UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 24, 2007

OR

o		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		94-2634797
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
4650 Cushing Parkway		94538
Fremont, California		(Zip code)
(Address of principal executive offices)

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

Title of class		Name of exchange on which registered
Common Stock, Par Value $0.001 Per Share		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 o No þ

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 o No þ

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 o No þ

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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 þ		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

     The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of December 24, 2006, 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 $5,014,214,243. 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 March 10, 2008, the Registrant had 124,781,047 outstanding shares of Common Stock.

Documents Incorporated by Reference

None.

 

 

LAM RESEARCH CORPORATION
2007 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page
Explanatory Note			2
Part I.			4
Item 1. Business			4
Item 1A. Risk Factors			11
Item 1B. Unresolved Staff Comments			19
Item 2. Properties			19
Item 3. Legal Proceedings			19
Item 4. Submission of Matters to a Vote of Security Holders			19
Part II.			19
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			19
Item 6. Selected Financial Data			22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			54
Item 8. Financial Statements and Supplementary Data			56
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			56
Item 9A. Controls and Procedures			56
Item 9B. Other Information			57
Part III.			58
Item 10. Directors, Executive Officers and Corporate Governance			58
Item 11. Executive Compensation			65
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			85
Item 13. Certain Relationships and Related Transactions, and Director Independence			87
Item 14. Principal Accounting Fees and Services			87
Part IV.			89
Item 15. Exhibits, Financial Statement Schedules			89
Signatures			129
Exhibit Index			131
EXHIBIT 3.2
EXHIBIT 10.117
EXHIBIT 10.118
EXHIBIT 10.119
EXHIBIT 10.120
EXHIBIT 10.121
EXHIBIT 10.122
EXHIBIT 10.123
EXHIBIT 10.124
EXHIBIT 10.125
EXHIBIT 10.126
EXHIBIT 10.127
EXHIBIT 10.128
EXHIBIT 10.129
EXHIBIT 10.130
EXHIBIT 10.131
EXHIBIT 10.132
EXHIBIT 10.133
EXHIBIT 10.134
EXHIBIT 10.135
EXHIBIT 10.136
EXHIBIT 10.137
EXHIBIT 10.138
EXHIBIT 10.139
EXHIBIT 10.140
EXHIBIT 10.141
EXHIBIT 10.142
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

Explanatory Note

     In this Annual Report on Form 10-K as of and for the year ended June 24, 2007 (the “2007 Form 10-K”), Lam Research Corporation, a Delaware corporation (“Lam Research” or “the Company”), is restating its consolidated balance sheet as of June 25, 2006 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended June 25, 2006 and June 26, 2005, as a result of a voluntary independent stock option review described below. The Company also recorded adjustments affecting previously-reported financial statements for fiscal years 1997 through 2004, the effects of which are summarized in cumulative adjustments to additional paid-in capital, deferred stock-based compensation, and retained earnings as of June 27, 2004. In addition, the Company is restating the unaudited quarterly condensed financial statements for interim periods of fiscal year 2006, and unaudited condensed balance sheets as of March 25, 2007, December 24, 2006 and September 24, 2006. There was no effect of the restatement on the consolidated statements of operations for the first three quarters of fiscal year 2007.

     On July 18, 2007, the Company announced that its Board of Directors had initiated a voluntary independent review regarding the timing of the Company’s past stock option grants and other related issues. The voluntary internal review arose after the Company’s independent registered public accounting firm performed auditing procedures relating to the Company’s historical stock option grant programs and procedures as part of the firm’s fiscal year-end 2007 audit. The Board of Directors appointed a special committee consisting of two independent board members (the “Independent Committee”) to conduct a comprehensive review of the Company’s historical stock option practices. The Independent Committee promptly engaged independent outside legal counsel and forensic accountants to assist with the review. On December 21, 2007, the Company announced that the Independent Committee had reached a preliminary conclusion that the actual measurement dates for financial accounting purposes of certain stock option grants issued in the past differed from the recorded grant dates of such awards. Upon the recommendation of management and the Independent Committee, the Audit Committee of the Board of Directors concluded that the financial statements for fiscal years 1997 through 2005, and the interim periods contained therein should no longer be relied upon. The Independent Committee’s review was completed in February 2008.

     The review covered stock option grants awarded in fiscal years 1997 through 2005 (the “Review Period”). The scope of the review included evaluating 100% of “Company-wide” grants, director grants, Section 16 officer grants, and new hire grants, as well as a sampling of grants deemed “other grants”, representing approximately 94% of all stock option grants during the Review Period. This Review Period comprised approximately 16,000 separate stock option grants on approximately 500 separately recorded grant dates. These grants involved approximately 58 million underlying shares of Common Stock and included grants to domestic and international employees. Share amounts have been adjusted as applicable to reflect the March 2000 3-for-1 stock split. The Independent Committee’s review also included procedures to identify potential modifications of stock option grants and grants awarded to consultants, and testing of cash exercises. The Company had not awarded any Company-wide stock option grants since October 2002 and stopped issuing stock option grants during fiscal year 2005 and only issued restricted stock units (“RSUs”) thereafter. The Independent Committee did not include fiscal years 2006 and 2007 in the scope of its review based on several factors including but not limited to the fact that the Company only issued RSUs after fiscal year 2005 and the Company’s equity granting processes and controls had been documented and tested as part of its assessment of the operating effectiveness of internal control over financial reporting as required by Section 404 of the Sarbanes Oxley Act of 2002. Additionally, no information arose during the stock option review that would indicate a need to expand the scope of the review to include other periods.

     Consistent with applicable accounting literature and guidance from the SEC staff, the Company organized the grants during the review period into categories based on the grant type and the process by which the grant was finalized. The Company analyzed the evidence from the Independent Committee’s review related to each category including, but not limited to, physical documents, electronic documents, and underlying electronic data about documents. Based on the relevant facts and circumstances, the Company applied the applicable accounting standards to determine, for grants within each category, the proper measurement date. If the measurement date was not the originally recorded grant date, accounting adjustments were made as required, resulting in stock-based compensation expense and related tax effects. The significant majority of the measurement date changes result from stock options granted prior to fiscal year 2003. As a result of the findings of the review, the Company has recognized incremental stock-based compensation and associated payroll tax expense of $96.4 million on a pre-tax basis ($65.8 million after taxes) in the aggregate during fiscal years 1997 through 2006 which includes incremental stock-based compensation expense of $1.2 million recognized in accordance with Financial Accounting Standards No. 123 (revised), “Share-Based Payment” (“SFAS No. 123R”) during fiscal year 2006.

