Good afternoon. My name is Amanda and I will be your conference operator. I’d like to welcome everyone to the KLA-Tencor first quarter fiscal 2011 conference call. I would now like to turn the conference call over to Mr. Ed Lockwood of KLA-Tencor Investor Relations. Mr. Lockwood, you may begin.

Thank you, Amanda. And we apologize for the technical difficulties this afternoon. Good afternoon everyone and welcome to KLA-Tencor’s first quarter fiscal year 2011 earnings conference call. Joining me on our call today are Rick Wallace, our President and Chief Executive Officer; and Mark Dentinger, our Chief Financial Officer. We are here today to discuss first quarter results for the period ended September 30, 2010. We released these results this afternoon at 1:15 p.m. Pacific Time. If you haven’t seen the release, you can find it on our web site at www.kla-tencor.com or call 408-875-3600 to request a copy. A simulcast of this call will be accessible on demand following its completion on the investor section of our website. There you will also find a calendar of future investor events, presentations and conferences, as well as links to KLA-Tencor’s SEC filings including our Annual Report on Form 10-K for the year ended June 30, 2010 and our subsequently filed 10-Q reports. In those filings you will find descriptions of risk factors that could impact our future results. As you know, our future results are subject to risks. Any forward-looking statements including those we make on this call today are subject to those risks, and KLA-Tencor cannot guarantee those forward-looking statements will come true. Our actual results may differ significantly from those projected in our forward-looking results. More information regarding factors that could cause those differences is contained in the filings we make with the SEC from time to time, including our fiscal year 2010 Form 10-K and our current reports on Form 8-K. We assume no obligation and do not intend to update those forward-looking statements, however, you could be reassured that any updates we do provide will be broadly disseminated and available over the web. With that, I will turn the call over to Rick.

