

We maintain an investment portfolio of various holdings, types, and maturities. As of June 28, 2009,
these securities are classified as available-for-sale and consequently are recorded in the Consolidated Balance
Sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other
comprehensive income, net of tax.

Fixed Income Securities

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and
variable rate long-term debt. At any time, a sharp rise in interest rates could have a material adverse impact
on the fair value of our fixed income investment portfolio. Conversely, declines in interest rates could have a
material adverse impact on interest income for our investment portfolio. We target to 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. The following table presents the hypothetical fair values of fixed income

securities as a result of selected potential market decreases and increases in interest rates. Market changes reflect
immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and
150 BPS. The hypothetical fair values as of June 28,2009 are as follows:

Valuation of Securities
Given an Interest Rate
Decrease of X Basis Points
(100 BPS)

(50 BPS)

(150 BPS)

Municipal Notes and Bonds . . . $106,193 $105,334 $104,476
US Treasury & Agencies . . . . .
24,482
Government-Sponsored

24,780

25,078

Fair Value as of
June 28, 2009
0.00%
(in thousands)
$103,618
24,184

Valuation of Securities
Given an Interest Rate
Increase of X Basis Points
100 BPS

50 BPS

150 BPS

$102,759 $101,901 $101,043
23,289

23,587

23,885

Enterprises . . . . . . . . . . . . .
Foreign Government . . . . . . . . .
Bank and Corporate Notes . . . .
Mortgage Backed Securities —
Residential . . . . . . . . . . . . . .
Mortgage Backed Securities —
Commercial . . . . . . . . . . . . .

6,421
1,025
229,179

6,388
1,025
228,843

6,355
1,025
228,507

6,323
1,024
228,171

6,290
1,024
227,835

6,257
1,024
227,499

6,225
1,023
227,163

11,868

11,789

11,709

11,630

11,551

11,472

11,393

13,524
Total . . . . . . . . . . . . . . . . . . . . . $393,450 $391,764 $390,078

13,688

13,606

13,442
$388,392

13,361

13,197
$386,706 $385,020 $383,333

13,279

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.

Publicly Traded Equity Securities

The values of our equity investments in publicly traded equity securities are subject to equity price risk. The
following table presents the hypothetical fair values of our publicly traded equity securities as a result of selected
potential decreases and increases in the price of each equity security in the portfolio. Potential fluctuations in the
price of each equity security in the portfolio of plus or minus 10%, 15%, 25% were selected based on potential
near-term changes in those security prices. The hypothetical fair values as of June 28, 2009 are as follows:

Valuation of Securities
Given an X% Decrease
in Stock Price
(15%)

(10%)

(25%)

Publicly traded equity securities . . . . . . . . . . $4,494 $5,093 $5,393

Foreign Currency Derivatives

Fair Value as of
June 28, 2009
0.00%
(in thousands)
$5,992

Valuation of Securities
Given an X% Increase
in Stock Price
15%

25%

10%

$6,591 $6,891 $7,490

We conduct business on a global basis in several major international currencies. As such, 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 except for certain of our revenues that are denominated
in Japanese yen, certain revenues and expenses denominated in the Euro, certain of our spares and service
contracts which are denominated in various currencies, and expenses related to our non-U.S. sales and support
offices which are denominated in the related countries’ local currency. We currently enter into foreign exchange
forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on Japanese
yen-denominated assets and forecasted Japanese yen-denominated revenue and on net intercompany liability
exposures denominated in Swiss francs, Euros and Taiwanese dollars. We currently believe these are our primary
exposures to currency rate fluctuation.

To protect against the reduction in value of forecasted Japanese yen-denominated revenues, we enter into
foreign currency forward exchange rate contracts that generally expire within 12 months, and no later than
24 months. These foreign currency forward exchange rate contracts are designated as cash flow hedges and are

carried on our 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 earnings in the same period
the hedged revenue is recognized. We also enter into foreign currency forward contracts to hedge the gains
and losses generated by the remeasurement of Japanese yen-denominated net receivable balances against the
U.S. dollar and net intercompany liability exposures denominated in Swiss francs, Euros and Taiwanese dollars.
The change in fair value of these balance sheet hedge contracts 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
and trade receivables also recorded in other income and expense, assuming the hedge contract fully covers the
intercompany and trade receivable balances.

The notional amount and unrealized gain of our outstanding forward contracts that are designated as cash
flow hedges as of June 29, 2008 is shown in the table below. This table also shows the change in fair value of
these cash flow hedges assuming a hypothetical foreign currency exchange rate movement of plus-or-minus
10 percent and plus-or-minus 15 percent.

Notional
Amount

Unrealized
FX Loss /(Gain)
June 28, 2009

Valuation of FX Contracts
Given an X% Increase (+) /
Decrease (-) in Each FX Rate

+ /-

(10%)

+ /-

(15%)

(in $ Millions)

Cash Flow Hedge
Forward Contracts Sold . . . . . .

JPY/USD

$24.1

$ 0.0

+/-

$2.4

+/-

$3.6

The notional amount and unrealized loss of our outstanding foreign currency forward contracts that are
designated as balance sheet hedges as of June 28, 2009 is shown in the table below. This table also shows the
change in fair value of these balance sheet hedges, assuming a hypothetical foreign currency exchange rate
movement of plus-or-minus 10 percent and plus-or-minus 15 percent. These changes in fair values would be
offset in other income and expense by corresponding change in fair values of the foreign currency denominated
intercompany and trade receivables assuming the hedge contract fully covers the intercompany and trade
receivable balances.

Notional
Amount

Unrealized
FX Loss /(Gain)
June 28, 2009

Valuation of FX Contracts
Given an X% Increase (+) /
Decrease (-) in Each FX Rate

+ /-

(10%)

+ /-

(15%)

(in $ Millions)

JPY/USD $ 16.8
USD/CHF $(138.8)
USD/TWD $ (42.7)
USD/EUR $ (97.6)
$(262.3)

$(0.1)
$(0.0)
$ 0.1
$ 0.0
$ 0.1

+/-
+/-
+/-
+/-
+/-

$ (1.7)
$13.9
$ 4.3
$ 9.8
$26.2

+/-
+/-
+/-
+/-
+/-

$ (2.5)
$20.8
$ 6.4
$14.6
$39.4

Balance Sheet Hedge

Forward Contracts Sold . . . . . .

Long-Term Debt

Our long-term debt includes $3.3 million of variable rate debt based on local LIBOR rates plus a spread
of 0.875 and is subject to adverse as well as beneficial changes in interest expense due to fluctuation in
interest rates.

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 June 28, 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.

Item 8. Financial Statements and Supplementary Data

The Consolidated Financial Statements required by this Item are set forth on the pages indicated in
Item 15(a). The unaudited quarterly results of our operations for our two most recent fiscal years are incorporated
herein by reference under Item 6, “Selected Financial Data”.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), as of June 28, 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.

Changes in Internal Control over Financial Reporting

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.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management has used
the framework set forth in the report entitled “Internal Control — Integrated Framework” published by the
Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the
Company’s internal control over financial reporting. Based on that evaluation, management has concluded that
the Company’s internal control over financial reporting was effective as of June 28, 2009 at providing reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.

Ernst & Young LLP, an independent registered public accounting firm, has audited the Company’s internal control

over financial reporting, as stated in their report, which is included in Part IV, Item 15 of this 2009 Form 10-K.

Effectiveness of Controls

While we believe the present design of our disclosure controls and procedures and internal control over
financial reporting is effective at the reasonable assurance level, 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.

Item 9B. Other Information

None.

PART III

We have omitted from this 2009 Form 10-K certain information required by Part III because we, as the
Registrant, will file a definitive proxy statement with the Securities and Exchange Commission (SEC) within
120 days after the end of our fiscal year, pursuant to Regulation 14A, as promulgated by the SEC, for our
Annual Meeting of Stockholders to be held November 5, 2009 (the “Proxy Statement”), and certain information
included therein is incorporated by reference. (However, the Reports of the Audit Committee and Compensation
Committee in the Proxy Statement are expressly not incorporated by reference herein.) For information regarding
our executive officers, see Part I, Item 1 of this 2009 Form 10-K under the caption “Executive Officers of the
Company”, which information is incorporated herein by this reference.

Item 10. Directors, Executive Officers, and Corporate Governance

The information concerning our directors required by this Item is incorporated by reference to our Proxy

Statement under the heading “Proposal No. 1 — Election of Directors.”

The information concerning our audit committee and audit committee financial experts required by this

Item is incorporated by reference to our Proxy Statement under the heading “Corporate Governance.”

The information concerning compliance by our officers, directors and 10% shareholders with Section 16
of the Exchange Act required by this Item is incorporated by reference to our Proxy Statement under the heading
“Section 16(a) Beneficial Ownership Reporting Compliance.”

Lam has adopted a Corporate Code of Ethics that applies to all employees, officers, and directors of the Company.
Our Code of Ethics is publicly available on the investor relations page of our website at www.lamresearch.com. To
the extent required by law, any amendments to, or waivers from, any provision of the Code of Ethics will promptly
be disclosed to the public. To the extent permitted by such legal requirements, we intend to make such public
disclosure by posting the relevant material on our website in accordance with SEC rules.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to our Proxy Statement under the

heading “Executive Compensation and Other Information.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this Item is incorporated by reference to our Proxy Statement under the
headings “Proposal No. 1 — Election of Directors”, “Security Ownership of Certain Beneficial Owners and
Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference to our Proxy Statement under the

heading “Certain Relationships and Related Transactions.”

Item 14. Principal Accounting Fees and Services

The information required by this Item is incorporated by reference to our Proxy Statement under the

heading “Relationship with Independent Registered Public Accounting Firm.”

Item 15. Exhibits, Financial Statement Schedules

(a)

1. Index to Financial Statements

PART IV

Consolidated Balance Sheets — June 28, 2009 and June 29, 2008 . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations — Years Ended June 28, 2009,

June 29, 2008, and June 24, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows — Years Ended June 28, 2009,

June 29, 2008, and June 24, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity — Years Ended June 28, 2009,

June 29, 2008, and June 24, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . .
Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

51
53
89
93

Schedules, other than those listed above, have been omitted since they are not applicable/

not required, or the information is included elsewhere herein.

3. See (c) of this Item 15, which is incorporated herein by reference.

(c)

The list of Exhibits follows page 95 of this 2009 Form 10-K and is incorporated herein by this

reference.

LAM RESEARCH CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of

$10,719 as of June 28, 2009 and $4,102 as of June 29, 2008 . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt and capital leases . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized —

June 28,
2009

June 29,
2008

374,167
205,221

732,537
326,199

253,585
233,410
69,043
60,401
1,195,827
215,666
178,439
17,007
169,182
91,605
84,145
$ 1,951,871

49,606
240,022
45,787
5,348
340,763
40,886
102,999
14,134
498,782
—

412,356
282,218
96,748
67,649
1,917,707
235,735
146,072
19,793
281,298
121,889
84,261
$ 2,806,755

89,158
389,845
128,250
30,426
637,679
276,503
85,611
23,018
1,022,811
5,347

5,000 shares, none outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Common stock, at par value of $0.001 per share; authorized —
400,000 shares; issued and outstanding — 126,532 shares
at June 28, 2009 and 125,187 shares at June 29, 2008 . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 34,679 shares at June 28, 2009 and 34,220 shares

at June 29, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127
1,377,231

125
1,332,159

(1,495,693)
(52,822)
1,624,246
1,453,089
$ 1,951,871

(1,490,701)
10,620
1,926,394
1,778,597
$ 2,806,755

See Notes to Consolidated Financial Statements

LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold — restructuring and asset impairments . . .
Cost of goods sold — 409A expense . . . . . . . . . . . . . . . . . . . .
Total costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative. . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and asset impairments . . . . . . . . . . . . . . . . . . . . . .
409A expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other income (expense), net:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .
Favorable legal judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) per share:

June 28,
2009
$1,115,946
706,219
20,993
—
727,212
388,734
288,269
233,061
96,255
44,513
3,232
4,647
—
669,977
(281,243)

24,283
(6,497)
922
—
(558)
(263,093)
39,055
$ (302,148)

YEAR ENDED
June 29,
2008
$2,474,911
1,282,494
12,610
6,401
1,301,505
1,173,406
323,759
287,282
—
6,366
44,494
—
2,074
663,975
509,431

51,194
(12,674)
31,070
—
(2,045)
576,976
137,627
$ 439,349

June 24,
2007
$2,566,576
1,261,522
—
—
1,261,522
1,305,054
285,348
241,046
—
—
—
—
—
526,394
778,660

71,666
(17,817)
(1,512)
15,834
892
847,723
161,907
$ 685,816

Basic net income (loss) per share. . . . . . . . . . . . . . . . . . . . . . .
Diluted net income (loss) per share . . . . . . . . . . . . . . . . . . . . .