     The Independent Committee also concluded that there was no intentional misconduct on the part of Company management or the Company’s independent directors. During its review of the Company’s historical stock option practices, the Independent Committee did not find evidence of any other financial reporting or accounting issues unrelated to stock-based compensation.

     The Company determined revised measurement dates for approximately 33 million options granted during fiscal year 1997 to March 2005. The additional aggregate stock-based compensation expense noted above is net of forfeitures related to employee terminations. To determine revised measurement dates, management evaluated all of the available evidence. For those grants where the revised measurement date could not be determined with certainty, management applied judgment to determine what it believes to be the most appropriate measurement date in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) and other applicable accounting rules, and considered the amount of additional compensation expense that could result had different dates been selected. For a broader discussion of the judgments underlying the revised measurement dates, see “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” in Item 7 of this 2007 Form 10-K. The adjustments relating to these option grants did not affect the Company’s previously reported revenue, cash, cash equivalents or short-term investments and relate exclusively to the Company’s historical stock option granting practices. This restatement is more fully described in Note 3, “Restatement of Consolidated Financial Statements” to Consolidated Financial Statements in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7. This 2007 Form 10-K also reflects the restatement of “Selected Financial Data” in Item 6 as of and for the years ended June 25, 2006, June 26, 2005, June 27, 2004, and June 29, 2003.

     Financial information included in the reports on Form 10-K, Form 10-Q and Form 8-K filed or furnished by Lam Research prior to January 24, 2008, and the related opinions of its independent registered public accounting firm and all earnings press releases and similar communications issued by the Company prior to January 24, 2008 are superseded in their entirety by this 2007 Form 10-K and other reports on Form 10-Q and Form 8-K filed by the Company with the Securities and Exchange Commission on or after January 24, 2008.

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, product development, demand, acceptance and market share, competitiveness, gross margins, levels of research and development (R&D), outsourced activities and operating expenses, tax expenses, our management’s plans and objectives for our current and future operations, management’s plans for repurchasing Company stock pursuant to the authorization of our Board, the levels of customer spending or R&D activities, general economic conditions and 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 24, 2007, June 25, 2006, and June 26, 2005.

Item 1. Business

     Lam Research Corporation (“Lam Research,” “we,” or the “Company”) was founded in 1980 and is headquartered in Fremont, California. The mailing address for our principal executive offices is 4650 Cushing Parkway, Fremont, California 94538, and our telephone number is (510) 572-0200. Additional information about Lam Research is available on our web site at http://www.lamresearch.com. Our Forms 10-K, Forms 10-Q, and Forms 8-K are available online at the Securities and Exchange Commission (SEC) web site on the Internet. The address of that site is http://www.sec.gov. We also make available free of charge the Forms 10-K, Forms 10-Q, and Forms 8-K and any amendments to those reports on our corporate web site at http://www.lamresearch.com as soon as reasonably practicable after we file them with or furnish them to the SEC.

     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 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.

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. Lam Research etch products selectively remove portions of various films from the wafer in the creation of semiconductors by utilizing various plasma-based technologies to create critical device features at current and future technology nodes. Plasma consists of charged and neutral species that react with exposed portions of the wafer surface to remove dielectric, metal, or polysilicon material and produce the finely delineated features and patterns of an integrated circuit.

     Advanced integrated circuit manufacturing requires etch systems capable of creating structures for the 45 nanometer (nm) and below technology nodes. At this time, memory manufacturers are transitioning from aluminum to copper conductive lines, while leading logic manufacturers are progressing with the implementation of more fragile dielectric insulating materials (low-κ and porous low-κ). Semiconductor manufacturers continue to require more precise control over the etching process in order to accommodate decreasing linewidths and increasing wafer diameters. Lam Research etch products and services are defined around the 2300^® etch series.

Dielectric Etch Products

     2300^® Exelan^®, 2300 ^® Exelan^® Flex™, and 2300^® Exelan^® Flex45™ systems. The Exelan family of dielectric etch products addresses volume manufacturing productivity requirements and enables customers to create advanced semiconductor devices. The 2300 Exelan Flex and 2300 Exelan Flex45 systems extend the capability of the 2300 Exelan family of products to address requirements for the 45 nm and below technology nodes. These systems are based on Lam Research’s patented Dual Frequency Confined^TM plasma technology, which enables in situ processing, where multiple chemistries can be run sequentially in the same process chamber.

     Upgrades to the 2300 Exelan product line provide enabling capability for etching smaller features and alternative dielectric materials as outlined in the semiconductor industry’s manufacturing roadmap.

Conductor Etch Products

     2300^® Versys^®, 2300 ^® Versys^® Kiyo™, 2300^® Versys^® Kiyo45™, 2300^® Versys ^® Metal High Performance, and 2300^® Versys^® Metal45™ systems. The Versys family of products for etching silicon and metal films utilizes Lam Research’s patented Transformer Coupled Plasma™ source technology; a high-density, low-pressure plasma source that addresses leading-edge device structure requirements for etching features at the 45 nm and below technology nodes. The systems enable sequential step tuning of gas flow and wafer temperature, which allows in situ processing of multi-layer stacks. Advanced Chamber Control and Conditioning (AC3™) technology reduces processing drift and maintains the same chamber conditions for subsequent wafers.

Deep Silicon Etch Products

     TCP^® 9400DSiE™ and 2300^® Syndion™ systems. The TCP 9400DSiE employs Lam Research’s TCP technology to facilitate deep silicon etch processes used in micro-electro mechanical systems (MEMS), power device, and passive component fabrication. The TCP-based technology provides the process flexibility needed to address a broad range of requirements for the manufacture of MEMS devices.

     The 2300 Syndion, which also employs TCP technology, addresses 3-D IC through-silicon via (TSV) etch applications. TSVs provide the interconnects for die-to-die and wafer-to-wafer stacking, eliminating wire bonding to increase device packing density (smaller form factor) and improve performance (higher process speed and lower power requirements). Important for TSV applications, the Syndion’s TCP-based technology enables sequential processing the same chamber while ensuring etch rate uniformity and profile symmetry to prevent tilting. The technology also supports clean mode operation and provides bias voltage control for process repeatability.

Patterning Process

     During semiconductor device manufacturing, lithography processes establish the templates for patterns to be created during subsequent etch processes.