Thanks, Ed. Thank you all for joining us for our call today. I’m going to focus my commentary on the summary highlights for the September quarter and then provide guidance for December then Mark is going to follow with the review of the financials. First of all, there is no storage of the bay today as to the pace of the global economic recovery or the near term direction in semiconductor and the semiconductor equipment market. So KLA-Tencor September results demonstrate the process control adoption remains at a very high level. Our numbers also show the company is successfully executing on our long-term strategic objectives, delivering sustained market leadership, strong revenue growth, record margins, record earnings per share in the quarter. New bookings in the September quarter were $785 million that’s the third highest level in the company’s history. The high level of demand we’re experiencing today is driven by the combination of strong adoption in the core market and a healthy contribution from new markets in our services business. Revenues grew 22% sequentially to $682 million significantly above the range of guidance and indicative of the high sense of urgency among our customers for getting our latest generation process control technologies qualified and in place. Non-GAAP earnings, was a record $0.99 per share in Q1, significantly above the guidance range of $0.80 to $0.88 per share. Underlying this outstanding financial performance in Q1, were record non-GAAP gross margins of 62% and record non-GAAP operating margins of 36%. With incremental margins coming in above our 60 to 70% target for gross margin and our 50 to 60% target for operating margins. And we ended the quarter with the $1.5 billion in cash and investments and $1.4 billion in backlog. Now in response to the high levels of demand we’ve been experiencing lately, we’re focused on driving our operations to meet customer requirements and we are positioned for continued growth in shipments, revenue and earnings as we move forward. Our strong financial performance as a result of KLA-Tencor’s technology and market leadership and it demonstrates the value our technology and services deliver in helping our customers execute their leading edge technology roadmaps. And also helps us sustain a high level of R&D which is essential to achieve our customer focus and growth strategies and provides the resources for us to deliver significant cash returns in the form of dividends and share repurchases. To that end, KLA-Tencor repurchased approximately 2 million shares of our common stock for approximately $62 million and paid cash dividends of approximately $42 million in the quarter. As you may recall, on July 13, we announced that our board of directors authorized an increase in the level the quarterly dividend to $0.25 per share which took effect with our first quarter dividend. That move reflects management and the board’s confidence in the long-term outlook for the company as well as the ongoing efforts to reward our shareholders for their continued investment. Turning now on to some specifics of the demand picture, gross bookings in Q1 were $785 million the third highest on record for KLA-Tencor but below the midpoint of the range of guidance for the quarter. The first quarter end market picture was highlighted by a sustained strong demand from foundries coming in at 44% of new orders in the September quarter. Our foundry customers are operating at high levels of capital intensity as they expand capacity to address the heightened competitive environment and increased business levels driven by rapid proliferation of new fabulous designs. Looking at the memory market, bookings for memory customers were 38% of the total in Q1. Well DRAM pricing in PC demand have been declining off late, our leading edge DRAM customers remain very profitable and are sustaining their investments to transition to the 4X nanometer and the 3X nanometer technology nodes. We also saw an increase in NAND equipment demand in Q1 to meet strong bit growth driven by rapid adoption in smartphones and Tablet PCs. Orders from NAND flash customers grew to 72% of memory orders with market leaders investing to ramp 30 nanometer and to qualify 20 nanometer technologies. Logic was 18% of bookings in September, driven by the continued migration to 22 nanometer. Now as you know, technology changes that enable Moore’s Law are constant in our industry. Regardless of where we are in the industry cycle, ship manufacturers are continuously innovating to lower the cost of production and improve performance of their products and process control is essential to successful innovation. Although orders remained at a high level compared with historical averages, the downward trend in bookings in the first quarter, following an extended period of robust growth was consistent with seasonality for KLA-Tencor. Is also indicative of a more cautious approach our customers have recently adopted with our capital spending budget, as weakening consumer PC demand and persistent uncertainty regarding the macro economy have impacted the spending in the short-term. However, overall semiconductor industry dynamics remained healthy, and the importance of maintaining cost and performance leadership continues to drive investments at a high level. Current external market estimates have semiconductor revenues growing in the range of 30% in calendar 2010, with growth currently forecast in the mid-single digits for calendar 2011. Fab utilization also remains at a high level and the WFE market is forecast to grow 120% in calendar 2010 with 2011 expected to be roughly flat year-over-year. We’re tracking 13 new fab projects currently in development or scheduled to qualify over the next several quarters. The majority of semiconductor capital spending today is focused primarily on technology investment and not capacity. And that focus is a key driver of the high demand we’re seeing in process control. And with the continued success of new products and sustain market leadership, coupled with our strong backlog and high performance business model, KLA-Tencor is well positioned to deliver outstanding revenue, profitability and earnings as we move ahead. Moving now to guidance. Gross bookings in December are projected to be flat to down 20%. We also expect continued revenue growth and strong margin performance, with December revenue expected to be in the range of 700 million to $740 million and non-GAAP earnings in the range of $1.00 to $1.10 per share. And with that, I’ll turn the call over to Mark for his review of the numbers.