$
$

(2.41)
(2.41)

$
$

3.52
3.47

$
$

4.94
4.85

Number of shares used in per share calculations:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125,595
125,595

124,647
126,504

138,714
141,524

See Notes to Consolidated Financial Statements

LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

June 28,
2009

YEAR ENDED
June 29,
2008

June 24,
2007

$(302,148)

$ 439,349

685,816

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided (used for) by operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on settlement of call option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating asset accounts:

Accounts receivable, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and maturities of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of call option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from settlement of call option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of restricted cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reissuances of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Schedule of noncash transactions

72,417
30,545
65,506
53,042
(14,294)
6,273
—
96,255
9,353

152,086
46,052
5,888
(39,381)
(82,464)
(177,259)
(78,129)

(44,282)
(19,457)
—
(209,298)
383,062
—
—
(3,439)
(8,375)
(92,206)
6,005

54,704
(26,661)
18,976
42,516
83,472
(58,904)
(33,839)
—
(3,319)

99,887
19,684
(21,972)
(40,125)
(64,007)
80,558
590,319

(76,803)
(482,574)
—
(310,873)
329,695
(13,506)
47,345
(4,560)
—
15,471
(495,805)

(256,047)
625
(6,273)
(30,946)
19,797
12,014
(260,830)
(25,416)
(358,370)
732,537
$ 374,167

(251,714)
251,915
58,904
(14,552)
8,563
12,694
65,810
(1,754)
158,570
573,967
$ 732,537

Acquisition of leased equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

454

$ 21,784

Supplemental disclosures:

Cash payments for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
7,808
$ 33,583

$ 10,900
$ 74,243

See Notes to Consolidated Financial Statements

38,097
17,055
—
35,554
62,437
(44,990)
—
—
625

(513)
(56,336)
(19,180)
9,055
51,112
44,827
823,559

(59,968)
(181,108)
3,000
(1,058,081)
1,103,311
—
—
—
—
110,000
(82,846)

(100,171)
—
44,990
(1,083,745)
18,123
42,468
(1,078,335)
774
(336,848)
910,815
573,967

—

17,700
53,508

$
$

LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Balance at June 25, 2006. . . . . . . . . . . . . . .
Sale of common stock . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . .
Income tax benefit on equity-based

compensation plans . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Components of comprehensive income:

Net income . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation

adjustment . . . . . . . . . . . . . . . . . . .

Unrealized gain on fair value
of derivative financial
instruments, net . . . . . . . . . . . . . . .

Unrealized gain on financial

instruments, net . . . . . . . . . . . . . . .

Less: reclassification adjustment for

losses included in earnings . . . . . .
Total comprehensive income . . . . .
Adjustment to initially apply

SFAS No. 158 . . . . . . . . . . . . .
Balance at June 24, 2007. . . . . . . . . . . . . . .
Sale of common stock . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . .
Tender offer . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit on equity-based

compensation plans . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Adoption of FIN 48 . . . . . . . . . . . . . . . . . . .
Components of comprehensive income:

Net income . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation

adjustment . . . . . . . . . . . . . . . . . . .

Unrealized gain on fair value
of derivative financial
instruments, net . . . . . . . . . . . . . . .

Unrealized gain on financial

instruments, net . . . . . . . . . . . . . . .

COMMON
STOCK
SHARES
141,785
2,388
(21,202)

COMMON
STOCK
$142
2
(21)

ADDITIONAL
PAID-IN
CAPITAL,
$1,051,851
42,466
—

TREASURY
STOCK
$ (416,447)
—
(1,083,724)

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
$(11,205)
—
—

—
564
—

—

—
—

—
1
—

—

—
—

62,437
1,907
35,554

—
17,002
—

—

—
—

—

—
—

—
—
—

—

1,755

5,355

505
—

RETAINED
TOTAL
EARNINGS
$ 1,408,764
$ 784,423
—
42,468
— (1,083,745)

—
(787)
—

62,437
18,123
35,554

685,816

—

—
—

1,755

5,355

505
693,513

—
123,535
1,703
(287)
—

—
$124
1
—
—

—
$1,194,215
12,695
—
(2,282)

—
$(1,483,169)
—
(14,552)
—

(794)
$ (4,302)
—
—
—

—
$1,469,452
—
—
—

(794)
$ 1,176,320
12,696
(14,552)
(2,282)

—
236
—
—

—

—
—
—
—

—

74,865
1,543
42,516
8,607

—

—
7,020
—
—

—

—
—
—
—

—

12,557

398

2,787

(461)
(359)
—
$ 10,620

—
—
—
17,593

74,865
8,563
42,516
26,200

439,349

—

12,557

398

2,787

—
—
—
$1,926,394

(461)
(359)
454,271
$ 1,778,597

Less: reclassification adjustment for

gains included in earnings . . . . . . .
SFAS No. 158 adjustment . . . . . . .
Total comprehensive income . . . . .
Balance at June 29, 2008. . . . . . . . . . . . . . .

—
—
—
125,187

—
—
—
$125

—
—
—
$1,332,159

—
—
—
$(1,490,701)

LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY – (continued)
(in thousands)

Sale of common stock . . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . .
Income tax benefit on equity-based

compensation plans . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Components of comprehensive loss:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation

adjustment . . . . . . . . . . . . . . . . . . .

Unrealized loss on fair value
of derivative financial
instruments, net . . . . . . . . . . . . . . .

Unrealized gain on financial

instruments, net . . . . . . . . . . . . . . .

COMMON
STOCK
SHARES
1,806
(1,367)

—
906
—

—

COMMON
STOCK

2
(1)

—
1
—

—

ADDITIONAL
PAID-IN
CAPITAL,
12,012
—

TREASURY
STOCK
—
(30,945)

(14,294)
(6,157)
53,511

—
25,953
—

—

Less: reclassification adjustment for

losses included in earnings . . . . . .
SFAS No. 158 adjustment. . . . . . . . . . .
Total comprehensive loss. . . . . . . .
Balance at June 28, 2009. . . . . . . . . . . . . . .

—
—
—
126,532

—
—
—
$127

—
—
—
$1,377,231

—
—
—
$(1,495,693)

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)

RETAINED
EARNINGS

—
—

—
—
—

—

(58,587)

(6,633)

1,192

501
85
—
$(52,822)

TOTAL
12,014
(30,946)

(14,294)
19,797
53,511

—
—

—
—
—

(302,148)

—

(58,587)

(6,633)

1,192

—
—
—
$1,624,246

501
85
(365,590)
$ 1,453,089

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 2009

Note 1: Company and Industry Information

The Company designs, manufactures, markets, and services semiconductor processing equipment used
in the fabrication of integrated circuits. Semiconductor wafers are subjected to a complex series of process and
preparation steps that result in the simultaneous creation of many individual integrated circuits. The Company
leverages its expertise in these areas to develop integrated processing solutions which typically benefit its
customers through reduced cost, lower defect rates, enhanced yields, or faster processing time. The Company
sells its products and services primarily to companies involved in the production of semiconductors in the United
States, Europe, Taiwan, Korea, Japan, and Asia Pacific.

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 the Company’s 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 the Company’s ability to develop and market competitive
products. For these and other reasons, the Company’s results of operations for fiscal years 2009, 2008, and 2007
may not necessarily be indicative of future operating results.

Note 2: Summary of Significant Accounting Policies

The preparation of financial statements, in conformity with U.S. generally accepted accounting principles
requires management to make 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. The Company based its estimates and assumptions on historical experience and
on various other assumptions believed to be applicable, and evaluates them on an on-going basis to ensure they
remain reasonable under current conditions. Actual results could differ significantly from those estimates.

Revenue Recognition: The Company recognizes 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 the Company has completed its system
installation obligations, received customer acceptance or is otherwise released from its installation or customer
acceptance obligations. In the event that terms of the sale provide for a lapsing customer acceptance period,
the Company recognizes 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, the Company recognizes 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 the Company receives customer acceptance or is otherwise released from its 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. The Company maintains a perpetual inventory
system and continuously records the quantity on-hand and standard cost for each product, including purchased
components, subassemblies, and finished goods. The Company maintains the integrity of perpetual inventory

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

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, the Company assumes title transfers when it completes 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 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. 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 the Company’s legal entities are eliminated from its consolidated
financial statements.

Management evaluates the need to record adjustments for impairment of inventory at least quarterly. The
Company’s 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. Estimates of market value include, but are not limited to, management’s forecasts
related to the Company’s future manufacturing schedules, customer demand, technological and/or market
obsolescence, general semiconductor market conditions, possible alternative uses, and ultimate realization
of excess inventory. If future customer demand or market conditions are less favorable than the Company’s
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. The Company offers standard warranties for our
systems that generally run for a period of 12 months from system acceptance. When appropriate, the Company
records 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 the
Company’s original estimates. While the Company periodically monitors the performance and cost of warranty
activities, if actual costs incurred are different than its estimates, the Company may recognize adjustments
to provisions in the period in which those differences arise or are identified. The Company does not maintain
general or unspecified reserves; all warranty reserves are related to specific systems. In addition to the provision
of standard warranties, the Company offers 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: The Company
accounts for its 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 requires the recognition of
the fair value of equity-based compensation in net income. The fair value of the Company’s restricted stock
units was calculated based upon the fair market value of Company stock at the date of grant. The fair value of
the Company’s 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

of equity-based awards is amortized over the vesting period of the award and the Company has 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.

The Company makes quarterly assessments of the adequacy of its tax credit pool related to equity-based
compensation to determine if there are any deficiencies that require recognition in its consolidated statements
of operations. As a result of the adoption of SFAS No. 123R, the Company 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 the Company have been utilized. In addition, the Company has 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. The Company has 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. The Company 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.

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.
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 future taxable income.
The Company believes 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 the Company determines that it would not be able to realize all or part of its net deferred tax assets,
an adjustment would be charged to earnings in the period such determination is made. Likewise, if the Company
later determines that it is more likely than not that the deferred tax assets would be realized, then the previously
provided valuation allowance would be reversed.

The Company calculates its 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.

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

In July 2006, the FASB issued FASB Interpretation 48, “Accounting for Income Tax Uncertainties”
(“FIN 48”). The Company adopted FIN 48 on June 25, 2007. FIN 48 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 de-recognition, measurement and classification of income tax uncertainties,
along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income
tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income
tax uncertainties. The Company 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 the Company’s tax provision in a subsequent period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the
application of complex tax regulations. As a result of the implementation of FIN 48, the Company recognizes
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 the Company 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 the Company to determine the probability of various
possible outcomes. The Company reevaluates 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.

Goodwill and Intangible Assets: The Company accounts 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 goodwill and identifiable intangible assets with indefinite useful
lives no longer be amortized, but instead be tested for impairment at least annually. SFAS No. 142 also requires
that intangible assets with estimable useful lives 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”.

The Company reviews goodwill at least annually for impairment. Should certain events or indicators
of impairment occur between annual impairment tests, the Company would perform an impairment test of
goodwill at that date. In testing for a potential impairment of goodwill, the Company: (1) allocates goodwill to its
various reporting units to which the acquired goodwill relates; (2) estimates the fair value of its reporting units;
and (3) determines 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 function. Furthermore,
if the estimated fair value of a reporting unit is less than the carrying value, the Company 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 the Company’s annual or periodic analyses, the Company makes estimates and judgments about the future
cash flows of that reporting unit. Although the Company’s cash flow forecasts are based on assumptions that are
consistent with its plans and estimates it is using to manage the underlying businesses, there is significant judgment
involved in determining the cash flows attributable to a reporting unit. In addition, the Company makes certain
judgments about allocating shared assets to the estimated balance sheets of its reporting units. The Company
also considers the Company’s and its competitor’s market capitalization on the date it performs 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, the Company may be required to record an impairment charge to write down the asset to its
realizable value.

Fiscal Year: The Company follows a 52/53-week fiscal reporting calendar and its fiscal year ends on the
last Sunday of June each year. The Company’s most recent fiscal year ended on June 28, 2009 and included 52
weeks. The fiscal year ended June 29, 2008 included 53 weeks and the fiscal year ended June 24, 2007 included
52 weeks. The Company’s next fiscal year, ending on June 27, 2010, will include 52 weeks.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Principles of Consolidation: The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated
in consolidation.