Patterning Products

     2300^® Motif ™ system. The 2300 Motif is a post-lithography pattern enhancement system that enables the creation of features as small as 10 nm by using plasma-based technology to deposit a thin film on printed photoresist holes and spaces. The film is created by applying multiple short etch-deposition cycles until the target feature size is achieved. This capability addresses a customer technology need for a solution enabling the creation of features two to three generations ahead of lithography. The system also simplifies optical proximity correction by improving the lithography profile and provides a cost-effective approach to extending lithography tool sets in select applications.

Clean Process

     The manufacture of semiconductor devices involves a series of processes such as etch and deposition, which leave particles and residues. The wafer must generally be cleaned following these steps to remove residues that could degrade device performance. Common wafer cleaning steps include post-etch/post-strip cleans and pre-diffusion/pre-deposition cleans (also referred to as “critical cleans”), during which the wafer surface is prepared for subsequent diffusion/deposition steps.

     For 65 nm technologies and below, defects transferred from the wafer edge bevel can significantly limit device yield. During device patterning, complex interactions of film deposition, lithography, etching, and chemical mechanical polishing (CMP) result in a wide range of unstable film stacks on the wafer edge. In subsequent process steps these film layers can produce defects that are transported to the device area of the wafer, and residues need to be removed from the wafer edge to eliminate these defect sources.

Wet Clean Products

     Confined Chemical Cleaning™ (C3™) single-wafer technology-based systems. At the 65 nm technology node and below, devices become more susceptible to damage from the chemical environment and mechanical forces of the cleaning process. Lam Research’s single-wafer wet cleaning system, based on the Company’s proprietary C3 technology, provides high-selectivity wafer cleaning with minimal mechanically induced damage and allows flexibility in selecting cleaning chemicals that minimize damage to device structures. Advanced drying technology integrated into the cleaning unit facilitates low-defect processing of hydrophobic materials, such as advanced low-κ dielectrics. Short contact times, enabled by an innovative chemical delivery mechanism to enhance the transport of chemicals to and from the wafer surface, minimize potential erosion or etching of delicate features on the wafer, while allowing for highly selective and efficient residue removal.

Bevel Clean Products

     2300^® Coronus^TM bevel clean system. The 2300 Coronus plasma-based bevel clean system is a plasma-based technology that allows control of the wafer edge at multiple steps during the device fabrication process by selectively removing films from the wafer edge using edge-confined plasma technology. Removal of these films at select points in the integration flow reduces defects and increases device yields. Precise control of the processing zone coupled with Lam Research’s Dynamic Alignment, which provides accurate wafer placement, ensures a repeatable processing area, wafer to wafer.

9400DSiE, AC3, C3, Confined Chemical Cleaning, Coronus, Flex, Flex45, Kiyo, Kiyo45, Metal45, Motif, Syndion, and Transformer Coupled Plasma are trademarks of Lam Research Corporation. 2300, Exelan, the Lam Research logo, Lam Research, TCP, and Versys are registered trademarks of Lam Research Corporation.

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 2007, 2006, and 2005 were $285.3 million, $229.4 million, and $195.3 million, respectively. The majority of spending is targeted at etch and plasma-based technology applications with an increasing proportion focused on adjacent markets, pre- and post-etch step opportunities, consistent with our multi-product growth strategy. We believe current challenges for customers in the pre- and post-etch applications present opportunities for us. We plan to leverage our extensive production experience in etch and strip into new products and new capabilities for our customers at the 65, 45, and 32 nm nodes, including post ion implantation strip, clean, and patterning.

     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 our customers’ 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 field 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, not to exceed 14 months from shipment of the system to the customer. The warranty provides that systems shall be free from defects in material and workmanship and conform to our published 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.

Export 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, 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. There can be no assurance that any of these factors will not have a material adverse effect on our business, financial position, and results of operations and cash flows. Revenue by region was as follows:

		Year Ended
		June 24,				June 25,				June 26,
		2007				2006				2005
						(in thousands)
Revenue:
United States		$	408,631			$	238,009			$	234,112
Europe			237,716				208,369				184,014
Asia Pacific			451,487				193,181				292,501
Taiwan			573,875				277,731				289,532
Korea			531,310				366,939				280,605
Japan			363,557				357,942				221,689
Total revenue		$	2,566,576			$	1,642,171			$	1,502,453

     Please see Note 21, “Segment, Geographic Information and Major Customers”, to Consolidated Financial Statements for a description of the geographic locations of long-lived assets.

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 2007, revenues from Hynix Semiconductor and Samsung Electronics Company, Ltd., each accounted for approximately 14% of total revenues. In fiscal year 2006, revenues from Samsung Electronics Company, Ltd., accounted for approximately 15% of total revenues and revenues from Toshiba Corporation accounted for approximately 12% of total revenues. In fiscal year 2005, revenues from Samsung Electronics Company, Ltd., accounted for approximately 13% 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 24, 2007 and June 25, 2006, our backlog was approximately $643 million and $521 million, respectively. Generally, orders for our products and services are subject to cancellation by our customers with limited penalties. Because some orders are received for shipments 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 16 of our Consolidated Financial Statements, included in Item 8 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 any 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 March 10, 2008, we had approximately 3,000 regular full-time employees.

     Each of our employees is required to sign an agreement to maintain the confidentiality of our proprietary information. All employees are required to sign an acknowledgement that they have read and agree to abide by a 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 spares 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. 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.

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 1 to 20 years. We believe that, although the patents we own and may obtain in the future will be of value, they will not alone 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 24, 2007 (the “2007 Form 10-K).

     During the quarter ended December 24, 2006, we acquired the U.S. silicon growing and silicon fabrication assets of Bullen Ultrasonics, Inc. We were the largest customer of the Bullen Ultrasonics silicon business. The silicon business has become a division of Lam Research post-acquisition.

     The acquisition includes 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 has not yet occurred as of the date of this filing. 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.

     Pursuant to the First Amendment to the Asset Purchase Agreement dated October 5, 2006, the parties to the Asset Purchase Agreement agreed that the closing of the sale of the Suzhou assets would take place within 5 business days following receipt by the parties of all necessary approvals, consents and authorizations of governmental and provincial authorities in the PRC and satisfaction of other customary conditions and covenants. We will pay the $2.5 million purchase price for the Suzhou assets upon the receipt of the approvals and satisfaction of conditions noted above.