Thanks, Rick. As most of you know, we present our income statement in two formats. One under U.S. GAAP and the other in a non-GAAP format which excludes amortization and write-down of intangible assets associated with acquisitions. Expenses associated with our stock options related litigation and certain costs and expenses which are outside of our core operations such as restructuring charges and unusual tax items. Our balance sheet and cash flow statements are presented in GAAP format only. Most of my prepared remarks and operations will refer to non-GAAP information but were a reference GAAP numbers, I’ll make the distinction. A reconciliation of our GAAP to non-GAAP income statement is attached to our press release and available at our website. The differences between this quarter’s GAAP and non-GAAP numbers are: acquisition related charges of $8 million before taxes or $0.03 a share after-taxes and a $9 million non-cash tax charge due to accumulative shortfall position in our employ stock activity. Removing this charge from GAAP earnings added about $0.06 per share to non-GAAP EPS. Following our record Q4, the Q1 new order total was $785 million which was our third best quarter ever. Net orders were 787 million, revenue and EPS for Q1 were above the top-end of our guidance ranges we issued in July, as we process the strong order pickup we experienced in the last few quarters. The regional distribution of new systems orders in the quarter-to-quarter change in distribution was as follows the U.S. was 21% of new systems orders in Q1, down from 25% in the June quarter; Europe was 4% of new systems orders, down from 12% in Q4; Japan was 7%, down from 12% last quarter; Korea was 24%, up from 19% last quarter; Taiwan was 34%, up from 18% last quarter and the rest of Asia was 10%, down from 14% in Q4. The Q1 distribution of new systems and services orders by product family and the quarter-to-quarter change in distribution was as follows Wafer inspection was 49% compared with 48% last quarter, Reticle inspection was 11%, down from 19% last quarter; Metrology was 17%, up from 14% from prior quarter; solar storage, high brightness LED and other non-semi was 6% even with last quarter and services was 17% of new orders in Q1, up from 13% last quarter. Foundry customers comprised 44% of semiconductor systems orders in Q1 versus 41% in Q4. Logic customers were 18% of systems orders in Q1 versus 21% in Q4 and memory system orders were 38% in Q1, even with last quarter. 67% of the semiconductor systems orders in Q1 were for 32 nanometer and below technology versus 41% in the June quarter. Looking forward, we expect that new orders for fiscal Q2 will be within a range of flat to down 20% from Q1. Shipments in Q1 which include both system shipments and services revenue were $677 million, up from 622 million last quarter. We added a little over $100 million to our backlog in Q1 and ended the quarter with 1.44 billion in total systems backlog. The backlog at September 30th included $337 million of revenue backlog for products that have been shipped and invoiced but have not yet been recognized as revenue and $1.1 billion in system orders that have not yet shipped. Systems revenue for Q1 was up 28% to $550 million compared with $430 million in Q4. Services revenue was $132 million in Q1, up slightly from $129 million in Q4. Our expectations for total revenue in Q1, is a range between 700 and 740 million. Non-GAAP gross margin was 62% in the September quarter, up 2 percentage points from June. For Q2, we are modeling an incremental gross margin target roughly equal to our stated goal of 60 to 70%. Operating expenses were 180 million, up $15 million from the June quarter. About 3 million of the quarter-to-quarter increase resulted from giving our employees new iPad devices and grossing them for taxes. Another 3 million of the increase was due to a Q4 credit in G&A expense for recovery of our claim arising from the Spansion bankruptcy which did not repeat in Q1. We expect our non-GAAP operating expenses to increase slightly in Q2, in line with our stated incremental operating margin target of 50 to 60%. Other income and expense or OIE, was a net $12 million expense in Q1, about $1 million higher than Q4. For modeling purposes, we expect OIE to be a net expense of approximately $11 million in Q2. In Q1, our non-GAAP income tax expenses $63 million or $0.27 of pretax income versus $41 million in Q4, which was 25% of pretax income. The tax rate increase arose largely from a change in the distribution of earnings between the U.S. and lower taxed international operations. Non-GAAP net income was $169 million or $0.99 per share in Q1. If we exclude the iPad distribution expense and apply our model tax rate of 38 – excuse me, 30%, our Q1 non-GAAP earnings per share would have been $0.96. At the revenue range I previously mentioned, we would expect our Q2 non-GAAP earnings to be somewhere between $1.00 and $1.10 per share assuming a tax rate of 30%. Weighted average shares used to compute EPS in Q1 were 169.8 million versus 171.3 million in Q4. During Q1, we spent $62 million repurchasing about 2 million shares and as of September 30th, we had approximately 3.2 million shares available under our current repurchase authorization. We anticipate continuing to repurchase shares in the December quarter. For guidance purposes, we are modeling an average share count of 169 million for Q2. Turning to the balance sheet, cash and investments ended the quarter at 1.5 billion about even with prior quarter-end. Cash generated from operations was $96 million in Q1 compared with $83 million in Q4. The quarter-over-quarter increase in operating cash flow largely resulted because we had $133 million more in customer collections and we did not have to make a $26 million semiannual interest payment this quarter. These effects were partially offset by larger outlays including annual bonus payments we made in September. Net accounts receivable ended the quarter at 500 million up from $440 million at June 30th, largely resulting from the $55 million increase in shipments from Q4 to Q1. DSOs were 67 days at September 30th versus 72 days at the end of June. Both DSO figures are net of allowance for uncollectible accounts in factoring. Net inventories increased by $62 million from June 30th and ended the quarter at 464 million. Inventory turnover based upon GAAP cost of revenues was 2.3 turns in Q1 flat with Q4. Net capital expenditures were $11 million in Q1 versus $6 million in Q4. Total headcount at September 30th was 5,180 up from 4,989 at June 30th. We expect our headcount will increase slightly during Q2. In summary, our guidance for Q2 is: new orders flat to down 20% from Q1, total revenue between 700 and 740 million, non-GAAP EPS between $1.00 and $1.10 assuming a tax rate of 30% of the pretax income. This concludes our prepared remarks in the quarter. I will now turn the call back over to Ed to begin Q&A.