Cash Equivalents and Short-Term Investments: All investments purchased with an original final maturity
of three months or less are considered to be cash equivalents. All of the Company’s short-term investments are
classified as available-for-sale at the respective balance sheet dates. The Company accounts for its investment
portfolio at fair value. The investments classified as available-for-sale are recorded at fair value based upon
quoted market prices, and any material temporary difference between the cost and fair value of an investment
is presented as a separate component of accumulated other comprehensive income (loss). Unrealized losses
are charged against “Other income (expense)” when a decline in fair value is determined to be other than-
temporary. The Company considers several factors to determine whether a loss is other-than-temporary. These
factors include but are not limited to: (i) the extent to which the fair value is less than cost basis, (ii) the financial
condition and near term prospects of the issuer, (iii) the length of time a security is in an unrealized loss position
and (iv) the Company’s ability to hold the security for a period of time sufficient to allow for any anticipated
recovery in fair value. The Company’s ongoing consideration of these factors could result in additional
impairment charges in the future, which could adversely affect its results of operation. An other-than-temporary
impairment is triggered when there is an intent to sell the security, it is more likely than not that the security
will be required to be sold before recovery, or the security is not expected to recover the entire amortized cost
basis of the security. Other-than-temporary impairments attributed to credit losses are recognized in the income
statement. There was an impairment charge of approximately $0.3 million and $1.0 million recorded in fiscal
years 2009 and 2008, respectively. There were no impairment charges recorded on the Company’s investment
portfolio in fiscal year 2007. The specific identification method is used to determine the realized gains and
losses on investments.

Property and Equipment: Property and equipment is stated at cost. Equipment is depreciated by the straight-
line method over the estimated useful lives of the assets, generally three to eight years. Furniture and fixtures
are depreciated by the straight-line method over the estimated useful lives of the assets, generally five years.
Software is depreciated by the straight-line method over the estimated useful lives of the assets, generally three
to five years. Buildings are depreciated by the straight-line method over the estimated useful lives of the assets,
generally twenty-five to thirty-three years. Leasehold improvements are generally amortized by the straight-line
method over the shorter of the life of the related asset or the term of the underlying lease. Amortization of capital
leases is included with depreciation expense.

Impairment of Long-Lived Assets (Excluding Goodwill): The Company routinely considers whether
indicators of impairment of long-lived assets are present. If such indicators are present, the Company determines
whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than
their carrying value. If the sum is less, the Company recognizes an impairment loss based on the excess of
the carrying amount of the assets over their respective fair values. Fair value is determined by discounted
future cash flows, appraisals or other methods. If the assets determined to be impaired are to be held and used,
the Company recognizes an impairment charge to the extent the present value of anticipated net cash flows
attributable to the asset are less than the asset’s carrying value. The fair value of the asset then becomes the
asset’s new carrying value, which the Company depreciates over the remaining estimated useful life of the asset.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

Derivative Financial Instruments: The Company carries derivative financial instruments (derivatives) on
the 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), Statement of Financial
Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”
(“SFAS No. 149”), and Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative
Instruments and Hedging Activities — An Amendment of FASB Statement 133” (“SFAS No. 161”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The Company has a policy that allows the use of derivative financial instruments, specifically foreign
currency forward exchange rate contracts, to hedge foreign currency exchange rate fluctuations on forecasted
revenue transactions denominated in Japanese yen and other foreign currency denominated assets. The Company
does not use derivatives for trading or speculative purposes.

The Company’s policy is to attempt to minimize short-term business exposure to foreign currency exchange
rate risks 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 the 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 currency forward exchange rate contracts that generally expire within 12 months, and no later than
24 months. These foreign currency forward exchange 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.

Each period, hedges are tested for effectiveness using regression testing. Changes in the fair value of
currency forwards due to changes in time value are excluded from the assessment of effectiveness and are
recognized in revenue in the current period. To qualify for hedge accounting, the hedge relationship must meet
criteria relating both to the derivative instrument and the hedged item. These 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 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 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 investments in 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.

The Company also enters 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 on net intercompany liability exposures denominated in Swiss francs, Euros and
Taiwanese dollars. Under SFAS No. 133 and SFAS No. 149, these 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 and trade receivables, recorded in other income and expense, assuming the hedge contract fully
covers the intercompany and trade receivable balances.

To hedge foreign currency risks, the Company uses foreign currency exchange forward contracts, where
possible and practical. These forward contracts are valued using standard valuation formulas with assumptions
about future foreign currency exchange rates derived from existing exchange rates and interest rates observed
in the market.

The Company considers its most current outlook in determining the level of foreign currency denominated
intercompany revenues to hedge as cash flow hedges. The Company combines these forecasts with historical
trends to establish the portion of its expected volume to be hedged. The revenues are hedged and designated as
cash flow hedges to protect the Company from exposures to fluctuations in foreign currency exchange rates. In

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the
related hedge gains and losses on the cash flow hedge are reclassified from accumulated other comprehensive
income (loss) to interest and other income (expense) on the consolidated statement of operations at that time.

The Company does not believe that it is or was exposed to more than a nominal amount of credit risk in
its interest rate and foreign currency hedges, as counterparties are established and well-capitalized financial
institutions. The Company’s exposures are in liquid currencies (Japanese yen and Euro), so there is minimal risk
that appropriate derivatives to maintain the Company’s hedging program would not be available in the future.

Guarantees: The Company accounts for guarantees in accordance with FASB Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees to
Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34”
(“FIN No. 45”). Accordingly, the Company evaluates its guarantees to determine whether (a) the guarantee
is specifically excluded from the scope of FIN No. 45, (b) the guarantee is subject to FIN No. 45 disclosure
requirements only, but not subject to the initial recognition and measurement provisions, or (c) the guarantee
is required to be recorded in the financial statements at fair value. The Company has recorded a liability for
certain guaranteed residual values related to specific facility lease agreements. The Company has evaluated
its remaining guarantees and has concluded that they are either not within the scope of FIN No. 45 or do not
require recognition in the financial statements. These guarantees generally include certain indemnifications to
its lessors under operating lease agreements for environmental matters, potential overdraft protection obligations
to financial institutions related to one of the Company’s subsidiaries, indemnifications to the Company’s
customers for certain infringement of third-party intellectual property rights by its products and services, and
the Company’s warranty obligations under sales of its products. Please see Note 13 for additional information
on the Company’s guarantees.

Foreign Currency Translation: The Company’s non-U.S. subsidiaries that operate in a local currency
environment, where that local currency is the functional currency, primarily generate and expend cash in their
local currency. Billings and receipts for their labor and services are primarily denominated in the local currency
and the workforce is paid in local currency. Their individual assets and liabilities are primarily denominated
in the local foreign currency and do not materially impact the Company’s cash flows. Accordingly, all balance
sheet accounts of these local functional currency subsidiaries are translated at the fiscal period-end exchange
rate, and income and expense accounts are translated using average rates in effect for the period, except for costs
related to those balance sheet items that are translated using historical exchange rates. The resulting translation
adjustments are recorded as cumulative translation adjustments, and are a component of accumulated other
comprehensive income (loss). Translation adjustments are recorded in other income (expense), net, where the
U.S. dollar is the functional currency.

Reclassifications: Certain amounts presented in the comparative financial statements for prior years have

been reclassified to conform to the fiscal year 2009 presentation.

Note 3: Recent Accounting Pronouncements

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, the
Financial Accounting Standards Board (FASB) issued FASB Staff Position (“FSP”) No. 157-2, delaying the
effective date of SFAS No. 157 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 the
Company beginning in its fiscal year ending June 27, 2010. In October 2008, the FASB issued FSP SFAS 157-3,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

“Determining the Fair Value of a Financial Asset in a Market That Is Not Active,” which clarifies the application
of Statement 157 when the market for a financial asset is inactive. Specifically, FSP SFAS 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 SFAS 157-3 is effective immediately and we have
adopted its provisions with respect to our financial assets and liabilities since 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 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 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 also establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.
SFAS No. 141R is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008.
The Company will adopt SFAS No. 141R in the beginning of fiscal year 2010. The accounting treatment of
tax benefits from acquired companies will change when SFAS No. 141R becomes effective. At such time, any
changes to the tax benefits associated with the valuation allowance recorded in the SEZ acquisition 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.

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
establishes accounting and reporting standards for the treatment of noncontrolling interests in a subsidiary.
Noncontrolling interests in a subsidiary will 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 the reclassification of minority interests to stockholders’ equity. The
Company expects to adopt SFAS No. 160 in the beginning of fiscal year 2010 and the Company does not believe
the adoption of SFAS No. 160 will have a material impact on its results of operations or 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 of Notes to Consolidated Financial
Statements for more information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

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 is effective for interim and annual periods ending after
June 15, 2009. The Company adopted FSP SFAS 157-4 during the quarter ended June 28, 2009. The adoption did
not have a material impact on the Company’s consolidated results of operations or 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 and APB 28-1 is effective for interim periods ending after
June 15, 2009. The adoption of FSP SFAS 107-1 and APB 28-1 will require expanded disclosure but will not have
a material impact on the Company’s consolidated results of operations or financial condition.

In April 2009, the FASB issued FASB Staff Position Statement of Financial Accounting Standards 115-2
and 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2”). This
FSP amends the requirements for the recognition and measurement of other-than-temporary impairments for
debt securities by modifying the pre-existing “intent and ability” indicator. Under FSP SFS 115-2, for impaired
debt securities, an other-than-temporary impairment is triggered when there is an intent to sell the security, it is
more likely than not that the security will be required to be sold before recovery, or the security is not expected
to recover the entire amortized cost basis of the security. Additionally, FSP SFAS 115-2 changes the presentation
of other-than-temporary impairments in the income statement for those impairments attributed to credit losses.
FSP SFAS 115-2 is effective for interim and annual reporting periods ending after June 15, 2009. The Company
adopted FSP SFAS 115-2 on March 30, 2009 and the adoption did not have a material impact on its consolidated
results of operations and financial condition. See Note 4 of Notes to Consolidated Financial Statements for the
disclosures required by FSP SFAS 115-2.

In May 2009, the FASB issued Statement of Financial Accounting Standards Number 165, “Subsequent
Events” (“SFAS No. 165”) which establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS
No. 165 requires the disclosure of the date at which an entity has evaluated subsequent events and the basis for
that date, that is, whether the date represents the date the financial statements were issued or were available to
be issued. The provisions of SFAS No. 165 are effective for interim and annual reporting periods ending after
June 15, 2009. In accordance with SFAS No. 165, the Company evaluated subsequent events through August 26,
2009, the date of issuance of the consolidated financial statements. During the periods from June 28, 2009 to
August 26, 2009, the Company did not have any material recognizable subsequent events.

Note 4: Financial Instruments

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. An asset or liability’s level is based on the lowest level of input that is significant to the
fair value measurement. This Statement requires that assets and liabilities carried at fair value be 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, bank and
corporate notes, and equity instruments, all of which are traded in an active market 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 government-sponsored enterprises, foreign government
issuances, bank and corporate notes, municipal notes and bonds, residential and commercial mortgage backed
securities, and 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 June 28, 2009.

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 June 28, 2009:

Total

Fair Value Measurement at June 28, 2009

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 . . . . . . . . . . . . . . . . . . . . $ 273,439
24,184
US Treasury & Agencies . . . . . . . . . . . . . . . . .
6,323
Government-Sponsored Enterprises. . . . . . . . .
1,024
Foreign Governments. . . . . . . . . . . . . . . . . . . .
228,171
Bank and Corporate Notes . . . . . . . . . . . . . . . .
103,618
Municipal Notes and Bonds . . . . . . . . . . . . . . .
11,630
Mortgage Backed Securities — Residential. . .
13,442
Mortgage Backed Securities — Commercial. .
Total Fixed Income. . . . . . . . . . . . . . . . . . . $ 661,831
5,992
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives Assets . . . . . . . . . . . . . . . . . . . . . . . . .
74
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 667,897
Liabilities
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . $

$ 273,439
24,184
—
—
183,171
—
—
—
$ 480,794
5,992
—
$ 486,786

—
—
6,323
1,024
45,000
103,618
11,630
13,442
$181,037
—
74
$ 181,111

—

—
—
—
—
—
—
—
—
$ —

$ —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The amounts in the table above are reported in the consolidated balance sheet as of June 28, 2009

as follows:

Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-Term Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash and investments . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued expenses and other current liabilities . . . . . . . . . . .

Total
$ 278,304
205,221
178,306
74
5,992
$ 667,897
69
$

Derivative Instruments and Hedging

Level 1
$ 278,304
24,184
178,306
—
5,992
$ 486,786
$

Level 2

—
181,037
—
74
—
$ 181,111
69

— $

Level 3
$—
—
—
—
—
$—
$—

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”). 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.

Cash Flow Hedges

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 $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 twelve months ended June 28, 2009. There were no gains or losses during the twelve
months ended June 29, 2008 and June 24, 2007 associated with ineffectiveness or forecasted transactions that
failed to occur. 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

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 June 28, 2009, the Company expected to reclassify the entire
amount associated with the $0.02 million of losses accumulated in other comprehensive income to earnings during
the next 12 months due to the recognition in earnings of the hedged forecasted transactions.