     The acquisition supports the competitive position and capability primarily of our dielectric Etch products by providing access to and control of critical intellectual property and manufacturing technology related to the production of silicon parts in our processing chambers. We funded the purchase price of the acquisition with existing cash resources.

     See the description of our acquisition of SEZ Holding AG under the heading “Subsequent Events” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this 2007 Form 10-K.

Other Cautionary Statements

     See the discussion of risks in the section of this 2007 Form 10-K entitled Item 1A, “Risk Factors” and elsewhere in this report.

EXECUTIVE OFFICERS OF THE COMPANY

     As of March 10, 2008, the executive officers of Lam Research were as follows:

Name		Age				Title
James W. Bagley			69			Executive Chairman
Stephen G. Newberry			54			President and Chief Executive Officer
Martin B. Anstice			40			Senior Vice President, Chief Financial Officer and Chief Accounting Officer
Ernest E. Maddock			49			Senior Vice President, Global Operations
Abdi Hariri			47			Group Vice President, Customer Support Business Group
Richard A. Gottscho			55			Group Vice President and General Manager, Etch Businesses
Thomas J. Bondur			40			Vice President, Global Field Operations

     James W. Bagley became Chief Executive Officer and a Director of the Company with the merger of Lam Research and OnTrak Systems, Inc., in 1997. Effective September 1, 1998, he was appointed Chairman of the Board. On June 27, 2005, Mr. Bagley transitioned from Chairman of the Board and Chief Executive Officer to Executive Chairman of the Board of Lam Research. Mr. Bagley currently is a director of Teradyne, Inc. and Micron Technology, Inc. From June 1996 to August 1997, Mr. Bagley served as Chairman of the Board and Chief Executive Officer of OnTrak Systems, Inc. He was formerly Chief Operating Officer and Vice Chairman of the Board of Applied Materials, Inc., where he also served in other senior executive positions during his 15-year tenure. Mr. Bagley held various management positions at Texas Instruments, Inc., before he joined Applied Materials, Inc.

     Stephen G. Newberry joined the Company in August 1997 as Executive Vice President and Chief Operating Officer. He was appointed President and Chief Operating Officer of Lam Research in July 1998 and President and Chief Executive Officer in June 2005. Mr. Newberry currently serves as a director of Lam Research Corporation and of SEMI, the industry’s trade association. Prior to joining Lam Research, Mr. Newberry served as Group Vice President of Global Operations and Planning at Applied Materials, Inc. During his 17 years at Applied Materials, he held various positions in manufacturing, product development, sales and marketing, and customer service. Mr. Newberry is a graduate of the U.S. Naval Academy (BS Ocean Engineering) and the Harvard Graduate School of Business (Program for Management Development) and served five years in naval aviation prior to joining Applied Materials.

     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 and named Senior Vice President, Chief Financial Officer and Chief Accounting Officer in March 2007. 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, Senior Vice President of Global Operations since March 2007 and previously Group Vice President of Global Operations since October 2003, currently oversees Global Operations which consists of: Information Technology, Global Supply Chain, Production Operations, Corporate Quality, Global Security, Global Real Estate & Facilities. Additionally, Mr. Maddock heads Bullen Semiconductor, a division of Lam Research. Mr. Maddock joined the Company in November 1997. Mr. Maddock’s previously held positions with the Company include Vice President of the Customer Support Business Group. Prior to his employment with Lam Research, he 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 of the Customer Support Business Group in March 2007. Prior to his current position, Mr. Hariri had been 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 Products 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, Global Field Operations since March 2007, joined Lam 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.

     Item 1A. Risk Factors

     In addition to the other information in this 2007 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.

The Results of Our Independent Committee Review of Our Historical Stock Option Practices and Resulting Restatements May Continue to Have Adverse Effects on Our Financial Results.

     The review by a special committee of our Board of Directors consisting of two independent Board members (the “Independent Committee”) of our historical stock option practices and the resulting restatement of our historical financial statements have required us to expend significant management time and incur significant accounting, legal, and other expenses during fiscal year 2008. The resulting restatements have had a material adverse effect on our results of operations. We have restated our historical results of operations to record additional non-cash, stock-based compensation expense of $95.2 million in the aggregate for the periods from fiscal 1997 to fiscal 2006 (excluding the impact of related payroll and income taxes). We expect to amortize less than $0.1 million of compensation expense under Financial Accounting Standards No. 123 (revised), “Share-Based Payment” (“SFAS No. 123R”) in periods subsequent to fiscal year 2006 to properly account for previously issued stock options with deemed incorrect measurement dates. Furthermore, to address potential adverse tax consequences certain of our employees have incurred or may incur as a result of the issuance and/or exercise of misdated stock options, we will take remedial actions to make such employees, including our Chief Executive Officer and other affected executive officers, whole for any or all such additional tax liabilities currently estimated to be in the range of approximately $50 million to $55 million. Such actions may cause us to incur additional cash or noncash compensation expense. See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 3, “Restatements of Consolidated Financial Statements,” to Notes to Consolidated Financial Statements of this 2007 Form 10-K for further discussion.

We May Be Subject to the Risks of Lawsuits in Connection With Our Historical Stock Option Practices, the Resulting Restatements, and the Remedial Measures We Have Taken.

     We, and our current and former directors and officers, may become the subject of government inquiries, shareholder derivative and class action lawsuits and other legal proceedings relating to our historical stock option practices and resulting restatements in the future. We have received a letter from a stockholder demanding that our Board of Directors take certain actions, including potentially legal action, in connection with our historical stock option practices, and threatening to sue if our Board of Directors does not comply with the stockholder’s demands. Our Board of Directors is currently reviewing the letter. We may also be subject to other kinds of lawsuits. Should any of these events occur, they could require us to expend significant management time and incur significant accounting, legal and other expenses. This could divert attention and resources from the operation of our business and adversely affect our financial condition and results of operations. In addition, the ultimate outcome of these potential actions could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price for our securities. Litigation may be time-consuming, expensive and disruptive to normal business operations, and the outcome of litigation is difficult to predict. The defense of these potential lawsuits could result in significant expenditures.

     Subject to certain limitations, we are obliged to indemnify our current and former directors, officers and employees in connection with any government inquiry or litigation related to our historical stock option practices that may arise. We currently hold insurance policies for the benefit of our directors and officers, although there can be no assurance that the insurance would cover all of the expenses that would be associated with any proceedings.

Judgment and Estimates Utilized by Us in Determining Stock Option Grant Dates and Related Adjustments may be Subject to Change due to Subsequent SEC Guidance or Other Disclosure Requirements.