Okay. Thank you, Mark. At this point, we’d like to open up the call to Q&A and we do once again request you limit yourself to one question given the limited time we have for the call today. Feel free to re-queue for your follow-up questions and we’ll do our best to get everyone on today’s call. So operator, we’re ready for our question.

(Operator Instructions) Your first question comes from the line Satya Kumar from Credit Suisse. Your line is now open.

Yeah, hi. This is Anupam for Satya. I had a question on orders. How do you think orders will be in first half ‘11 and what portion of backlog do you think is shippable within next six months?

Yeah, well I’ll take the first part of that and let Mark take the second part. As you know we don’t forecast that far, we don’t guide bookings out into the next calendar year. But I would say that the perspective right now is that calendar ‘11 looks to be flat with calendar ‘10 which of course is significantly over ‘09 whether that’s back-end loaded or not I think lot of factors are at play but I, if I model out the whole year, I think we’re looking at the calendar ‘11 that we think overall is flat. We’re tracking in about 13 new projects and it really depends on the timing of when those projects get released and make their investments.

Yeah, I think you’re – I’m sorry, with respect to your question on what portion of the backlog is shippable over the six months. We typically don’t guide shipments, however, I do understand the nature of your question and because we’re in a hyper ramp right now. I will tell you that our internal plan is to ship north of $800 million in the current quarter and repeat something like that coming out of Q2. So we would expect all of our backlog and maybe even a little more to try to ship out over the next six months. Those shipment figures do include, by the way, services revenue. We wouldn’t typically guide this but I do understand the nature of your question.

Okay, great. Thanks a lot.

Your next question comes from the line of C.J. Muse from Barclays Capital. Your line is now open. C.J. Muse: Yeah, good afternoon. Thank you for taking my question. I’m curious on the foundry side, I guess I’d love to hear kind of what you’re seeing there from your customers and whether there was some push outs there in the September is to why your orders came in at the lower end of your guided range. And then thinking a little bit longer term into calendar ‘11, clearly very robust spend for you in calendar ‘10. Can that repeat itself or has a lot of the spend been front-end loaded and I guess within that discussion, I’d love to hear your comments and thoughts around their spend for 28 nanometer in high K metal gate and how that – all of the interplay for foundry’s spend should look as we move into calendar ‘11?

Yeah, C.J., sure, good questions. I think that, we did see a bit of softening as we’ve said we’re in the bottom part of the range for bookings for September and not really outside of normal for seasonality for us. But clearly there has been, in spite digestion period we think we’re in right now across the industry and that includes these foundries but there are several projects on the book. So when we look out, there are major foundry players talking about increasing CapEx for calendar ‘11 and we see many projects outside of, just the major players there, you go across the space and there is a lot of investment across foundry. Whether 2011 will repeat? 2010, our current model is we see 2011 normally being flat with what we see 2010 shaping up to be very hard to predict at this time where that’ll happen inside of the different segments, but we think foundries stays pretty long, logic pretty steady and I think DRAM is probably remain soft offset by NAND spending continuing. That’s kind of how we see it. C.J. Muse: Very helpful. Thank you.

Okay.

Your next question comes from the line of Jim Covello from Goldman Sachs. Your line is now open.

Hey great guys, thanks so much for taking the question. I appreciate it. The shipments versus revenue, if you’re going to ship 800 for each in the next couple of quarters, how do you think that translates into revenue given recognition issues and things of that nature?

I think it’s hard to predict it exactly, Jim. But as you might imagine, we have guided up in revenue for next quarter and we would expected if we actually follow-up through with the shipment plan that we currently got in place obviously the revenue would have to be increasing as we look out to our fiscal Q3 as well. But it will follow in due course, if we need to ship in play.

You think kind of with the – I know this is hard as you’re saying, but like is it, increase directionally or do you think on an absolute basis consistent with the shipment numbers?

