Good day ladies and gentlemen. Thank you for standing by. Welcome to the Lam Research Corporation June 2009 Quarterly Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will open for questions. (Operator Instructions). This call is scheduled to conclude at 3 PM. I would now like to turn the conference over to Carol Raeburn, Senior Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone and welcome to Lam Research Corporation's quarterly conference call. Here today are Steve Newberry, President and Chief Executive Officer; and Ernie Maddock, Lam's Chief Financial Officer. Today we will discuss the financial results for the June 2009 quarter and Steve will share our business outlook for the September quarter before opening up for Q&A. A press-release detailing our financial results for the quarter ended June 28, 2009 was distributed by the Business Wire shortly after 1 o' clock this afternoon and is available on our website at Lamresearch.com. Today's call contains forward-looking statements including those relating to our forecasts of shipments, revenues, expenses, margins and earnings per share, as well as other statements of the Company's expectations, beliefs and funds, that are important factors that could cause actual results to differ materially from those described in these forward-looking statements, and the list of these factors can be found in the slide package accompanying this conference call and on our most recently filed Form 10-K. All forward-looking statements are based on information as of today's date and the company assumes no obligation to update any of them. This call is scheduled to us until 3 PM and we ask that you please limit questions to one per firm. Without that I'll turn the call over to Ernie, who'll review of the June quarter results. Ernest E. Maddock: Thank you, Carol. I'm happy to be able to share that we have exceeded on that guidance in all categories for the June quarter. June quarter shipments were $246 million, meaningfully higher than our guidance range for the quarter; reflecting Lam's ability to respond quickly to unexpected customer demand with leading edge capacity-related edge and clean equipment and to an uptick in demand in our installed base business. June quarter shipment levels represent an increase of 55% from the March quarter. But, application and market segment shipment breakout for the quarter 300 millimeter applications represent 95% of total system shipments. Applications at less than or equal to the 65 nanometer technology node were 93% of system shipments. During the June quarter, Memory segment customers comprise about 48% of the total system shipments. And as a subset, demand component represents approximately 48% of total memory. Foundry customers were 34% of system shipments with logic and other at 18%. June quarter revenue of $217.8 million exceeded our guidance range and represents a 25% increase from March quarter revenue. Our clean and edged systems businesses improved and our installed based business also posted higher than forecast revenues due to improvements in our customer's utilization rates and an increase in the number of service contracts. June quarter ongoing gross margin was 31.1% within the higher range of our guidance and reflects an increase of 430 basis points over March quarter levels. The gross margin performance is a result of improved product mix and better absorption from the factory and field related to increased business volume. Ongoing operating expenses were $114 million for the June quarter, a decrease of approximately 15 million from the March quarter. Our operating expenses reflect one-time credits and spending reductions of $4 million related to employee benefits, travel, supplies and legal expenses. We would not expect future quarters spending to benefit from similar credits or spending reductions. Our ongoing operating loss for the June quarter was $46.6 million, 13.4 million less than the midpoints of our guidance. Other income and expense was a positive $2.9 million for the quarter and consisted of interest income, partially offset by expenses related to balance sheet, currency hedges and interest expense. Non-ongoing expenses of 18.6 million, included 5.4 million for expenses related to our previously announced restructuring plans, a $4.6 million charge related to a legal matter and a $7.2 million non-cash charge related to the finalization of the March quarter of goodwill impairment. The ongoing tax expense for the quarter was $13.3 million, representing a tax rate of negative 30.4% on the operating loss. And our total tax for the quarter was 26.2 million and includes the $12.9 million charge related to ongoing... non-ongoing matters. As we've previously discussed, our tax structure is optimized for operating profits rather than losses and we expect to have continuing tax expenses in periods of operating losses. GAAP loss per share was $0.70 and the ongoing loss was $0.45 per share based upon a $126 million shares. Moving onto our balance sheet, cash and short-term investments including restricted cash was $758 million, a decrease of 49 million from the March quarter ending balance and reflective of our improved financial performance and focus on minimizing cash expenditures. Accounts receivable days outstanding increased slightly from 103 days in March to 106 days in June, reflective of the increase in shipment rates and the timing of associated collections. We anticipate DSO performance to remain at or near this level for the remainder of the calendar year. Inventory levels decreased by 10% consistent with the rise in shipments levels, resulting in improved inventory turns of 2.6, up from 2.1 in the March quarter. At the end of June our deferred revenue balance was $64.7 million, which does not include $13 million related to Japanese shipments and that will be acknowledged as revenue in future quarters. As June represents our fiscal year-end, backlog was 391 million at the end of the June quarter, compared to our last disposed backlog of 410 million as of the June 2008 quarter. Total capital expenditures were $6 million for the quarter and depreciation and the amortization decreased slightly to $18 million. Employee headcount declined slightly to 2,930 employees. Non-cash expenses included in the June quarter ongoing results, includes 13 million for equity compensation and 18 million in depreciation and amortization noted a moment ago. As previously discussed, we continue to suspend purchases under our $250 million share buyback program on which approximately 225 million remains. As we regain sustained positive cash flow levels, the status of the share buyback plan will be revisited. For more complete details of the geographic breakdown of shipments and revenues, please see today's press release and our website for reconciliation of our shipments revenue, deferred revenue, cash and operational cash disbursements. Now to Steve's comments. Stephen G. Newberry: Thank you, Ernie. Good afternoon everyone and thank you for joining our June conference call. As you can see from the results we posted for the June quarter, there is a definite improvement in the business environment. Increased investments are being made for new equipments, as well as upgrades to expand leading-edge wafer starts in foundry, logic and memory. And together with improvements in fab utilization, we are experiencing a strong rebound in shipments and revenue after depressed levels of the March quarter. Having said that, we still expect that spending on wafer fab equipment for 2009, will be in the range of 10 to 11 billion; now bias to the high-end of that range. Back in January, we said a second half improvements in demand for wafer fab equipment would be required to get to that level of spending and at this point in time, it appears that scenario will clay out close to what we thought. Even if memory pricing has improved over the past few months, our analysis suggests there still remains approximately 20% or 350,000 wafer starts per month of idled memory capacity. In previous cycles, it has been common practice for our customers to upgrade idled equipment where possible as a cost effective solution to meeting new technology node output needs at this point in the cycle. With the current high volume of idle capacity available for remanufacture and upgrade, we anticipate that conversion activity will represent a meaningful revenue opportunity for us over the next few years. This opportunity is substantial in edge, where new technology capability is typically required to meet leading edge requirements at the next technology node. A year or so ago, we established our reliant product group to increase our focus and capabilities on the refurb and upgrades business opportunities we expected to be available in edge and have now added a clean refurbishment and upgrades business unit to support our customers need relative to Lam's installed base for single wafer cleaners, which is the largest in the world. In today edge market, as our customers utilize available idled equipment and either refurbish or upgrade the equipment, this temporarily reduces the total demand for edge equipment purchases at the leading-edge, particularly in memory by about 45 to 50%. Once demand accelerates and capacity utilization rises, there is a little to no available tools for refurbishment or upgrade on the leading-edge and most of all leading-edge wafer start editions must be filled utilizing new equipment. All their installed based tools cannot be refurbished or upgraded for reuse on the leading-edge. But, they can be utilized in trailing edge foundries where 300 millimeter tool sets are needed. We intend to be very active and to use 300 millimeter tool set market, as it develops in the coming quarters. During our recent analyst event, we shared various longer term targets for Lam's market share in financial performance when wafer fab equipment spending once again reaches anticipated levels of 20 billion and 25 billion. One of these targets was to achieve market share in the mid 30s in single-wafer clean. As we have said many times, the market for single-wafer clean is growing faster than most segments in wafer fab equipment. In 2009, we estimate that 3.5% of wafer fab equipment will be spent on single-wafer clean equipment and over the next five years or so, we expect spending to rise to around 5% of wafer fab equipment. Lam's key positions of strength in single-wafer clean had historically been in back-end of the line, foundry and logic and spending for new equipment in those segments has been suppressed over the past 12 months resulting in temporally exacerbated reductions in revenues and market share for our equipment. When new capacity is added in foundry and logic, we expect our market share will increase by 4 to 7 percentage points with our current tool of record positions. In addition, over the next six to 18 months we are targeting numerous application penetrations at existing single-wafer customers as well as our customers who will be introducing single wafer cleaners to their fabs at the current and next generation nodes. Utilizing our strength in edge and the focus on providing leading edge technically differentiated solutions to our customers, we expect to win a sizeable number of those targeted penetrations which we expect will add an additional five to seven points of market share in the next few years. Clearly, our targeted market share in the mid 30s requires significant penetration wins, but the opportunity and the customer needs are there and with our history of solid execution, we believe this is a realistic target for us. In this period of reduced customer spending, we have continued major investments in product portfolios as we believe they represent a significant growth opportunity when the upturn comes. We do, however, remain focused on balancing the need to invest in next generation technologies; we're carefully managing the cash expenditures of the company. Now moving into the September quarter, our guidance is as follows. Shipments of 350 million, plus or minus 15 million; revenues of around 290 million, plus or minus 15 million. Gross margin targeted at 38%, plus or minus 2 percentage points and operating loss of 10 million, plus or minus 7 million and a loss per share of approximately negative $0.05 to negative $0.20 a share. As always, we will continue our focus on serving the needs of our customers by supporting their installed base needs, providing cost effective solutions with our reused and upgrade strategy and wining new tool selections at the next technology node. With those comments, we will now take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. (Operator Instructions). Please limit your self to one question and then requeue for additional questions. Our first question comes from the line of C.J. Muse with Barclays Capital. Please go ahead. C.J. Muse: Hi, good afternoon. Thank you for taking my question. Steve, I thought what you discussed in terms of the idle capacity, pretty interesting. I guess as part of that are you referring solely to 300 millimeter memory capacity? And then, as part of that, you talked about how the revenue opportunity was roughly half of what it would be if there was new equipment? And I guess, could you also add to that part of the conversation, what the impact is of double-patterning and growing the market there for edge? And overall, what the revenue dollar could look like?