     In determining the restatement adjustments in connection with the stock option review, management used all reasonably available relevant information to form conclusions it believes are appropriate as to the most likely option granting actions that occurred, the dates when such actions occurred, and the determination of grant dates for financial accounting purposes based on when the requirements of the accounting standards were met. We considered various alternatives throughout the course of the review and restatement, and we believe the approaches used were the most appropriate, and that the choices of measurement dates used in our review of stock option grant accounting and restatement of our financial statements were reasonable and appropriate in our circumstances. However, the SEC may issue additional guidance on disclosure requirements related to the financial impact of past stock option grant measurement date errors that may require us to amend this filing or other filings with the SEC to provide additional disclosures pursuant to such additional guidance. Any such circumstance could also lead to future delays in filing our subsequent SEC reports and delisting of our Common Stock from the NASDAQ Global Select Market. Furthermore, if we are subject to adverse findings in any of these matters, we could be required to pay damages or penalties or have other remedies imposed upon us which could harm our business, financial condition, and results of operations.

We Have not Been in Compliance With SEC Reporting Requirements and NASDAQ Listing Requirements. If We are Unable to Attain Compliance With, or Thereafter Remain in Compliance With SEC Reporting Requirements and NASDAQ Listing Requirements, There may be a Material Adverse Effect on Our Business and Our Stockholders.

     As a consequence of the Independent Committee review of our historical stock option practices and resulting restatements of our financial statements, we have not been able to file our periodic reports with the SEC on a timely basis and continue to face the possibility of delisting of our stock from the NASDAQ Global Select Market. We have now filed this 2007 Form 10-K and we believe that this filing, together with the expected filing of the Quarterly Report on Form 10-Q as of and for the quarter ended September 23, 2007 (the “First Quarter 2008 Form 10-Q”) and the Quarterly Report on Form 10-Q as of and for the quarter ended December 23, 2007 (the “Second Quarter 2008 Form 10-Q”) with the SEC will remediate the Company’s non-compliance with Marketplace Rule 4310(c) (14), subject to the affirmative completion by the NASDAQ Stock Market Inc. (“NASDAQ”) of its compliance protocols and its notification to the Company accordingly. However, if NASDAQ disagrees with the Company’s position or if the SEC disagrees with the manner in which the financial impact of past stock option grants have been accounted for and reported, or not reported, there could be further delays in filing subsequent SEC reports or other actions that might result in delisting of the Company’s Common Stock from the NASDAQ Global Select Market.

          See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 3, “Restatements of Consolidated Financial Statements,” to Consolidated Financial Statements of this 2007 10-K for further discussion. Until we have returned to full compliance with SEC reporting requirements and NASDAQ listing requirements, the possibility of a NASDAQ delisting exists. If this happens, the price of our stock and the ability of our stockholders to trade in our stock would be adversely affected. In addition, we would be subject to a number of restrictions regarding the registration of our stock under federal securities laws, and we would not be able to allow our employees to exercise their outstanding options, which could adversely affect our business and results of operations.

          As a result of the delayed filings of our Quarterly Report on Form 10-Q for the quarters ended September 23, 2007 and December 23, 2007, as well as of this 2007 Form 10-K, we will be ineligible to register our securities on Form S-3 for sale by us or resale by others until one year from the date the last delinquent filing is made. We may use Form S-1 to raise capital or complete acquisitions, but doing so could increase transaction costs and adversely impact our ability to raise capital or complete acquisitions of other companies in a timely manner.

It may be Difficult or More Costly to Obtain Director and Officer Liability Insurance Coverage as a Result of Our Stock Option Restatement.

          The issues arising from our restatement may make it more difficult to obtain director and officer liability insurance coverage in the future. If we are able to obtain this coverage, it could be significantly more costly than in the past, which could have an adverse effect on our financial results and cash flow. If we are unable to secure appropriate director and officer liability insurance coverage on reasonable terms, our directors and officers could face increased risks of personal liability in connection with the performance of their duties. In that event, we believe we could have difficulty attracting and retaining qualified directors and officers, which could adversely affect our business.

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:

•		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;
•		changes in our estimated effective tax rate;
•		new or modified accounting regulations and practices; and
•		exchange rate fluctuations.

     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 can typically range in price 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 declare 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 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 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 might 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 Lam Research’s 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 Lam Research’s 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 four 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 play key roles 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 84% in fiscal year 2007, 86% in fiscal year 2006 and 84% in fiscal year 2005 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 are subject to risks including, but not limited to:

•		trade balance issues;
•		economic and political conditions;
•		changes in currency controls;
•		differences in the enforcement of intellectual property and contract rights in varying jurisdictions;
•		our ability to develop relationships with local suppliers;
•		compliance with U.S. and international laws and regulations, including U.S. export restrictions;
•		fluctuations in interest and currency exchange rates;
•		the need for technical support resources in different locations; and
•		our ability to secure and retain qualified people for the operation of our business.

     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. 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 region. A significant trade disruption in these areas could have a material, adverse impact on our future revenue and profits.

     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 in Japan that are denominated in Japanese yen, certain of our spares and service contracts which are denominated in other currencies, and expenses related to our non-U.S. sales and support offices which are denominated in these countries’ local currency.

     We currently enter into foreign currency forward contracts to minimize the short-term impact of the exchange rate fluctuations on Japanese yen-denominated assets and forecasted Japanese yen-denominated revenue where we currently believe our primary exposure to currency rate fluctuation lies and will 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 our yen-denominated assets with currency forward contracts, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we currently do not enter into such forward contracts for currencies other than the yen, and we therefore are subject to both favorable and unfavorable 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 Income 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 both 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) all necessary environmental permits 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 Holding AG, 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. We anticipate that our recent acquisition of SEZ will give rise to risks like these, as we integrate its operations with ours. 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 acquisitions 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 or earnings from levels 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;
•		developments in, or claims relating to, patent or other proprietary rights;
•		success or failure of our new and existing products;
•		liquidity of Lam Research;
•		disruptions with key customers or suppliers; or
•		political, economic, or environmental events occurring globally or in any of our key sales regions.

     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.

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 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. 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” or the “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 24, 2007. 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 Firm and Lam Research that, in the Firm’s professional judgment, might have a bearing on the 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 2008 to 2014. These leases generally include options to renew or purchase the facilities. Please see additional information under the heading “Subsequent Events” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this 2007 Form 10-K regarding renewal of these leases and entry into additional leases. 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 a manufacturing facility located in Eaton, Ohio. Our fiscal year 2007 rental payments for the space occupied during that period aggregated approximately $11 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 material adverse effect on our consolidated financial position, liquidity, operating results, or our consolidated financial statements taken as a whole.