I wouldn’t want to get too fine with it, but I would say that the slope of both should be close.

Okay.

Of that.

Okay, great. And then on the cash, I mean is the plan to continue to do both dividends and the buyback?

Yeah. Right now, we’re obviously generating a tremendous amount of cash and when we adopted the dividend we obviously had a long-term perspective in mind with our new highly profitable model at current levels. And so, we’re sort of full steam ahead on it.

Great. Thanks a lot, congratulations.

Thanks, Jim.

Your next question comes from the line of Krish Sankar from the Bank of America, Merrill Lynch. Your line is now open.

Yeah, thanks for taking my question. Rick, if I look at your order guidance, the spread is about 160 million. What drives the low end and the upper end of that guidance?

Well, Krish as you know, there got – these got big projects out there and whether or not they come through, I think you also know that from our perspective, we like to keep range widen up to not have any particular customer feel like they’re going to be the difference between us making inside or outside the range. So big clumpy deals, I do think in this environment you end up with large deals happening and some of them come in now and you certainly – if you’re in our position with the backlog we’ve got, we don’t want to be needy about the orders that their times where the negotiations get pretty deep into the quarter of our price and so on. So we want to leave ourselves in legal room.

Got it. And then my final question is, late last year, you guys saw a nice tailwind from TSMC’s yield issues in the first. Now when the entrance in foundries go to sub-4X, are you seeing similar kind of yield issues they’re experiencing and how does that benefit you guys? Thank you.

Yeah. We’re definitely seeing issues across the board and we’re hearing more and more challenges as people scale down and pushing really hard on our development projects so what it’s doing is, we’re engaging quite close to the customers and helping them come up with strategies to deal with the challenges as advanced as I know. And at the same time, pushing very hard on getting the new products out that are going to help provide the capability to make the inspection necessary to support the advanced node, so no question that the challenges our customers face for yield or are only increasing as we go forward.

Thank you.

Your next question comes from the line of Timothy Arcuri from Citigroup. Your line is now open.

Hi, Rick. If you look at your shipments and you just take 2010 relative to last year, it’s up about 80% year-over-year and CapEx is up about 2X. Is that just shipment timing, or is there some particular mix that’s causing the shipments to sort of be more back-end loaded in the year and even in the Q1 for you then for your peers? Thanks.

Yeah, sure. I think that, we look at all of those metrics and I think it’s certainly true that we have some long lead items that take a little time for us to get out. I also think, if you look at bookings were up more, were up about 95% year-on-year, if you count the middle of the range and shipments would be lagging at about 80%, so we’re certainly in line when we look at the booking side, but shipments a little bit delayed. Next question?

Your next question comes from the line of Stephen Chin from UBS. Your line is now open.

Hi, this is Max [ph] for Stephen. Thanks for taking my question. Given on spending – memory spending in the next year, would you say KLA market share is stronger at NAND flash customers compared to DRAM?

That’s really hard to separate. I think our market share ends up splitting more along specific customer lines, I have to think through tally that up. I don’t think there is a big difference frankly between NAND and DRAM for us in terms of share, kind of comes and goes. Over time, our share ends up being pretty strong in some product lines and obviously not a strong in some others.

All right, thanks. And just one quick follow-up. What do you think the orders by customer type would be in the coming quarter?

Sure. Yeah, we’re looking forward to December. We see memory being about 36% of the overall orders and we look at logic, see that about 10% and 54% out of foundry and 7% non-semi.

All right, thank you very much.

Your next question comes from the line of Mahesh Sanganeria, RBC Capital Markets. Your line is now open.

Hi guys. This is Casey [ph], calling in for Mahesh. If you were to look at the range in the bookings guidance, would you say more of the uncertainty comes from foundry versus memory or is it’ll be underground?

Yeah, I wouldn’t – yes I wouldn’t attribute to either one. I’d say the range is really more of a broader statement than a specific customer type.

Okay. And when you look into year, at the moment you’re looking for flat CapEx. What are some of the projects out there, what are the nature of the projects out there back that causes you some lot of concern?

Our products or customer products?

Customers’ projects. Yeah, projects.