Balance Sheet Hedges

The Company also enters into foreign exchange forward contracts to hedge the effects of foreign currency
exchange rate fluctuations associated with foreign currency denominated assets and liabilities, primarily
intercompany receivables and payables. Under SFAS No. 133 and SFAS No. 149, 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 and trade receivables, recorded in other income and
expense, assuming the hedge contract fully covers the intercompany and trade receivable balances.

As of June 28, 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:

(in thousands)

Foreign Currency Forward

Contracts
Sell JPY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sell JPY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buy CHF . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buy EUR . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buy TWD . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,183

—
16,730
138,889
97,609
42,722
$ 295,950

The fair value of derivatives instruments in the Company’s condensed consolidated balance sheets as of

June 28, 2009 was as follows:

Fair Value of Derivative Instruments

Asset Derivatives

Liability Derivatives

Balance Sheet
Location

Fair Value

(in thousands)

Balance Sheet
Location

Fair Value

Derivatives designated as SFAS 133

hedging instruments:
Foreign exchange forward contracts . . . . Prepaid expense and

other assets

$ 6

Accrued liabilities

$ 0

Derivatives not designated as hedging
instruments under SFAS 133:
Foreign exchange forward contracts . . . . Prepaid expense and

Total derivatives . . . . . . . . . . . . . . . . . . . . . .

other assets

$ 68
$ 74

Accrued liabilities

$ (69)
$ (69)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The effect of derivative instruments designated as cash flow hedges on the Company’s consolidated

statements of operations for the year ended June 28, 2009 was as follows:

Derivatives in Cash Flow Hedging Relationships:

Gain (Loss) Recognized
(Effective Portion) (1)

Gain (Loss) Recognized
(Effective Portion) (2)

Gain (Loss) Recognized
(Ineffective Portion) (3)

(in thousands)

Gain (Loss) Recognized
(Excluded from
Effectiveness Testing) (4)

Derivatives

Designated
as SFAS 133
Hedging
Instruments:
Foreign exchange

forward
contracts . . .

$(11,840)

$ (3,485)

$(4,085)

$ 1,462

(1) Amount recognized in other comprehensive income (effective portion).

(2) Amount of gain (loss) reclassified from accumulated other comprehensive income into income (effective

portion) located in revenue.

(3) Amount of gain (loss) recognized in income on derivative (ineffective portion) located in other income

(expense), net.

(4) Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)

located in other income (expense), net.

The effect of derivative instruments not designated as cash flow hedges on the Company’s condensed

consolidated statement of operations for the twelve months ended June 28, 2009 was as follows:

Gain (Loss)
Recognized (5)
(in thousands)

Derivatives Not Designated as SFAS 133 Hedging Instruments:

Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(953)

(5) Amount of gain (loss) recognized in income located in other income (expense), net.

The Company’s primary financial instruments include its cash, cash equivalents, short-term investments,
restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt
and capital leases, and foreign currency related derivatives. The estimated fair value of cash, accounts receivable
and accounts payable approximates their carrying value due to the short period of time to their maturities.
The estimated fair value of long-term debt and capital lease obligations approximates its carrying value as the
substantial majority of these obligations have interest rates which adjust to market rates on a periodic basis.
The fair value of cash and cash equivalents, short-term investments, restricted cash and investments, long-term
investments, and foreign currency related derivatives are based on quotes from brokers using market prices for
similar instruments.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Investments

Investments at June 28, 2009 and June 29, 2008 consist of the following:

June 28, 2009

June 29, 2008

Unrealized
Gain

Unrealized
(Loss)

Cost

Fair Value

Cost

Unrealized
Gain

Unrealized
(Loss)

Fair Value

Available for Sale:
Cash and Cash Equivalents:

Cash . . . . . . . . . . . . . . . . . . $ 95,941
Fixed Income Money

$ —

$ 95,941 $

91,958

$ —

$ — $

91,958

Market Funds . . . . . . . .
Bank and Corporate Notes
(Time Deposits) . . . . . .

Total Cash and Cash

Equivalents . . . . . . . . . . . .
Short Term Investments and

Restricted Cash:
Municipal Notes and

Bonds . . . . . . . . . . . . . .
US Treasury & Agencies. . .
Government-Sponsored

Enterprises . . . . . . . . . .
Foreign Governments . . . . .
Bank and Corporate

Notes . . . . . . . . . . . . . .
Mortgage Backed Securities
— Residential . . . . . . .
Mortgage Backed Securities
— Commercial. . . . . . .

Equity Money Market

Funds . . . . . . . . . . . . . .
Total Short Term Investments

273,439

4,787

374,167

101,587
23,828

6,177
1,024

—

2,069
387

146
—

222,512

1,025

11,328

13,465

—

385

166

—

273,439

538,819

4,787

101,760

374,167

732,537

103,618
24,184

146,877
39,317

6,323
1,024

21,078

—

694
147

132

—

538,819

101,760

732,537

(413)
(71)

147,159
39,392

(84)

21,126

223,439

261,440

530

(682)

261,288

—

(38)
(31)

—
—

(98)

(83)

11,630

(189)

13,442

—

3,301

(24)

3,306

and Restricted Cash and
Investments . . . . . . . . . . . .
Total cash, cash equivalents,
short-term investments,
and restricted cash and
investments . . . . . . . . . . . . $ 754,088

379,921

4,178

(439)

383,660

472,013

1,532

(1,274)

472,271

$ 4,178

$ (439)

$757,827 $ 1,204,550

$ 1,532

$(1,274)

$ 1,204,808

The Company accounts for its investment portfolio at fair value. Net realized gains and (losses) on
investments included other-than-temporary impairment charges of $0.3 million and $1.0 million in fiscal years
2009 and 2008, respectively. Realized gains and (losses) from investments were approximately $2.2 million
and $(1.9) million in fiscal year 2009 and approximately $3.3 million and $(1.3) million in fiscal year 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

An analysis of the Company’s fixed income securities in unrealized loss positions as of June 28, 2009 is

as follows:

UNREALIZED LOSSES
LESS THAN 12 MONTHS

UNREALIZED LOSSES
12 MONTHS OR GREATER

TOTAL

Gross
Unrealized
Loss

Fair Value

Gross
Unrealized
Loss

Fair Value

Fixed Income Securities

Municipal Bonds . . . . . . . . . . . . . . . $ 6,810
US Treasury & Agencies . . . . . . . . .
4,585
Government-Sponsored

Enterprises . . . . . . . . . . . . . . . . .
Bank and Corporate Bonds . . . . . . .
Mortgage Backed Securities —

—
4,022

$ (38)
(31)

—
(12)

$ —
—

—
3,891

$ —
—

$ 6,810
4,585

$ (38)
(31)

—
(86)

—
7,914

—
(98)

Residential . . . . . . . . . . . . . . . . .

—

1,014

(272)

1,014

(272)

Mortgage Backed Securities —

Commercial . . . . . . . . . . . . . . . .

—
Total Fixed Income . . . . . . . . . . . . . . . $ 15,417

—
$ (82)

—
$4,905

—
$(358)

—
$20,322

—
$(439)

The amortized cost and fair value of cash equivalents and short-term investments and restricted cash and

investments with contractual maturities are as follows:

Due in less than one year . . . . . . . . . . . . . . . . . . . . . . .
Due in more than one year . . . . . . . . . . . . . . . . . . . . . .
No Single Maturity Date . . . . . . . . . . . . . . . . . . . . . . .

June 28, 2009

June 29, 2008

Cost

Estimated
Fair Value

Cost

Estimated
Fair Value

(in thousands)

$ 504,359
153,732
—
$ 658,092

$ 504,597
157,233
—
$ 661,831

$ 893,749
215,542
3,301
$1,112,592

$ 894,096
215,448
3,306
$1,112,850

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 have been classified as short-term on the accompanying consolidated
balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally
of cash equivalents, short-term investments, restricted cash and investments, trade accounts receivable, and
derivative financial instruments used in hedging activities.

Cash is placed on deposit in major financial institutions in various countries throughout the world.
Such deposits may be in excess of insured limits. Management believes that the financial institutions that
hold the Company’s cash are financially sound and, accordingly, minimal credit risk exists with respect to
these balances.

The Company’s available-for-sale securities, which are invested in taxable financial instruments, must
have a minimum rating of A2 / A, as rated by two of the following three rating agencies: Moody’s, Standard &
Poor’s (S&P), or Fitch and available-for-sale securities which are invested in tax-exempt financial instruments
must have a minimum rating of A2 / A, as rated by any one of the following three rating agencies: Moody’s,
Standard & Poor’s (S&P), or Fitch. The Company’s policy limits the amount of credit exposure with any one
financial institution or commercial issuer.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The Company is exposed to credit losses in the event of non performance by counterparties on the foreign
currency forward contracts that are used to mitigate the effect of exchange rate changes. These counterparties
are large international financial institutions and to date, no such counterparty has failed to meet its financial
obligations to the Company. The Company does not anticipate nonperformance by these counterparties.

As of June 28, 2009, three customers accounted for approximately 17%, 15%, and 14% of accounts

receivable. As of June 29, 2008 one customer accounted for approximately 11% of accounts receivable.

Credit risk evaluations, including trade references, bank references and Dun & Bradstreet ratings are
performed on all new customers, and subsequent to credit application approval, the Company monitors its
customers’ financial statements and payment performance. In general, the Company does not require collateral
on sales.

Note 5: Inventories

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:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 6: Property and Equipment

Property and equipment, net, consist of the following:

Manufacturing, engineering and

office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation

and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

June 29,
2008

(in thousands)

$ 145,421
35,487
52,502
$ 233,410

$ 157,135
54,684
70,399
$ 282,218

June 28,
2009

June 29,
2008

(in thousands)

$ 254,397
69,567
16,550
64,488
52,115
13,295
470,412

$ 258,050
73,237
16,785
45,474
46,300
12,060
451,906

(254,746)
$ 215,666

(216,171)
$ 235,735

Depreciation expense recognized during fiscal years 2009, 2008, and 2007 was $48.4 million, $36.8 million,

and $28.3 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Note 7: Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 8: Other Income (Expense), Net

The significant components of other income (expense), net, are as follows:

June 28,
2009

June 29,
2008

(in thousands)

$171,609
21,185
10,897
36,331
$240,022

$225,227
61,308
26,139
77,171
$389,845

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses) . . . . . . . . . . . . . . . . . . . . . . . .
Favorable legal judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

$24,283
(6,497)
922
—
(558)
$18,150

Year Ended
June 29,
2008

(in thousands)
$ 51,194
(12,674)
31,070
—
(2,045)
$ 67,545

June 24,
2007

$ 71,666
(17,817)
(1,512)
15,834
892
$ 69,063

Included in foreign exchange gains during the year ended June 29, 2008 are gains of $42.7 million relating
primarily to the settlement of a hedge of the Swiss franc associated with the acquisition of SEZ. The legal
judgment of $15.8 million in fiscal year 2007 was obtained in a lawsuit filed by the Company alleging breach of
purchase order contracts by one of its customers.

Note 9: Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) 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. There are
no dilutive shares included during fiscal year 2009 due to the net loss for the period. The following table provides a
reconciliation of the numerators and denominators of the basic and diluted computations for net income per share.

June 28,
2009

Year Ended
June 24,
June 29,
2007
2008
(in thousands, except per share data)

Numerator:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (302,148)

$ 439,349

$ 685,816

Denominator:

Basic average shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of potential dilutive securities:

125,595

124,647

138,714

Employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share — Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share — Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .

—
125,595
(2.41)
(2.41)

$
$

1,857
126,504
3.52
3.47

$
$

2,810
141,524
4.94
4.85

$
$

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

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:

Number of potential dilutive securities excluded . . . . . . . . . . . . . . .

2,699

Note 10: Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:

June 28,
2009

Year Ended
June 29,
2008
(in thousands)
250

June 24,
2007

567

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on fair value of

June 28,
2009

$ (302,148)
(58,587)

Year Ended
June 29,
2008
(in thousands)
$ 439,349
12,557

derivative financial instruments, net . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on financial instruments, net . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for loss (gain) included in earnings. . . . . .
SFAS No. 158 adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,633)
1,192
501
85
$ (365,589)

398
2,787
(461)
(359)
$ 454,271

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

June 24,
2007

$ 685,816
1,755

5,355
82
505
—
$ 693,513

Accumulated foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated unrealized gain on derivative financial instruments . . . . . . . . . . . . . . . .
Accumulated unrealized gain (loss) on financial instruments . . . . . . . . . . . . . . . . . . .
SFAS No. 158 adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

June 29,
2008

(in thousands)

$(51,975)
15
206
(1,068)
$(52,822)

$ 6,612
5,895
(734)
(1,153)
$10,620

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Note 11: Equity-Based Compensation Plans

The Company has adopted stock plans that provide for the grant to employees of equity-based awards,
including stock options and restricted stock units, of Lam Research Common Stock. In addition, these plans
permit the grant of nonstatutory equity-based awards to paid consultants and outside directors. According
to the plans, the equity-based award price is determined by the Board of Directors or its designee, the plan
administrator, but in no event will it be less than the fair market value of the Company’s Common Stock on
the date of grant. Equity-based awards granted under the plans vest over a period determined by the Board of
Directors or the plan administrator. The Company also has an employee stock purchase plan (ESPP) that allows
employees to purchase its Common Stock. A summary of stock plan transactions is as follows:

Options Outstanding

Restricted Stock Units

June 25, 2006 . . . . . . . . . . . . . . .
Additional amount authorized . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . .
June 24, 2007 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . .
June 29, 2008 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . .
June 28, 2009 . . . . . . . . . . . . . . .