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.

     In October 2004, we announced that our Board of Directors had authorized the repurchase of up to $250 million of our Common Stock from the public market or in private purchases. The terms of the repurchase program permitted us to repurchase shares through September 30, 2007. In August 2005, we announced that our Board of Directors had authorized the repurchase of an additional $500 million of our Common Stock from the public market or private purchase. The terms of the repurchase program permitted us to repurchase shares through September 30, 2008. In February 2007, we announced that our Board of Directors had authorized the repurchase of up to an additional $750 million of our Common Stock from the public market or private purchase. The terms of the repurchase program permitted us to repurchase shares at a pace determined by management. We completed the repurchase of all amounts available under our share repurchase authorizations during the quarter ended June 24, 2007. Share repurchases under the authorizations were as follows:

		Total Number								Total Number of Shares				Remaining Amount
		of Shares				Average				Purchased as Part of				Available Under
		Repurchased				Price Paid				Publicly Announced				the Repurchase
Period		(1)				per Share				Plans or Programs				Programs
		(in thousands, except per share data)
As of June 25, 2006			12,833			$	32.59				12,833			$	331,708
Quarter Ending September 24, 2006			27				40.20				—			$	331,708
Quarter Ending December 24, 2006			1,452				51.83				1,447			$	256,696
Additional authorization of up to $750 million — February 23, 2007			—				—				—			$	1,006,696
Quarter Ending March 25, 2007			5,221				45.78				5,214			$	768,006
March 26, 2007 - April 22, 2007			2,493				50.41				2,490			$	642,458
April 23, 2007 - May 20, 2007			7,842				53.86				7,841			$	220,135
May 21, 2007 - June 24, 2007			4,168				52.86				4,164			$	—
Total			34,036			$	44.13				33,989

     The following graph compares the cumulative five-year total return to stockholders on Lam Research’s Common Stock relative to the cumulative total returns of the NASDAQ Composite Index and the RDG Semiconductor Composite Index. An assumed investment of $100 (with reinvestment of all dividends) is to have been made in our Common Stock and in each of the indices on June 30, 2002 and its relative performance is tracked through June 30, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Lam Research Corporation, The NASDAQ Composite Index
And The RDG Semiconductor Composite Index

Item 6. Selected Financial Data

     The following tables include selected summary financial data for each of our last five fiscal years. As discussed in Note 3, “Restatements of Consolidated Financial Statements” to Consolidated Financial Statements, our selected financial data as of and for the years ended June 25, 2006, June 26, 2005, June 27, 2004, and June 29, 2003, have been restated to correct our past accounting for stock option grants and other related adjustments. These data should be read in conjunction with Item 8, “Financial Statements and Supplementary Data”, and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this 2007 Form 10-K.

		Year Ended
		June 24,				June 25,				June 26,				June 27,				June 29,
		2007				2006				2005				2004				2003
						As reported				As reported				As reported				As reported
		(in thousands, except per share data)
OPERATIONS:
Total revenue		$	2,566,576			$	1,642,171			$	1,502,453			$	935,946			$	755,234
Gross margin			1,305,054				827,394				764,092				431,049				303,829
Restructuring charges, net			—				—				14,201				8,327				15,901
Operating income (loss)			778,660				406,265				391,002				106,180				(5,385	)
Loss on equity derivative contracts in Company stock (EITF 00-19)			—				—				—				—				(16,407	)
Net income (loss)			685,816				335,755				299,341				82,988				(7,739	)
Net income (loss) per share:
Basic		$	4.94			$	2.42			$	2.17			$	0.63			$	(0.06	)
Diluted		$	4.85			$	2.34			$	2.10			$	0.59			$	(0.06	)
BALANCE SHEET:
Working capital		$	743,563			$	1,140,143			$	865,703			$	519,782			$	655,794
Total assets			2,101,605				2,313,344				1,448,815				1,198,626				1,198,275
Long-term obligations, less current portion			252,487				350,969				2,786				9,554				332,209

		Year Ended
		June 24,				June 25,				June 26,				June 27,				June 29,
		2007				2006				2005				2004				2003
						Adjustments				Adjustments				Adjustments				Adjustments
		(in thousands, except per share data)
OPERATIONS:
Total revenue		$	—			$	—			$	—			$	—			$	—
Gross margin			—				(382	)			(628	)			(946	)			(2,749	)
Restructuring charges, net			—				—				—				—				—
Operating income (loss)			—				(1,497	)			(2,860	)			(9,387	)			(15,384	)
Loss on equity derivative contracts in Company stock (EITF 00-19)			—				—				—				—				—
Net income (loss)			—				(545	)			(2,089	)			(5,502	)			(10,442	)
Net income (loss) per share:
Basic		$	—			$	(0.00	)		$	(0.02	)		$	(0.04	)		$	(0.08	)
Diluted		$	—			$	(0.00	)		$	(0.01	)		$	(0.04	)		$	(0.08	)
BALANCE SHEET:
Working capital		$	—			$	(1,423	)		$	(28,333	)		$	(20,416	)		$	(16,923	)
Total assets			—				14,038				23,534				23,492				20,043
Long-term obligations, less current portion			—				—				—				—				—

See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 3, “Restatement of Consolidated Financial Statements” to Consolidated Financial Statements in Item 8 for an explanation of these adjustments.