Oh! The projects that are out there, I see. Well, clearly in 2011, what we’re counting on is continued investment as I said probably steady investment in logic. We think that there would be continued investment in foundry as the foundry competition really increases and actually gets more meaningful, more players investing. I think DRAM is likely to be a little bit soft and the NAND would make that up. So if you take any of those and they don’t hold then that obviously would have a downward pressure. On the other hand, if we see more strength let’s say, in the second half to a DRAM then that could strengthen the position of the DRAM customers driving more investment by them. So when we balance the whole thing, we do come up with a range where we scenarios were its up and then we see scenarios where it’s down and we end it up coming out right in the middle.

Okay. Good thank you.

Thanks.

Your next question comes from the line of Mehdi Hosseini from Susquehanna. Your line is now open.

Yes, thank you. For the September quarter, can you please provide the mixture of revenue and bookings from ICOS?

I’m sorry, for which quarter?

For the September quarter.

The September. Yeah, we don’t breakout individual divisions but we have said that’s a non-semi which is where we lump the back-end cash for us, because that’s non-front end, non-WFT was about 6% overall of the bookings and forecasted. They’re consistent with what it was in June and forecasted in the December quarter to go into 7%. Now that includes back end test, high grade LED, solar and hard disc drives, storage market. So really it’s rather – it’s broader than what we get out of any one product division, but overall consistent with as a percent with what we saw in June.

Understood. And then, would the equipment lead time in my opinion come in and considering a flourish CapEx for next year. Don’t you think that your customers could wait till like Q2 to place the orders that would impact in production for the second half of next year?

Oh! Certainly. Yeah, I mean I think that the customer, if you had think our average lead time is on the order of six months for us and certainly they could wait until June to get December shipments and December order fulfillments in next calendar year. Not really a big change I mean, what we’ve really been doing is, is ramping to meet the demand but, I think with a lot of heroic effort, we’re doing that and I think we’re – we’ll be able to continue that, but yeah there is no question that you would have to see bookings in the first half to support the second half numbers.

And just very quickly, what should I think your booking guidance and your overall turn of the business relative to some of the other front-end equipment companies that have reported and have been relatively more constructive about the near-term booking momentum?

Yeah, I think the biggest difference was, I think we have with many of the peers is the backlog that we have and the strength that we had in prior quarters for us, for example, the June quarter created a lot of backlog on which we’re now working off and so when we look at that and even that given even that scenario we added a backlog over $100 million in the last quarter. So for us, we continue to drive the revenue growth and the earnings that go with that but we actually don’t see that the bookings is going to be at the same level for the December quarter, it will be slightly under but will still have a tremendous amount of backlog in the queue and be able to continue to drive earnings. I think a lot of the other businesses end up being more turns businesses which cause them to perhaps burn up their backlog a lot faster.

Thank you.

Your next question comes from the line of Hari Chandra from Deutsche Bank. Your line is now open.

Thank you. In terms of the order max, you noted them the technology have a great sound, you’re driving it. Can you give the split between capacity orders versus technology upgrade and also how do you see that percentage is shifting over the next couple of quarters and any particular segment tilting towards capacity?

Yeah, I think right now it’s really hard to tell exactly when you look at some of the systems that are placed and except for when you look at pure R&D, because we’re really obviously going to piloted their early part of the ramp and then the product goes forward, but clearly we’re benefiting from the advanced technology nodes. I think the capacity buys are there, but if I had to do a rough split, just on top of my head, I’d say its 60-40 right now technology versus capacity and that that’ll probably trend and I think there is probably coming as we look forward and we think about some of the build outs that are going to happen and things like NAND where you see factors coming online over the next few years it’ll be more capacity oriented. But it’s really hard to say exactly what that split is, given the outside of the pure R&D technology buys. Is that makes sense?

Thank you. And one question on the December shipment split, do you see – how do you see that shaping up?

The shipments put you approximately follow the bookings profile.

Okay.

If you look to the prior quarter and in this case maybe the prior quarter now.

Okay. Thank you.

Okay.

Your next question comes from the line of Gary Sway from Oppenheimer & Co. Your line is now open.