Available
For Grant
9,947,397
15,000,000
(1,091,897)

148,837
(4,500)

23,999,837
(960,157)

84,124
(7,283,998)

15,839,806
(2,592,679)

981,297
(3,516,323)

10,712,101

Number of
Shares
5,527,938

—
(2,179,367)
(63,431)

3,285,140
—
(663,681)
(14,765)

—
2,606,694
476,094
(731,934)
(760,538)

—
1,590,316

Weighted-
Average
Exercise Price
$20.04

Number of
Shares
1,045,512

Weighted-
Average
FMV at Grant
$33.60

$ —
$19.57
$19.34

$20.37
$ —
$19.13
$23.23

$21.60
$20.21
$16.42
$24.97

$22.10

1,091,897

$50.39

(85,406)

$40.52

(208,328)
1,843,675
960,157

$34.51
$43.14
$43.41

(69,359)

$47.97

(1,038,249)
1,696,224
2,116,585

$37.56
$46.51
$27.29

(220,759)

$43.98

(1,071,987)
2,520,063

$47.26
$30.32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Outstanding and exercisable options presented by price range at June 28, 2009 are as follows:

Range of
Exercise
Prices

$
8.69-$9.67
$10.81-$12.57
$12.71-$14.38
$14.50-$16.14
$16.63-$19.25
$19.79-$23.99
$24.19-$28.04
$28.12-$38.94
$40.19-$49.25
$50.46-$53.00
$ 8.69-$53.00

Options Outstanding

Options Exercisable

Number of
Options
Outstanding
97,935
77,971
44,262
75,593
65,280
611,447
437,923
117,030
53,050
9,825
1,590,316

Weighted-
Average
Remaining
Life
(Years)
0.30
0.51
0.88
1.84
1.70
4.08
1.40
3.87
0.81
0.70
2.50

Weighted-
Average
Exercise
Price
$ 9.62
$12.43
$13.54
$15.41
$17.38
$20.61
$25.95
$29.57
$45.33
$50.99
$22.10

Number of
Options
Exercisable
97,935
77,605
44,262
74,393
65,280
135,353
437,923
117,030
53,050
9,825
1,112,656

Weighted-
Average
Exercise
Price
$ 9.62
$ 12.44
$ 13.54
$ 15.42
$ 17.38
$ 22.03
$ 25.95
$ 29.57
$ 45.33
$ 50.99
$ 22.92

The Company awarded a total of 2,116,585 and 960,157 restricted stock units during fiscal years 2009
and 2008, respectively. Certain of the unvested restricted stock units at June 28, 2009 contain Company-
specific performance targets. As of June 28, 2009, 2,520,063 restricted stock units remain subject to vesting
requirements. The Company awarded 476,094 stock options during fiscal year 2009 and all remain subject
to vesting requirements as of June 28, 2009. The Company did not award any stock options during fiscal
year 2008.

The 2007 Stock Incentive Plan provides for the grant of non-qualified equity-based awards to eligible
employees, consultants and advisors, and non-employee directors of the Company and its subsidiaries. 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. As of June 28, 2009 there were a total of 4,110,379 shares subject to options
and restricted stock units issued and outstanding under the Company’s Stock Plans. As of June 28, 2009, there
were a total of 10,712,101 shares available for future issuance under the 2007 Stock Incentive Plan.

The ESPP allows employees to designate a portion of their base compensation to be 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 purchase period. Typically, each offering period lasts
12 months and comprises three interim purchase dates. In fiscal year 2004, the Company’s stockholders approved
an amendment to the 1999 ESPP to (i) each year automatically increase the number of shares available for issuance
under the plan by a specific amount on a one-for-one basis with shares of Common Stock that the Company will
redeem in public market and private purchases for such purpose and (ii) to authorize the Plan Administrator (the
“Compensation Committee of the Board”) to set a limit on the number of shares a plan participant can purchase on
any single plan exercise date. The automatic annual increase provides that the number of shares in the plan reserve
available for issuance shall be increased on the first business day of each calendar year commencing with 2004,
on a one-for-one basis with each share of Common Stock that the Company redeems, in public-market or private
purchases, and designates for this purpose, by a number of shares equal to the lesser of (i) 2,000,000, (ii) one and
one-half percent (1.5%) of the number of shares of all classes of Common Stock of the Company outstanding on
the first business day of such calendar year, or (iii) a lesser number determined by the Plan Administrator. During
fiscal years 2009, 2008 and 2007, the number of shares of Lam Research Common Stock reserved for issuance
under the 1999 ESPP increased by 1.9 million shares, 1.9 million shares, and 2.0 million shares, respectively,
subject to repurchase of an equal number of shares in public market or private purchases.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

During fiscal year 2009, 905,948 shares of the Company’s Common Stock were sold to employees under
the 1999 ESPP. A total of 11,386,794 shares of the Company’s Common Stock have been issued under the 1999
ESPP through June 28, 2009, at prices ranging from $4.11 to $46.25 per share. At June 28, 2009, 7,360,526 shares
were available for purchase under the 1999 ESPP.

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). The Company
recognized equity-based compensation expense of $53.5 million during fiscal year 2009, $42.5 million during
fiscal year 2008 and $35.6 million during fiscal year 2007. The income tax benefit recognized in the consolidated
statements of operations related to equity-based compensation expense was $9.1 million during fiscal year 2009,
$7.0 million during fiscal year 2008, and $5.8 million during fiscal year 2007. The estimated fair value of the
Company’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a
straight-line basis.

Stock Options and Restricted Stock Units

Stock Options

The Company did not grant any stock options during fiscal years 2008 and 2007. The fair value of the
Company’s stock options issued during fiscal year 2009 was estimated using a Black-Scholes option valuation
model. This model requires the input of highly subjective assumptions, including expected stock price volatility
and the estimated life of each award. The Company assumed no expected dividends and the following assumptions
used to value these stock options:

Expected term: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility: . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate: . . . . . . . . . . . . . . . . . . . . . . . .

4.0 years
46.9%
2.07%

The year-end intrinsic value relating to stock options for fiscal years 2009, 2008, and 2007 is

presented below:

June 28,
2009

Intrinsic value — options outstanding . . . . . . . . . . . .
Intrinsic value — options exercisable . . . . . . . . . . . .
Intrinsic value — options exercised . . . . . . . . . . . . . .

$ 6.70
$ 4.50
$ 7.20

Year Ended
June 29,
2008
(millions)
$ 41.20
$ 40.74
$ 22.18

June 24,
2007

$107.50
$102.00
$ 69.00

As of June 28, 2009, there was $3.1 million of total unrecognized compensation cost related to nonvested
stock options granted and outstanding; that cost is expected to be recognized through March 2011. Cash received
from stock option exercises was $12.0 million, $12.7 million, and $42.5 million during fiscal years 2009, 2008,
and 2007, respectively.

Restricted Stock Units

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 June 28, 2009, there was $57.0 million of total unrecognized
compensation cost related to nonvested restricted stock units granted; that cost is expected to be recognized over
a weighted average remaining vesting period of 1.2 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

ESPP

ESPP awards were valued using the Black-Scholes model. During fiscal years 2009, 2008, and 2007 ESPP

was valued assuming no expected dividends and the following weighted-average assumptions:

Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009
0.68

June 29,
2008
0.82
74.00% 42.60% 44.50%
5.00%
2.00%
0.41%

June 24,
2007
0.68

As of June 28, 2009, there was $5.3 million of total unrecognized compensation cost related to the ESPP

that is expected to be recognized over a remaining vesting period of 6 months.

Note 12: Profit Sharing and Benefit Plans

Profit sharing is awarded to certain employees based upon performance against specific corporate
financial and operating goals. Distributions to employees by the Company are based upon a percentage of
earned compensation, provided that a threshold level of the Company’s financial and performance goals are
met. In addition to profit sharing the Company has other bonus plans based on achievement of profitability and
other specific performance criteria. Charges to expense under these plans were $16.2 million, $93.1 million, and
$102.0 million during fiscal years 2009, 2008, and 2007, respectively.

The Company maintains a 401(k)-retirement savings plan for its full-time employees in North America.
Commencing September 1, 2006, each participant in the plan may elect to contribute from 2% to 75% of his or her
annual salary to the plan, subject to statutory limitations. The Company makes matching employee contributions
in cash to the plan at the rate of 50% of the first 6% of salary contributed. Employees participating in the 401(k)-
retirement savings plan are 100% vested in the Company matching contributions and investments are directed
by participants. The Company made matching contributions of approximately $4.7 million, $5.0 million, and
$4.4 million in fiscal years 2009, 2008, and 2007, respectively.

Note 13: Commitments

The Company has certain obligations to make future payments under various contracts, some of which
are recorded on its balance sheet and some of which are not. Obligations are recorded on the Company’s balance
sheet in accordance with U.S. generally accepted accounting principles and include the Company’s long-term
debt which is outlined in the following table and noted below. The Company’s off-balance sheet arrangements
include contractual relationships and are presented as operating leases and purchase obligations in the tables
below. The Company’s contractual cash obligations and commitments relating to these agreements, and its
guarantees are included in the table below. The amounts in the tables below exclude $103 million of liabilities
under FIN 48 as the Company is unable to reasonably estimate the ultimate amount or time of settlement. See
Note 14, “Income Taxes” of Notes to Consolidated Financial Statements for further discussion.

Capital Leases

Capital leases reflect building lease obligations assumed from the Company’s acquisition of SEZ and an

office equipment lease. The amounts in the table below include the interest portion of payment obligations.

Long-Term Debt

During fiscal year 2009, the Company paid the outstanding principal balance of $250.0 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. In connection with the payment, the parties agreed to terminate the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

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 the
Company for customary fees.

The Company’s remaining total long-term debt of $27.1 million as of June 28, 2009 is the result of obligations
assumed in connection with the acquisition of SEZ, consisting of various bank loans and government subsidized
technology loans supporting operating needs.

The Company’s contractual cash obligations relating to its existing capital leases and long-term debt as of

June 289, 2009 are as follows:

Payments due by period:
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on capital leases . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt and capital leases . . .
Long-term debt and capital leases . . . . . . . . . . . . . . . . .

Capital
Leases

Long-term
Debt
(in thousands)

Total

$ 1,940
1,883
1,905
1,900
1,660
12,252
21,540
2,452
1,455
$17,633

$ 3,893
11,046
8,191
4,016
—
—
27,146

$ 5,833
12,929
10,096
5,916
1,660
12,252
48,686

3,893
$ 23,253

5,348
$40,886

Operating Leases

The Company 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 Fremont, California headquarters
and certain other facility leases provide the Company with an option to extend the leases for additional periods
or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based
on the general rate of inflation. The Company’s rental expense for facilities occupied during fiscal years 2009,
2008 and 2007 was approximately $9 million, $11 million and $11 million, respectively.

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

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 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”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

completed construction on the second property on June 1, 2009. Upon completion of construction, the Company’s
occupation of each Livermore property was no longer governed by its Construction Agreement, and was instead
governed by the relevant Operating Lease.

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 is required, pursuant to the terms of the Operating Leases and associated documents,
to maintain collateral in an aggregate of approximately $164.9 million (upon completion of the Livermore
construction) in separate interest-bearing accounts and/or eligible short-term investments as security for 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 June 28,
2009, the Company had $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 $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 $164.9 million plus
related indemnification or other obligations).

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

The Company’s contractual cash obligations with respect to operating leases as of June 28, 2009

are as follows:

Payments due by period:
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Leases
(in thousands)

9,945
6,831
7,222
8,440
7,836
145,917
$ 186,191

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Purchase Obligations

Purchase obligations consist of significant contractual obligations either on an annual basis or over multi-
year periods related to the Company’s outsourcing activities or other material commitments, including vendor-
consigned inventories. The Company continues to enter into new agreements and maintain existing agreements
to outsource certain activities, including elements of its manufacturing, warehousing, logistics, facilities
maintenance, certain information technology functions, and certain transactional general and administrative
functions. The contractual cash obligations and commitments table presented below contains the Company’s
obligations at June 28, 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 the Company’s storage locations and
warehouses, are not reported as the Company’s inventory until title is transferred to the Company or its purchase
obligation is determined. At June 28, 2009, vendor-owned inventories held at the Company’s locations and not
reported as its inventory were $13.4 million.