		Year Ended
		June 24,				June 25,				June 26,				June 27,				June 29,
		2007				2006				2005				2004				2003
						As restated				As restated				As restated				As restated
		(in thousands, except per share data)
OPERATIONS:
Total revenue		$	2,566,576			$	1,642,171			$	1,502,453			$	935,946			$	755,234
Gross margin			1,305,054				827,012				763,464				430,103				301,080
Restructuring charges, net(1)			—				—				14,201				8,327				15,901
Operating income (loss)(2)			778,660				404,768				388,142				96,793				(20,769	)
Loss on equity derivative contracts in Company stock (EITF 00-19)			—				—				—				—				(16,407	)
Net income (loss)			685,816				335,210				297,252				77,486				(18,181	)
Net income (loss) per share:
Basic		$	4.94			$	2.42			$	2.16			$	0.59			$	(0.14	)
Diluted(3)		$	4.85			$	2.33			$	2.09			$	0.54			$	(0.14	)
BALANCE SHEET:
Working capital		$	743,563			$	1,138,720			$	837,370			$	499,366			$	638,871
Total assets			2,101,605				2,327,382				1,472,349				1,222,118				1,218,318
Long-term obligations, less current portion			252,487				350,969				2,786				9,554				332,209

Unaudited Selected Quarterly Financial Data

Stock and Dividend 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 March 10, 2008 we had 348 stockholders of record. In fiscal years 2007 and 2006 we did not declare or pay cash dividends to our stockholders. We currently have no plans to declare or pay cash dividends. During fiscal year 2007, we repurchased 21,156,586 shares of Common Stock at a total cost of $1.08 billion under terms of our repurchase programs discussed earlier in Item 5 of this 2007 Form 10-K thereby completing all currently available repurchase programs.

		Three Months Ended
		June 24,				March 25,				December 24,				September 24,
		2007				2007				2006				2006
		(in thousands, except per share data)
QUARTERLY FISCAL YEAR 2007:
Total revenue		$	678,519			$	650,270			$	633,400			$	604,387
Gross margin			342,729				326,245				322,916				313,164
Operating income			200,349				188,973				194,505				194,833
Net income			170,231				164,741				167,326				183,518
Net income per share
Basic		$	1.31			$	1.17			$	1.18			$	1.29
Diluted		$	1.28			$	1.15			$	1.15			$	1.27
Price range per share		$	46.58-$56.04			$	43.10-$54.68			$	42.06-$57.05			$	36.66-$47.46
Number of shares used in per share calculations:
Basic			130,169				140,423				142,306				141,928
Diluted			132,868				143,052				145,346				144,850

		Three Months Ended
		June 25,				March 26,				December 25,				September 25,
		2006				2006				2005				2005
		As restated (1)				As restated (1)				As restated (1)				As restated (1)
		(in thousands, except per share data)
QUARTERLY FISCAL YEAR 2006:
Total revenue		$	525,596			$	437,423			$	358,245			$	320,907
Gross margin			274,178				219,514				177,332				155,988
Operating income			159,445				109,652				76,411				59,260
Net income			122,448				86,002				77,481				49,279
Net income per share
Basic		$	0.87			$	0.61			$	0.57			$	0.36
Diluted		$	0.85			$	0.59			$	0.54			$	0.35
Price range per share		$	41.54-$53.74			$	35.44-$48.57			$	28.37-$39.18			$	27.77-$32.61
Number of shares used in per share calculations:
Basic			141,168				140,122				136,572				136,453
Diluted			144,708				144,743				142,439				141,760

     The following tables reflect the impact of the restatement on the Company’s consolidated balance sheets for the first three quarters of fiscal 2007 and 2006, and on the consolidated statements of operations for the four quarters in fiscal 2006. There was no impact of the restatement on the consolidated statements of operations for the first three quarters of fiscal 2007.

Consolidated Statement of Operations

Quarter Ended June 25, 2006		As
(in thousands, except per share data)		reported				Adjustments (1)				As restated
Total revenue		$	525,596			$	—			$	525,596
Cost of goods sold			251,445				(27	)			251,418
Gross margin			274,151				27				274,178
Research and development			60,824				11				60,835
Selling, general and administrative			53,921				(23	)			53,898
Total operating expenses			114,745				(12	)			114,733
Operating income			159,406				39				159,445
Other income, net			9,398				—				9,398
Income before income taxes			168,804				39				168,843
Income tax expense			46,655				(260	)			46,395
Net income		$	122,149			$	299			$	122,448
Net income per share:
Basic net income per share		$	0.87							$	0.87
Diluted net income per share		$	0.84							$	0.85
Number of shares used in per share calculations:
Basic			141,168				—				141,168
Diluted			144,683				25				144,708

Consolidated Statement of Operations
Quarter Ended March 26, 2006		As
(in thousands, except per share data)		reported				Adjustments (1)				As restated
Total revenue		$	437,423			$	—			$	437,423
Cost of goods sold			217,769				140				217,909
Gross margin			219,654				(140	)			219,514
Research and development			61,083				148				61,231
Selling, general and administrative			48,303				328				48,631
Total operating expenses			109,386				476				109,862
Operating income			110,268				(616	)			109,652
Other income, net			7,828				—				7,828
Income before income taxes			118,096				(616	)			117,480
Income tax expense			31,759				(281	)			31,478
Net income		$	86,337			$	(335	)		$	86,002
Net income per share:
Basic net income per share		$	0.62							$	0.61
Diluted net income per share		$	0.60							$	0.59
Number of shares used in per share calculations:
Basic			140,122				—				140,122
Diluted			144,846				(103	)			144,743

Consolidated Statement of Operations
Quarter Ended December 25, 2005		As
(in thousands, except per share data)		reported				Adjustments (1)				As restated
Total revenue		$	358,245			$	—			$	358,245
Cost of goods sold			180,735				178				180,913
Gross margin			177,510				(178	)			177,332
Research and development			55,742				178				55,920
Selling, general and administrative			44,859				142				45,001
Total operating expenses			100,601				320				100,921
Operating income			76,909				(498	)			76,411
Other income, net			9,308				—				9,308
Income before income taxes			86,217				(498	)			85,719
Income tax expense			8,439				(201	)			8,238
Net income		$	77,778			$	(297	)		$	77,481
Net income per share:
Basic net income per share		$	0.57							$	0.57
Diluted net income per share		$	0.55							$	0.54
Number of shares used in per share calculations:
Basic			136,572				—				136,572
Diluted			142,525				(86	)			142,439

Consolidated Statement of Operations
Quarter Ended September 25, 2005		As
(in thousands, except per share data)		reported				Adjustments (1)				As restated
Total revenue		$	320,907			$	—			$	320,907
Cost of goods sold			164,828				91				164,919
Gross margin			156,079				(91	)			155,988
Research and development			51,242				150				51,392
Selling, general and administrative			45,155				181				45,336
Total operating expenses			96,397				331				96,728
Operating income			59,682				(422	)			59,260
Other income, net			8,488				—				8,488
Income before income taxes			68,170				(422	)			67,748
Income tax expense			18,679				(210	)			18,469
Net income		$	49,491			$	(212	)		$	49,279
Net income per share:
Basic net income per share		$	0.36							$	0.36
Diluted net income per share		$	0.35							$	0.35
Number of shares used in per share calculations:
Basic			136,453				—				136,453
Diluted			141,430				330				141,760