Great. Thank you for taking my question. Could you guys explain maybe you did explain this on the call but I just didn’t hear, I joined a little bit late so I apologize, but could you explain why there is this re-divergence in terms of shipments in revenue, what in the product mix is driving that divergence or ability of recognized revenue? It seems like you’re building a decent amount of deferred revenue now. And just second question, sort of a bigger picture question with still a lot of sort of new fab projects in the pipeline particularly for NAND in 2011. There is just sort of common perception that NAND is less CapEx intensive then DRAM per semi-cap equipment spending overall. I was wondering if that – the same case for inspection or metrology and whether or not inspection and metrology could actually see higher CapEx intensity with NAND compared to processing.

Yeah, I’ll take a part of that and let Mark deal with the divergence, your question on that. Really start with the second part of your question, capital intensity for NAND and DRAM. From our perspective, in a process control world, we are seeing new challenges emerge in advanced design rolls on NAND that even our customers weren’t to wear out that as recently as three or six months ago challenges they’re having. So as a result, we are seeing increased activity and then increased in the process control percentage, the people are willing to invest and need to invest. So I think for us, NAND is going to be a healthy market as we go forward. That said, we still got a lot of work to do to execute on our strategy to support that. And I don’t see, DRAM right now, I just think its overall there are many challenges associating with the technology but we start to see the overall activity level being as high for DRAM in general as we do for NAND. And Mark, can you split?

Yeah, let me just take a quick response to your question on the divergence between the shipment profile and the revenue profile. In the – first of all, it usually takes at least 90 days to turn shipments into revenue when you get into just passing the units along installing customer burn in and then final product acceptance. When we are moving in, let’s call it normal circumstances which isn’t that often as it turns out. You will see a 90-day turn of that or a little bit longer than 90-days. When you are in a step-up ramp like we’re in right now. It takes a little bit longer to turn that into revenue. I will say that however, in Q1 we actually revenued ahead of the prior quarter shipment. So we actually revenued 683 this quarter and we shipped 622 last quarter. So it can move back and forth. That won’t every quarter, but it will happen often just to let you know that it should vacillate at 90 or slightly greater than 90 days. I hope that responses to your question. And again, if we meet the shipment, the revenue will follow relatively shortly thereafter in the next couple of quarters.

Okay. Can I speak out one more question real quickly here? If you guys are going through a digesting face and you’re reflecting that in terms of your order guidance here in the December quarter coming off September, then in September why did metrology kind of hold fast at roughly the 130 million kind of range. I would have thought that if you’re starting to see the impact of capacity digestion, you would have seen metrology kind of downtick a little bit more than any other sector or division for you? Is there a reason for that?

Why September, I’m sorry, September metrology held in there, but overall we are down.

Yeah. Why did metrology of all things hold a better in your order book compared to other segments when we’re going through a little bit of a capacity digestion as you indicated on the call?

Yeah. Well I think it’s a relative thing, right. I think it from our perspective, in that case there is the metrology that is turns out to be closer to turns business and has to do with supporting capacity where some of our inspection markets are longer in lead and therefore their timing is offset among different product lines. And so, just like process control buys probably had more turns in September, we have more turns in metrology. We also came off of a very strong market period in June for things like Reticle. So it’s a relative basis. Is that makes sense?

Yeah, absolutely. All right, thank you.

You got.

Your next question comes from the line of Atif Malik from Morgan Stanley. Your line is now open.

Hi, thanks for taking my questions. And a nice quarter, nice results. Mark, I have a question, as you think about EUV over the next couple of years, I mean I just want to know your operating expenses, R&D line, is there a reason to believe that and that can kind of creep up into next year because of EUV efforts or if you kind of stick with you actinic approach, you can move around R&D all those from different projects?

No, it actually it’s an interesting observation, that take. It is possible that we could – we would have some upward pressure on the R&D line next year. Just as function of that total OpEx and as a function of revenue. And that could be just as a result of the timing in new product introductions and certainly EUV is a big frontier for us on the R&D side. What you’ll see right now is, is that we previously laid out the model for KLA-Tencor. We’re experiencing levels of profitability in the current performance that we’re considerably ahead of where we were before. And we believe moving into this period, if you – we spoke in, three or four years ago. We believe that we would get a 200 to 300 basis point improvement both from the operational improvement and some of the decisions that we made with respect offshore manufacturing and things like that, 200 to 300 basis point improvement in operating margin. We obviously are getting than that right now, but that is certainly partially a function of the actions we took, but it’s also partially a function of the timing of when new projects come on board and when new R&D hit and it’s possible we could experience some of that pressure as we look out into the first half of next year and certainly beyond that a little bit. But in the long run, we believe, we have obtained 200 to 300 solid basis points of improvement in the operating line.