The Company’s contractual cash obligations and commitments related to these agreements as of June 28,

2009 are as follows:

Payments due by period:
Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1-3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3-5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase
Obligations
(in thousands)

$103,247
66,006
33,819
16,671
$219,743

Guarantees

The Company accounts for its 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.

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 June 28, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Warranties

The Company offers standard warranties on our systems that generally run 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.

Changes in the Company’s product warranty reserves were as follows:

Balance at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties assumed upon acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties issued during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expirations and change in liability for pre-existing warranties during the period . . .
Changes in foreign currency exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14: Income Taxes

The components of income (loss) before income taxes are as follows:

Year Ended

June 28,
2009

June 29,
2008

(in thousands)

$ 61,308
878
13,613
(31,553)
(20,805)
(2,256)
$ 21,185

$ 52,186
21,059
52,923
(58,095)
(6,765)
—
$ 61,308

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

$ 15,301
(278,394)
$ (263,093)

Year Ended
June 29,
2008
(in thousands)
$246,028
330,948
$576,976

June 24,
2007

$351,319
496,404
$847,723

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Significant components of the provision (benefit) for income taxes attributable to income before income

taxes are as follows:

Federal:

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

State:

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign:

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

Year Ended
June 29,
2008

(in thousands)

June 24,
2007

$ (6,523)
11,668
$ 5,145

$116,788
(18,635)
$ 98,153

$ 70,285
2,001
$ 72,286

(487)
8,047
$ 7,560

5,603
930
6,533

(73)
4,509
4,436

$15,017
11,333
$26,350
$39,055

$ 38,294
(5,353)
$ 32,941
$137,627

$ 75,344
9,841
$ 85,185
$161,907

Deferred tax assets:

Tax benefit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting reserves and accruals deductible in different periods . . . . . . . . . . . . .
Inventory valuation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized R&D expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:

Intangibles — foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Temporary differences for capital assets — federal and state . . . . . . . . . . . . . . . .
State cumulative temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

June 29,
2008

(in thousands)

$ 57,350
72,037
11,656
6,200
5,677
4,095
157,015
(35,518)
121,497

0
(25,632)
(11,917)
(4,326)
(41,875)
$ 79,622

$ 40,543
87,932
18,561
11,996
9,040
5,007
173,079
(3,407)
169,672

(13,835)
(20,052)
(16,607)
(2,637)
(53,131)
$116,541

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Realization of the Company’s net deferred tax assets is 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 such assets will be realized with the exception of $35.5 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. If the valuation allowance related to deferred
tax assets were released as of June 28, 2009, approximately $32.1 million would be credited to the statement
of operations and $3.4 million would be credited to goodwill. The accounting treatment related to tax benefits
from acquired companies will change when SFAS 141R becomes effective in the first quarter of our fiscal year
2010. At such time, any changes to the tax benefits associated with the valuation allowance recorded in the
SEZ acquisition 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.

Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect
the exercises in fiscal year 2009 and 2008. Some exercises resulted in tax deductions in excess of previously
recorded benefits based on the option value at the time of grant (“windfalls”). Although these additional tax
benefits are reflected in net operating loss carryforwards, pursuant to SFAS 123(R), the additional tax benefit
associated with the windfall is not recognized until the tax benefits reduce cash taxes payable, at which time the
Company will credit equity.

As of June 28, 2009, the Company had California net operating loss carry-forwards of approximately $17.4
million. Unused net operating loss carry-forwards will expire at various dates beginning in the year 2030. When
recognized, pursuant to the implementation guidance in SFAS 123R and Footnote 82 of FAS123R, these net
operating losses will result in a benefit to additional paid-in capital of approximately $2 million.

At June 28, 2009, the Company had federal and state tax credit carryforwards of approximately
$111.2 million, of which approximately $39.7 million will expire in varying amounts between fiscal years 2023
and 2030. The remaining balance of $71.5 million of tax carryforwards may be carried forward indefinitely. The
tax benefits relating to approximately $66.6 million of the tax credit carryforwards will be credited to equity
when recognized, in accordance with SFAS No. 123R.

At June 28, 2009, the Company had foreign net operating loss carryforwards of approximately $73.4 million
of which $39.9 million will expire in fiscal year 2012. The remaining balance of $33.5 million of net operating
loss carryforwards may be carried forward indefinitely.

A reconciliation of income tax expense provided at the federal statutory rate (35% in fiscal years 2009,

2008 and 2007) to actual income expense is as follows:

Income tax expense computed at federal statutory rate . . . . . . . . .
State income taxes, net of federal tax benefit . . . . . . . . . . . . . . . .
Foreign income taxes at different rates . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation Allowance, net of federal tax benefit . . . . . . . . . . . . . . .
Equity-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 28,
2009

$ (92,083)
(4,550)
125,124
(9,273)
12,109
10,985
(3,257)
$ 39,055

Year Ended
June 29,
2008

(in thousands)
$201,942
3,712
(84,077)
(6,745)
—
10,717
12,078
$137,627

June 24,
2007

$ 296,703
3,447
(122,574)
(9,156)
—
6,195
(12,708)
$ 161,907

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Effective from fiscal year 2003 through June 2013, the Company has negotiated a tax holiday on certain
foreign earnings, which is conditional upon the Company meeting certain employment and investment thresholds.
In fiscal year 2009 these certain foreign entities reported a loss. Accordingly, the Company did not record a
tax benefit in 2009. The impact of the tax holiday decreased income taxes by approximately $18.9 million for
fiscal year 2008 and $48.4 million in fiscal year 2007. The benefit of the tax holiday on net income per share
(diluted) was approximately $0.00 in fiscal year 2009, $0.15 in fiscal year 2008 and $0.34 in fiscal year 2007.

Unremitted earnings of the Company’s foreign subsidiaries included in consolidated retained earnings
aggregated to approximately $782.1 million at June 28, 2009. These earnings, which reflect full provisions for
foreign income taxes, are indefinitely reinvested in foreign operations. If these earnings were remitted to the
United States, they would be subject to U.S. taxes of approximately $195.2 million at current statutory rates. The
Company’s federal income tax provision includes U.S. income taxes on certain foreign-based income.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes (FIN 48). FIN 48
clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position
is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on de-
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. On June 25, 2007, upon adoption of FIN 48, the cumulative effect of applying FIN 48 was reported as
an increase of the beginning balance of retained earnings of approximately $17.6 million.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows:

Beginning balance as of June 25, 2007 (date of adoption) . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements and effective settlements with tax authorities and related remeasurements . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . . .
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during current period . . . . . . . . . . . . . . .
Balance as of June 29, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements and effective settlements with tax authorities and related remeasurements . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . . .
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during current period . . . . . . . . . . . . . . .
Balance as of June 28, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in millions)
$119.2
(11.7)
(0.7)
—
—
37.0
$143.8
0
(0.7)
13.9
(2.5)
23.9
$178.4

During fiscal year 2008, the Company completed its unilateral advanced pricing agreement (“APA”) with
certain foreign tax authorities. As a result of the APA, the Company reduced its balance of gross unrecognized
tax benefits by approximately $11.7 million, of which $8.1 million relates to years prior to fiscal year 2008.

The amount of unrecognized tax benefits that, if recognized, that would impact the effective tax rate
was $125.5 million and $101.8 million as of June 28, 2009 and June 29, 2008. Approximately $9.1 million of
unrecognized tax benefits are related to the SEZ pre-acquisition period and would result in an adjustment to
goodwill. 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 these 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits
as tax expense. The Company had accrued interest and penalties relating to unrecognized tax benefits of
approximately $19.1 million and $12.6 million as of June 28, 2009 and June 29, 2008, respectively. During fiscal
year 2009, interest and penalties related to unrecognized tax benefits increased by $6.5 million.

The Internal Revenue Service (IRS) is examining our U.S. income tax return for the fiscal year 2007.
The State of California Franchise Tax Board (FTB) is examining our tax returns for the fiscal years 2005 and
2006 and it is anticipated that the audit will be completed by the end of fiscal year 2010. As of June 28, 2009, no
significant adjustments have been proposed by the IRS or FTB.

The French tax authorities have examined our tax returns for the fiscal years 2004 through 2006 and have
proposed certain adjustments to the Company’s transfer pricing. We have appealed the proposed adjustments
and the appeal is currently in review. We are currently under examination by the Japanese tax authorities for
our fiscal years 2002 through 2008. We believe we have made adequate tax payments and/or accrued adequate
amounts such that the outcome of these audits will have no material adverse effects on our consolidated
operating results.

The Company does not anticipate that the total unrecognized tax benefits will significantly change due to

the settlement of audits and the expiration of statute of limitations in the next 12 months.

Note 15: Acquisitions

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:

Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 628,092
11,115
$ 639,207

$ 345,494
67,743
225,970
$ 639,207

Unaudited pro forma financial information is presented below as if the acquisition of SEZ occurred at the
beginning of the fiscal periods presented below. The pro forma information presented below is not necessarily
indicative of the consolidated financial position or results of operations in future periods or the results that
actually would have been realized had the acquisition in fact occurred at the beginning of fiscal years 2008 and
2007. The pro forma results below reflect certain adjustments to exclude one-time transaction costs incurred
with the acquisition, to amortize intangible assets and to transition to an acceptance-based revenue recognition
model with respect to the acquisition of SEZ.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Pro forma results of operations are as follows:

Pro forma revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . .

June 29,
2008
$2,687,846
445,621
3.58
3.52

$
$

June 24,
2007
$2,907,129
709,605
5.12
5.01

$
$

Bullen Ultrasonics

During the quarter ended December 24, 2006, the Company acquired the U.S. silicon growing and silicon
fabrication assets of Bullen Ultrasonics, Inc. The Company was the largest customer of the Bullen Ultrasonics
silicon business. The silicon business has become a division of the Company post-acquisition.

The acquisition included assets related to Bullen Ultrasonics’ silicon growing and silicon fabrication
business, including assets of Bullen Ultrasonics and Bullen Semiconductor (Suzhou) Co., Ltd., a wholly foreign-
owned enterprise established in Suzhou, Jiangsu, People’s Republic of China (“PRC”). The closing of the U.S.
asset acquisition occurred on November 13, 2006. The acquisition of the Suzhou assets occurred during the quarter
ending September 28, 2008. The assets acquired consist of fixtures, intellectual property, equipment, inventory,
material and supplies, contracts relating to the conduct of the business, certain licenses and permits issued by
government authorities for use in connection with the operations of Eaton, Ohio and Suzhou manufacturing
facilities, real property and leaseholds connected with such facilities, data and records related to the operation of
the silicon growing and silicon fabrication business and certain proprietary rights.

The acquisition supports the competitive position and capability primarily of the Company’s dielectric
etch products by providing access to and control of critical intellectual property and manufacturing technology
related to the production of silicon parts in the Company’s processing chambers. The Company funded the
purchase price of the acquisition with existing cash resources.

The acquisition was accounted for as a business combination in accordance with Statement of Financial
Accounting Standards Number 141, “Business Combinations” and all amounts were recorded at their estimated
fair value. The condensed consolidated financial statements include the operating results from the date of
acquisition. Pro forma results of operations have not been presented because the effects of the acquisition were
not material to the Company’s results.

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

Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$173,893
3,215
$177,108

$ 55,433
65,419
56,256
$177,108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Note 16: Goodwill and Intangible Assets

Goodwill

Changes in the balance of goodwill during the twelve months ended June 28, 2009 and June 29, 2008 were

as follows:

Balance as of June 29, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional share purchases / acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in foreign currency exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 28, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of June 24, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional share purchases / acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of changes in foreign currency exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 29, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in thousands)
$ 281,298
10,960
(1,303)
(96,255)
(25,518)
$ 169,182

(in thousands)
$ 59,741
220,732
825
$ 281,298

A combination of factors, including the current economic environment, a sustained decline in our market
valuation and a decline in our operating results were indicators of possible impairment of the Company’s goodwill.
The Company performed an analysis during the quarter ended March 29, 2009 and concluded, in accordance with
Statement of Financial Accounting Standards Number 142, “Goodwill and Other Intangible Assets”, that the fair
value of our Clean Product Group had 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 and
an additional $7.2 million during the quarter ended June 28, 2009 upon finalization of the impairment analysis.

The calculation of the goodwill impairment charge is based on estimates of future operating results.
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 $104 million is not tax deductible due to

foreign jurisdiction law. The remaining goodwill balance of approximately $65 million is tax deductible.