Yeah, what I talked about the idle wafer starts, we're talking about wafer starts. It's almost exclusively 300 millimeter now. But, it is 300 millimeter equipments. But there's not much 200 millimeter wafer start. And I was talking about memory. The 45 to 50% down is again referring to memory. There is some reduction in reuse in non-memory activities, although it's not as extensive, because you don't have the same level of idled wafer starts that they want to convert. Typically, what will happen, when you see demand rise and the overall utilization in the memory fab goes up, you probably have about 20% reuse and 80% new equipment purchases. And that depends on the customer and that depends on how fast they're converting. But, we anticipate that in 2009, there'll be about 250,000 wafer starts needed at the 5X and some early 4X DRAM. And some were around a 150 to 175,000 wafer starts, NAND at 3X node. And I think the reuse activity in NAND is probably higher than it is in DRAM. But, I do anticipate that as we move into 2010, that we'll see that the amount of reuse will start to decline and over the next couple of years, we'll start to see that the spending in memory will be 75 or 80% new equipment. So that represents a significant opportunity for increased wafer fab equipment investment. As it relates to double-patterning, clearly you're going to have some additional edge steps, that's factored in to how we look at the total sides of the market. We think that if you have to buy all new equipment for 10,000 wafer starts, the edge spending typically would need to be about 30 to 35 million for 10,000 wafer starts. And you'd have about for single-wafer clean, you'd end up with about a third of that or about 10 to 12 million per 10,000 wafer starts of new equipment capacity.