Okay. Just to be clear, the absolute dollars and even R&D I think could go higher but, does operating margins could still improve because of better supply chain or outflow?

I don’t know if they would improve as a percentage from here. They should certainly go up as the revenue improves that we are experiencing a really high level of operating margin contribution right now is a function of revenue. And my point is, is that we maybe operating with a little bit of a tailwind in terms of complex R&D project, and if you look out farther than that, 452.

Got it. And then, just a follow-up, in your non-semi segment, can you – I know it’s a small contribution, but can you give some kind of order on where you saw the most trends in LED, solar or data storage?

Yeah, sure. We had a record quarter in solar for the September quarter that’s a small business but it did have a record quarter. I’d say the high brightness LED continues to look good and we continue to see growth there. Obviously there has been some softening in the disc space but we’re actually pretty well positioned with new products there. And then lastly, back in packaging we did see a little bit of softening and we expect that to continue reflecting some of the challenges in the back end on the short-term but we think that’ll recover as we go into next year.

And are there any big enough technology inflexion points in these markets this year or next year where liquidity could benefit or is it kind of a more of the old?

Yeah, there is definitely growth. I mean we’re seeing, and for us it’s a pretty good business segment. If you look overall we’re at a 200, $250 million run rate outside of course semi and we think the long-term growth trajectory of that stays that’s probably 20%. So the challenge is, of course that’s coming off is smaller base relative to the rest of our business. So there are definitely challenges in each of those markets, if you walk through and we’ve got products and we’ve got market position and the ability to invest and drive those as we go forward. So that’s part of our long-term growth plan, but relative to the other side of the business that remains reasonably small.

Thanks.

Your last question comes from Jagadish Iyer from Arete Research. Your line is now open.

Yeah, thanks for taking my question. Two questions, Rick. First question is that you’ve said about WFE being flat for all other. The question is that, given the mix is going to change between DRAM, NAND and logic and foundry, do you think that you can outgrow the WFE in ‘011 please?

We do. We think that again, if I go through it again, I think foundry is flattish, we think that logic is flattish, we think that the increases in the NAND space, having investments there and thus so in DRAM and based on our current positions and the investments that we’re making, certainly it's our plan to continue to grow. We do have the emerging markets as well. So yes, we believe we can continue our strategy of executing growth strategy like, it takes us faster than the overall industry performance.

Okay. The second question is that, if the orders – if the order pass continues for the next two quarters or three quarters, do you think that you could sustain a gross margin of over 60% if assuming that revenue run rate is over 700 million?

Yes. I mean the answer is yes. If you look at our incremental gross margin, we guided up there, we guided 700, 740 and you can infer from our model that’s 60 to 70% incremental gross margin. We got a strong ratchet in that zone with gross margin. So we’re in a strong position. But yeah, we believe that that’s what we’re committed to. We think it’s there and as long as revenue hangs in there, our growth, then we’re in great shape.

Yeah, one last question if I can squeeze it. Every one of your peers is talking about TFT and wafer-level packaging, can you help me find out, how much is scarlet tracking in terms of opportunities in wafer-level packaging maybe you can speak on that?

Yeah, sure. We have plays on that. Obviously we’ve got some work going on in the back-end. We’ve got a very strong position on the businesses that we have there and we think for both wafer-level packaging and TFT we’ve got good opportunities and the potential to add but we want to make sure that those markets really materialize in a way that we would get a good return on those investments. So we’re tracking and then working closely that we believe we’re very well positioned for them.

Thank you.

And at this time, there are no further questions. I turn the call back over to Ed Lockwood for closing remarks.

Okay, operator. Thank you very much and thank you all for joining us on our call today and your continued support. This concludes our call.

This concludes today’s conference call. You may now disconnect.