Intangible Assets

The following table provides details of the Company’s intangible assets subject to amortization as of

June 28, 2009 (in thousands, except years):

Customer relationships . . . . . . . . . . . . . . . . . . . . .
Existing technology . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in
Foreign
Currency
Exchange
Rates

Net

$ — $21,669
$42,595
$14,994
12,347
$91,605

(7,204)
(1,298)
—
$ (8,502)

Weighted-
Average
Useful Life
(years)
6.90
6.70
4.10
6.13
6.07

Gross
$ 35,226
61,598
35,216
20,270
$ 152,310

Accumulated
Amortization
$(13,557)
(11,799)
(18,924)
(7,923)
$(52,203)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The following table provides details of the Company’s intangible assets subject to amortization as of

June 29, 2008 (in thousands, except years):

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Existing technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross
$ 35,226
61,598
35,216
17,710
$149,750

Accumulated
Amortization
$ (8,501)
(4,008)
(10,157)
(5,195)
$(27,861)

Net
$ 26,725
57,590
25,059
12,515
$121,889

Weighted-
Average
Useful Life
(years)
6.90
6.70
4.10
7.40
6.20

The Company recognized $24.0 million, $17.9 million, and $9.2 million in intangible asset amortization

expense during fiscal years 2009, 2008, and 2007, respectively.

The estimated future amortization expense of purchased intangible assets as of June 28, 2009 is as follows

(in thousands):

Fiscal Year
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$24,168
21,188
17,937
16,506
9,956
1,850
$91,605

Note 17: Segment, Geographic Information and Major Customers

The Company operates in one reportable business segment: manufacturing and servicing of front-end
wafer processing semiconductor manufacturing equipment. The Company’s material operating segments
qualify for aggregation under Statement of Financial Accounting Standards No. 131, “Disclosures about
Segments of an Enterprise and Related Information,” due to their identical customer base and similarities
in economic characteristics, nature of products and services, and processes for procurement, manufacturing
and distribution.

The Company operates in six geographic regions: the United States, Europe, Taiwan, Korea, Japan,
and Asia Pacific. For geographical reporting, revenues are attributed to the geographic location in which the
customers’ facilities are located while long-lived assets are attributed to the geographic locations in which the
assets are located.

June 28,
2009

Year Ended
June 29,
2008
(in thousands)

June 24,
2007

Revenue:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 171,359
121,178
141,375
208,053
239,911
234,070
$1,115,946

$ 417,807
235,191
308,984
502,683
554,924
455,322
$2,474,911

408,631
237,716
451,487
573,875
531,310
363,557
$ 2,566,576

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

June 28,
2009

June 29,
2008
(in thousands)

June 24,
2007

Long-lived assets:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 183,372
90,608
4,077
2,687
11,478
1,776
$ 293,998

$ 188,432
113,020
1,797
5,420
3,511
1,982
$ 314,162

$ 138,172
20,515
1,398
694
3,409
1,143
$ 165,331

In fiscal year 2009, revenues from Samsung Electronics Company, Ltd. and Toshiba Corporation accounted
for approximately 19% and 11%, respectively, of total revenues. In fiscal year 2008, revenues from Samsung
Electronics Company, Ltd. and Toshiba Corporation accounted for approximately 19% and 13%, respectively
of total revenues. In fiscal year 2007, revenues from Hynix Semiconductor and Samsung Electronics each
accounted for approximately 14% of total revenues.

Note 18: Restructuring and Asset Impairments

During the June 2008 quarter the Company incurred 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 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.

During the March 2009 quarter the Company incurred 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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

The Company distinguishes 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 2009 of
approximately $65.5 million, consisting of severance and benefits for involuntarily terminated employees of
$52.0 million, charges for the write-off of certain assets totaling $10.2 million, and charges for the present
value of remaining lease payments, net of sublease income, on vacated facilities of $3.3 million. Of the total
$65.5 million in charges, $21.0 million was recorded in cost of goods sold and $44.5 million was recorded in
operating expenses in our fiscal year 2009 consolidated statement of operations.

The Company recorded net restructuring charges and asset impairments during fiscal year 2008 of
approximately $19.0 million, consisting of severance and benefits for involuntarily terminated employees of
$5.5 million, 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 million. The Company 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 million was recorded in operating expenses
in the Company’s fiscal year 2008 consolidated statement of operations.

Below is a table summarizing activity relating to the June 2008 Plan:

Severance
and
Benefits

$ 5,513
(927)
—
4,586
12,554
(13,155)
(3,418)
567

Facilities

$ 899
—
—
899
—
(873)
—
$ 26

Abandoned
Assets
(in thousands)
$ 1,893
—
(1,893)
—
3,395
—
(3,395)
$ —

Inventory

Total

$ 10,671
—
(10,671)
—
3,067
—
(3,067)

— $

$ 18,976
(927)
(12,564)
5,485
19,016
(14,028)
(9,880)
593

Below is a table summarizing activity relating to the December 2008 Plan:

Severance
and
Benefits

$ 16,412
(15,728)
—
684

Facilities

$ 618
—
(618)
$ —

Abandoned
Assets

(in thousands)
$ —
—
—
$ —

Inventory

Total

$ 819
—
(819)
$ —

$ 17,849
(15,728)
(1,437)
684

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
JUNE 28, 2009

Below is a table summarizing activity relating to the March 2009 Plan:

Severance
and
Benefits

$ 23,038
(18,647)
(466)
$ 3,925

Facilities

$ 2,265
(1,828)
—
437

Abandoned
Assets
(in thousands)
$ 3,008
—
(3,008)
$ —

Inventory

Total

$ 330
—
(330)
$ —

$ 28,641
(20,475)
(3,804)
$ 4,362

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 2015.

Note 19: Stock Repurchase Program

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 the December 2008 quarter. Share repurchases under the authorizations
were as follows (in thousands, except per-share data):

Period
Authorization of up to $250 million —

September 2008 . . . . . . . . . . . . . . . . . . . . . .
Quarter ended September 28, 2008 . . . . . . . . . .
Quarter ended December 28, 2008 . . . . . . . . . .
Quarter ended March 29, 2009 . . . . . . . . . . . . . .
Quarter ended June 28, 2009 . . . . . . . . . . . . . . .

Total
Number of
Shares
Repurchased

—
1
1,053
—
—

Total Cost
of Repurchase

Average Price
Paid Per Share

$ —
15
23,043
—
—

$ —
30.00
21.87
—
—

Amount
Available
Under
Repurchase
Program

$250,000
249,985
226,942
226,942
226,942

In addition to shares repurchased under Board authorized repurchase programs shown above, during
the twelve months ended June 28, 2009 the Company withheld 312,213 shares, respectively, through net share
settlements upon the vesting of restricted stock unit awards under the Company’s equity compensation plans to
cover tax withholding obligations.

Note 20: Legal Proceedings

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.

Aspect Systems, Inc. (“Aspect”) sued the Company for breach of contract and various business torts arising
out of a transaction in which the Company licensed Aspect to sell certain of the Company’s legacy Autoetch
and Drytek products. The case went to trial in the United States District Court for the District of Arizona in
December of 2008, resulting in a jury verdict in favor of Aspect. The Company filed an appeal from the ensuing
judgment, which is now pending. The Company recorded the amount of the legal judgment of $4.6 million in its
consolidated statement of operations for the year ended June 28, 2009.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Lam Research Corporation

We have audited the accompanying consolidated balance sheets of Lam Research Corporation as of
June 28, 2009 and June 29, 2008, and the related consolidated statements of operations, stockholders’ equity,
and cash flows for each of the three years in the period ended June 28, 2009. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Lam Research Corporation at June 28, 2009 and June 29, 2008, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended June 28,
2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

As discussed in Note 2 to the Notes to the Consolidated Financial Statements, under the heading Income
Taxes, Lam Research Corporation changed its method of accounting for income tax uncertainties in fiscal
year 2008.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Lam Research Corporation’s internal control over financial reporting as of June 28, 2009,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated August 26, 2009 expressed an unqualified
opinion thereon.

San Jose, California
August 26, 2009

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Lam Research Corporation

We have audited Lam Research Corporation’s internal control over financial reporting as of June 28, 2009,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Lam Research Corporation’s management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Lam Research Corporation maintained, in all material respects, effective internal control

over financial reporting as of June 28, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Lam Research Corporation as of June 28, 2009 and
June 29, 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for
each of the three years in the period ended June 28, 2009 of Lam Research Corporation and our report dated
August 26, 2009 expressed an unqualified opinion thereon.

San Jose, California
August 26, 2009

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the

Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

LAM RESEARCH CORPORATION

By /s/ Stephen G. Newberry

Stephen G. Newberry,
President and Chief Executive Officer

Dated: August 26, 2009

POWER OF ATTORNEY AND SIGNATURES

By signing this Annual Report on Form 10-K below, I hereby appoint each of Stephen G. Newberry and
Ernest E. Maddock, jointly and severally, as my attorney-in-fact to sign all amendments to this Form 10-K on
my behalf, and to file this Form 10-K (including all exhibits and other related documents) with the Securities
and Exchange Commission. I authorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact
for himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention
and purpose of this Power of Attorney. I ratify and confirm all lawful actions taken directly or indirectly by my
attorneys-in-fact and by any properly appointed substitute attorneys-in-fact.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed

below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures

Title

Date

Principal Executive Officer
/s/ Stephen G. Newberry
Stephen G. Newberry

Principal Financial Officer and
Principal Accounting Officer
/s/ Ernest E. Maddock
Ernest E. Maddock

Other Directors
/s/ James W. Bagley
James W. Bagley

/s/ Dr. Seiichi Watanabe
Dr. Seiichi Watanabe

/s/ David G. Arscott
David G. Arscott

/s/ Robert M. Berdahl
Robert M. Berdahl

/s/ Richard J. Elkus, Jr.
Richard J. Elkus, Jr.

/s/ Jack R. Harris
Jack R. Harris

/s/ Grant M. Inman
Grant M. Inman

/s/ Catherine P. Lego
Catherine P. Lego

/s/ Patricia S. Wolpert
Patricia S. Wolpert

President and Chief Executive Officer,
Director

August 26, 2009

Senior Vice President, Chief Financial
Officer, and Chief Accounting Officer

Executive Chairman

Director

LAM RESEARCH CORPORATION

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Additions

Balance
at
Beginning
of
Period

Charged
to
Costs
and
Expenses

Balance
at
End
of
Period

Deductions
(Describe)

Description

YEAR ENDED JUNE 28, 2009
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . .

$ 4,102,000

$ 6,794,000

$177,000 (1)

$10,719,000

YEAR ENDED JUNE 29, 2008
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . .

$ 3,851,000

$ 255,000

4,000 (1)

$ 4,102,000

YEAR ENDED JUNE 24, 2007
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . .

$ 3,822,000

20,000

9,000 (1)

$ 3,851,000

(1) $0.2 million of specific customer accounts written-off in fiscal 2009, and $0.0 million in fiscal years 2008

and 2007, respectively.

LAM RESEARCH CORPORATION

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 28, 2009
EXHIBIT INDEX

Description

Certificate of Incorporation of the Registrant, dated September 7, 1989; as amended by the
Agreement and Plan of Merger, Dated February 28, 1990; the Certificate of Amendment
dated October 28, 1993; the Certificate of Ownership and Merger dated December 15,
1994; the Certificate of Ownership and Merger dated June 25, 1999 and the Certificate of
Amendment effective as March 7, 2000.

Bylaws of the Registrant, as amended, dated May 15, 2009.

Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred
Stock dated January 27, 1997.

Amended 1991 Stock Option Plan and Forms of Stock Option Agreements.

Amended and restated 1997 Stock Incentive Plan.

Amended and restated 1996 Performance-Based Restricted Stock Plan.

Amended and restated 1999 Stock Option Plan.

Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended.

Lam Research Corporation 2004 Executive Incentive Plan, as amended.

Lam Research Corporation 2007 Stock Incentive Plan, as amended.

Asset Purchase Agreement dated October 5, 2006 by and among Lam Research Corporation,
Bullen Ultrasonics, Inc., Eaton 122 Ltd., Bullen Semiconductor (Suzhou) Co., Ltd., Mary
A. Bullen and Vicki Brown.

First Amendment to Asset Purchase Agreement dated October 5, 2006 by and among Lam
Research Corporation, Bullen Ultrasonics, Inc., Eaton 122 Ltd., Bullen Semiconductor
(Suzhou) Co., Ltd., Mary A. Bullen and Vicki Brown.

Form of Indemnification Agreement.

Employment Agreement for Stephen G. Newberry, dated January 1, 2003.

Employment Agreement for Ernest Maddock, dated April 15, 2003.

Form of Nonstatutory Stock Option Agreement — Lam Research Corporation 1997 Stock
Incentive Plan.

Form of Restricted Stock Unit Award Agreement (U.S. Agreement A) — Lam Research
Corporation 1997 Stock Incentive Plan.

Form of Restricted Stock Unit Award Agreement (non-U.S. Agreement I-A) — Lam
Research Corporation 1997 Stock Incentive Plan.