Consolidated Balance Sheet
March 25, 2007		As
(in thousands)		reported				Adjustments (1)				As restated
ASSETS
Cash and cash equivalents		$	494,807			$	—			$	494,807
Short-term investments			638,878				—				638,878
Accounts receivable, net			461,365				—				461,365
Inventories			228,435				—				228,435
Deferred income taxes			54,765				—				54,765
Prepaid expenses and other current assets			66,118				—				66,118
Total current assets			1,944,368				—				1,944,368
Property and equipment, net			107,388				—				107,388
Restricted cash			360,038				—				360,038
Deferred income taxes			28,672				24,486				53,158
Goodwill			55,892				—				55,892
Intangible assets, net			61,615				—				61,615
Other assets			51,897				—				51,897
Total assets		$	2,609,870			$	24,486			$	2,634,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable		$	142,814			$	—			$	142,814
Accrued expenses and other current liabilities			333,948				1,423				335,371
Deferred profit			166,109				—				166,109
Total current liabilities			642,871				1,423				644,294
Long-term debt			250,000				—				250,000
Other long-term liabilities			821				—				821
Total liabilities			893,692				1,423				895,115
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—				—
Common stock			137				—				137
Additional paid-in capital			1,078,130				88,908				1,167,038
Treasury stock			(720,555	)			—				(720,555	)
Accumulated other comprehensive loss			(6,600	)			—				(6,600	)
Retained earnings			1,365,066				(65,845	)			1,299,221
Total stockholders’ equity			1,716,178				23,063				1,739,241
Total liabilities and stockholders’ equity		$	2,609,870			$	24,486			$	2,634,356

Consolidated Balance Sheet

December 24, 2006		As
(in thousands)		reported				Adjustments (1)				As restated
ASSETS
Cash and cash equivalents		$	629,117			$	—			$	629,117
Short-term investments			574,845				—				574,845
Accounts receivable, net			456,427				—				456,427
Inventories			212,299				—				212,299
Deferred income taxes			40,799				—				40,799
Prepaid expenses and other current assets			43,169				—				43,169
Total current assets			1,956,656				—				1,956,656
Property and equipment, net			97,034				—				97,034
Restricted cash			415,038				—				415,038
Deferred income taxes			37,516				14,038				51,554
Goodwill			55,892				—				55,892
Intangible assets, net			64,641				—				64,641
Other assets			52,929				—				52,929
Total assets		$	2,679,706			$	14,038			$	2,693,744
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable		$	111,429			$	—			$	111,429
Accrued expenses and other current liabilities			350,140				1,423				351,563
Deferred profit			176,794				—				176,794
Total current liabilities			638,363				1,423				639,786
Long-term debt			300,000				—				300,000
Long-term liabilities less current portion			833				—				833
Total liabilities			939,196				1,423				940,619
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—				—
Common stock			142				—				142
Additional paid-in capital			1,032,946				78,460				1,111,406
Treasury stock			(486,003	)			—				(486,003	)
Accumulated other comprehensive loss			(6,900	)			—				(6,900	)
Retained earnings			1,200,325				(65,845	)			1,134,480
Total stockholders’ equity			1,740,510				12,615				1,753,125
Total liabilities and stockholders’ equity		$	2,679,706			$	14,038			$	2,693,744

Consolidated Balance Sheet

September 24, 2006		As
(in thousands)		reported				Adjustment (1)				As restated
ASSETS
Cash and cash equivalents		$	1,031,348			$	—			$	1,031,348
Short-term investments			233,284				—				233,284
Accounts receivable, net			379,869				—				379,869
Inventories			188,179				—				188,179
Deferred income taxes			47,206				—				47,206
Prepaid expenses and other current assets			40,714				—				40,714
Total current assets			1,920,600				—				1,920,600
Property and equipment, net			56,786				—				56,786
Restricted cash and investments			470,038				—				470,038
Deferred income taxes			38,533				14,038				52,571
Other assets			48,404				—				48,404
Total assets		$	2,534,361			$	14,038			$	2,548,399
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable		$	125,550			$	—			$	125,550
Accrued expenses and other current liabilities			305,571				1,423				306,994
Deferred profit			153,123				—				153,123
Total current liabilities			584,244				1,423				585,667
Long-term debt			350,000				—				350,000
Long-term liabilities less current portion			924				—				924
Total liabilities			935,168				1,423				936,591
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—				—
Common stock			142				—				142
Additional paid-in capital			983,253				78,460				1,061,713
Treasury stock			(410,718	)			—				(410,718	)
Accumulated other comprehensive loss			(6,483	)			—				(6,483	)
Retained earnings			1,032,999				(65,845	)			967,154
Total stockholders’ equity			1,599,193				12,615				1,611,808
Total liabilities and stockholders’ equity		$	2,534,361			$	14,038			$	2,548,399

Consolidated Balance Sheet

March 26, 2006		As
(in thousands)		reported				Adjustments (1)				As restated
ASSETS
Cash and cash equivalents		$	757,845			$	—			$	757,845
Short-term investments			233,528				—				233,528
Accounts receivable, net			319,150				—				319,150
Inventories			144,259				—				144,259
Deferred income taxes			50,813				—				50,813
Prepaid expenses and other current assets			34,173				—				34,173
Total current assets			1,539,768				—				1,539,768
Property and equipment, net			43,903				—				43,903
Restricted cash			85,038				—				85,038
Deferred income taxes			36,409				24,226				60,635
Other assets			33,707				—				33,707
Total assets		$	1,738,825			$	24,226			$	1,763,051
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable		$	107,142			$	—			$	107,142
Accrued expenses and other current liabilities			280,999				1,530				282,529
Deferred profit			119,168				—				119,168
Total current liabilities			507,309				1,530				508,839
Long-term liabilities less current portion			1,605				—				1,605
Total liabilities			508,914				1,530				510,444
Commitments and contingencies
Stockholders’ equity:
Preferred stock			—				—				—
Common stock			140				—				140
Additional paid-in capital			896,437				88,840				985,277
Treasury stock			(386,101	)			—				(386,101	)
Accumulated other comprehensive loss			(10,811	)			—				(10,811	)
Retained earnings			730,246				(66,144	)			664,102
Total stockholders’ equity			1,229,911				22,696				1,252,607
Total liabilities and stockholders’ equity		$	1,738,825			$	24,226			$	1,763,051