Form of Restricted Stock Unit Award Agreement (U.S. Agreement) — Lam Research
Corporation 2007 Stock Incentive Plan

Form of Restricted Stock Unit Award Agreement — Outside Directors (U.S. Agreement)
— Lam Research Corporation 2007 Stock Incentive Plan.

Form of Restricted Stock Unit Award Agreement — Outside Directors (non-U.S. Agreement)
— Lam Research Corporation 2007 Stock Incentive Plan.

Transaction Agreement dated December 10, 2007 by and between Lam Research
Corporation and SEZ Holding AG.

Exhibit

3.1(4)

3.2(24)

3.3(4)

4.4(2)*

4.8(9)*

4.11(3)*

4.12(8)*

4.13(8)*

4.14(12)*

4.15(13)*

10.1(11)

10.2(11)

10.3(1)

10.85(5)*

10.95(6)*

10.99(7)*

10.102(10)

10.103(10)

10.106(15)*

10.107(16)

10.108(16)

10.110(17)

Exhibit

10.111(18)

10.112(18)

10.113(18)

10.114(18)

10.115(18)

10.116(14)*

10.117(19)

10.118(19)

10.119(19)

10.120(19)

10.121(19)

10.122(19)

10.123(19)

10.124(19)

10.125(19)

10.126(19)

10.127(19)

10.128(19)

10.129(19)

10.130(19)

Description

Credit Agreement dated as of March 3, 2008 among Lam Research Corporation, as the Borrower,
ABN Amro Bank N.V., as Administrative Agent, and the other Lenders Party thereto.

Unconditional Guaranty dated as of March 3, 2008 by Bullen Semiconductor Corporation
to ABN AMRO Bank N.V.

Security Agreement dated as of March 3, 2008 between Lam Research Corporation and
ABN AMRO Bank N.V.

Security Agreement dated as of March 3, 2008 between Bullen Semiconductor Corporation
and ABN AMRO Bank N.V.

Pledge Agreement dated as of March 3, 2008 among Lam Research Corporation and ABN
AMRO Bank N.V.

Employment Agreement between James W. Bagley and Lam Research Corporation, dated
December 11, 2006.

Lease Agreement (Fremont Building #1) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Pledge Agreement (Fremont Building #1) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Closing Certificate and Agreement (Fremont Building #1) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.

Agreement Regarding Purchase and Remarketing Options (Fremont Building #1)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 21, 2007.

Lease Agreement (Fremont Building #2) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Pledge Agreement (Fremont Building #2) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Closing Certificate and Agreement (Fremont Building #2) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.

Agreement Regarding Purchase and Remarketing Options (Fremont Building #2)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 21, 2007.

Lease Agreement (Fremont Building #3) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Pledge Agreement (Fremont Building #3) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Closing Certificate and Agreement (Fremont Building #3) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.

Agreement Regarding Purchase and Remarketing Options (Fremont Building #3)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 21, 2007.

Lease Agreement (Fremont Building #4) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Pledge Agreement (Fremont Building #4) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 21, 2007.

Exhibit

10.131(19)

10.132(19)

10.133(19)

10.134(19)

10.135(19)

10.136(19)

10.137(19)

10.138(19)

10.139(19)

10.140(19)

10.141(19)

10.142(19)

10.143(20)

10.144(20)

10.145(20)

10.146(20)

10.147(21)

10.148(22)*

10.149(22)*

10.150(23)*

10.151(25)*

10.152(25)*

10.153(25)*

Description

Closing Certificate and Agreement (Fremont Building #4) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.

Agreement Regarding Purchase and Remarketing Options (Fremont Building #4)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 21, 2007.

Lease Agreement (Livermore/Parcel 6) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.

Pledge Agreement (Livermore/Parcel 6) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.

Closing Certificate and Agreement (Livermore/Parcel 6) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 18, 2007.

Agreement Regarding Purchase and Remarketing Options (Livermore/Parcel 6)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 18, 2007.

Construction Agreement (Livermore/Parcel 6) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 18, 2007.

Lease Agreement (Livermore/Parcel 7) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.

Pledge Agreement (Livermore/Parcel 7) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.

Closing Certificate and Agreement (Livermore/Parcel 7) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated December 18, 2007.

Agreement Regarding Purchase and Remarketing Options (Livermore/Parcel 7)
between Lam Research Corporation and BNP Paribas Leasing Corporation, dated
December 18, 2007.

Construction Agreement (Livermore/Parcel 7) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 18, 2007.

First Modification Agreement (Fremont Buildings #1, #2, #3, #4) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated April 3, 2008.

First Modification Agreement (Livermore Parcel 6) between Lam Research Corporation
and BNP Paribas Leasing Corporation, dated April 3, 2008.

Second Modification Agreement (Livermore Parcel 6) between Lam Research Corporation
and BNP Paribas Leasing Corporation, dated July 9, 2008.

First Modification Agreement (Livermore Parcel 7) between Lam Research Corporation
and BNP Paribas Leasing Corporation, dated July 9, 2008.

First Amendment to Credit Agreement between Lam Research Corporation, ABN AMRO
B.V. and the Lenders party thereto, dated September 29, 2008.

Form of Indemnification Agreement.

Reformation of Stock Option Agreement.

Stock Option Amendment and Special Bonus Agreement.

Employment Agreement with Stephen G. Newberry, dated July 1, 2009.

Employment Agreement with Martin B. Anstice, dated July 1, 2009.

Form of Change in Control Agreement.

Exhibit

Description

23.1

31.1

31.2

32.1

32.2

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Subsidiaries of the Registrant.

Consent of Independent Registered Public Accounting Firm.

Power of Attorney (See Signature page)

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

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

Section 1350 Certification — (Principal Executive Officer)

Section 1350 Certification — (Principal Financial Officer)

Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
April 3, 1988.

Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995.

Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 26, 1999.

Incorporated by reference to Registrant’s Amendment No. 2 to its Annual Report on Form 10K/A for the
fiscal year ended June 25, 2000.

Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 30, 2003.

Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended
June 29, 2003.

Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended
June 27, 2004.

Incorporated by reference to Registrant’s Registration Statement on Form S-8 (No. 33-127936) filed with
the Securities and Exchange Commission on August 28, 2005.

(9)

Incorporated by reference to Registrant’s Current Report on Form 8-K dated November 8, 2005.

(10) Incorporated by reference to Registrant’s Current Report on Form 8-K dated February 6, 2006.

(11) Incorporated by reference to Registrant’s Current Report on Form 8-K dated October 10, 2006.

(12) Incorporated by reference to Registrant’s Current Report on Form 8-K dated November 2, 2006.

(13) Incorporated by reference to Registrant’s Registration Statement of Form S-8 (No. 333-138545) filed with

the Securities and Exchange Commission on November 9, 2006.

(14) Incorporated by reference to Registrant’s Current Report on Form 8-K dated December 15, 2006. This

exhibit was originally filed with the 8-K as Exhibit Number 10.1.

(15) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended

December 24, 2006.

(16) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended

March 25, 2007.

(17) Incorporated by reference to Registrant’s Current Report on Form 8-K dated December 14, 2007.

(18) Incorporated by reference to Registrant’s Current Report on Form 8-K dated March 7, 2008.

(19) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended

June 24, 2007.

(20) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended

June 29, 2008.

(21) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended

September 28, 2008.

(22) Incorporated by reference to Registrant’s Current Report on Form 8-K dated November 13, 2008.

(23) Incorporated by reference to Registrant’s Current Report on Form 8-K dated May 8, 2008.

(24) Incorporated by reference to Registrant’s Current Report on Form 8-K dated May 21, 2009.

(25) Incorporated by reference to Registrant’s Current Report on Form 8-K dated July 31, 2009.

Indicates management contract or compensatory plan or arrangement in which executive officers of the
Company are eligible to participate.

SUBSIDIARIES OF THE REGISTRANT

EXHIBIT 21

SUBSIDIARY
Lam Research International Sarl
Lam Research International B.V.
Lam Research GmbH
Lam Research Co., Ltd.
Lam Research (Shanghai) Co., Ltd.
Lam Research Service Co., Ltd.
Lam Research Ltd.
Lam Research SAS
Lam Research Singapore Pte Ltd
Lam Research Korea Limited
Lam Research S.r.l.
Lam Research (Israel) Ltd.
Lam Research Co., Ltd.
LAM Research B.V.
Lam Research (Ireland) Limited
Silfex Incorporated
Lam Research Semiconductor (Suzhou) Co., Ltd.
Lam Research Holding AG
Lam Research AG
Lam Research Management GmbH
SEZ America Inc.
SEZ Japan
SEZ Asia Pacific Pte. Ltd.
SEZ Singapore Pte. Ltd.
SEZ Korea Ltd.
SEZ China Ltd.
SEZ Taiwan Ltd.
SEZ D.O.O.
SEZ Slovakia S.T.O.

STATE OR OTHER
JURISDICTION OF OPERATION
Switzerland
Netherlands
Germany
Japan
China
China
United Kingdom
France
Singapore
Korea
Italy
Israel
Taiwan
Netherlands
Ireland
Ohio, United States
China
Switzerland
Austria
Austria
United States
Japan
Singapore
Singapore
Korea
China
Taiwan
Slovenia
Slovakia

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-4 No. 333-30545) of
Lam Research Corporation and in the related Prospectus and in the Registration Statements (Form S-8 Nos. 333-
01011, 333-18115, 333-32981, 333-45265, 333-66833, 333-72751, 333-93115, 333-74500, 333-84638, 333-127936,
333-138545 and 333-156335) pertaining to the amended and restated 1996 Performance-Based Restricted Stock
Plan, 1997 Stock Incentive Plan, 1999 Employee Stock Purchase Plan, 1999 Stock Option Plan, 2007 Stock
Incentive Plan, and the Savings Plus Plan, 401(k) of Lam Research Corporation of our reports dated August 26,
2009, with respect to the consolidated financial statements and schedule of Lam Research Corporation and the
effectiveness of internal control over financial reporting of Lam Research Corporation, included in this Annual
Report (Form 10-K) for the year ended June 28, 2009.

San Jose, California
August 26, 2009

EXHIBIT 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)

I, Stephen G. Newberry, certify that:

I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.

August 26, 2009

/s/ Stephen G. Newberry
Stephen G. Newberry
President and Chief Executive Officer

EXHIBIT 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)

I, Ernest E. Maddock, certify that:

I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;

any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.

August 26, 2009

/s/ Ernest E. Maddock
Ernest E. Maddock
Senior Vice President, Chief Financial Officer
and Chief Accounting Officer

EXHIBIT 32.1

SECTION 1350 CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)

In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for
the fiscal period ending June 28, 2009 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I, Stephen G. Newberry, President and Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

(2)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

August 26, 2009

/s/ Stephen G. Newberry
Stephen G. Newberry
President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant
to § 906 of the Sarbanes-Oxley Act of 2002, and will not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that Lam Research Corporation specifically
incorporates it by reference.

EXHIBIT 32.2

SECTION 1350 CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)

In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for
the fiscal period ending June 28, 2009 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), I, Ernest E. Maddock, Senior Vice President, Chief Financial Officer and Chief Accounting
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1)

(2)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

August 26, 2009

/s/ Ernest E. Maddock
Ernest E. Maddock
Senior Vice President, Chief Financial Officer
and Chief Accounting Officer

BOARD OF DIRECTORS

EXECUTIVE OFFICERS

James W. Bagley
Executive Chairman

Stephen G. Newberry
President and Chief Executive Officer

James W. Bagley
Executive Chairman

David G. Arscott
General Partner,
Compass Technology Group

Martin B. Anstice
Executive Vice President and
Chief Operating Officer

Robert M. Berdahl
President,
Association of American Universities

Ernest E. Maddock
Senior Vice President and
Chief Financial Officer

Richard J. Elkus, Jr.
Chairman,
Voyan Technology

Richard A. Gottscho, Ph.D.
Group Vice President and
General Manager, Etch Businesses

Jack R. Harris
Chairman, HT, Inc., and
Executive Chairman, Metara, Inc.

Abdi Hariri
Group Vice President,
Global Operations

Grant M. Inman
General Partner,
Inman Investment Management

Catherine P. Lego
General Partner,
The Photonics Fund, LLP,
and Member, Lego Ventures, LLC

Seiichi Watanabe, Ph.D.
Representative Director,
TechGate Investment, Inc.

Patricia S. Wolpert
Owner,
Wolpert Consulting LLC

Sarah O’Dowd, Esq.
Group Vice President
Human Resources and Chief Legal Officer

Thomas J. Bondur
Vice President and General Manager,
Sales and Marketing

Jeffery Marks, Ph.D.
Vice President and General Manager,
Global Clean Business Group

1009/19140/202

10/6/09 3:47 AM

Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538

Phone: 1.510.572.0200
www.lamresearch.com

184733LAM_Cvr_R1.indd 1