Thank you. Our next question comes from the line of Tim Arcuri please go ahead.

Hi, Steve. I am just trying to run through numbers here. And tell me, tell me why this doesn't make sense? As I look back at the last peak, you were shipping roughly kind of $650 million give or take. And it was roughly 75% memory in kind of you know 25 other. So maybe 490 memory and like 160 non-memory. So, if I simply just take that 490 memory, and just cut into half as per your comments previously about the upgrades versus the new tools, and I just add back that 160 non-memory, it kind of gets me to 400 million equivalent, given the idle memory wafers out there to what you shipped last peak. So, in some ways you're kind of beginning to bump up against what the maximum shipment... the maximum market could, be given this 50% haircut that you're talking about in the memory market. Can you tell why that math is, or is not right?

Well that 650 million revenue has about 25% of it is customer service business revenue. And the numbers that we're talking about relate to just systems revenue. So, there is clearly more upside, when you look at it from the standpoint of systems revenue.

Thank you. Our next question comes from the line of Jim Covello with Goldman Sachs. Please go ahead.

Hi, this is Kate Kotlarsky for Jim Covello. I had a couple of questions. One, if maybe you can add some color within memory. It looks like, there might be a pickup in the NAND business, sooner maybe than the pickup in the DRAM business. I was just curious how you'd characterize your conversations with your NAND customers versus your DRAM customers? And whether you think, the NAND industry might be a bigger driver sort of in, as we come out of this downturn, kind of vis-à-vis or the previous upturn? Thank you.

Well, I think that the... there's more volume wafer start editions on the leading edge in DRAM being added right now at this time than there is in NAND, probably almost a 2 to 1 ratio. And that's to be expected given the number of units that are produced for DRAM versus for NAND. Clearly, the leading edge and market share leaders in NAND are investing at cautiously prudent levels given the flat pricing environment for NAND, but they're clearly expecting to add wafer start capacity output in the third and fourth quarter of '09. And depending upon what environment, we see from a demand standpoint in 2010, clearly, there will be a need for additional investment at a greater level in 2010 for NAND. But, the reality is that DRAM is such a big, big business that the requirement to add leading-edge wafer starts in DRAM is expected to be quite significant in 2010. The issue will be how much of that will be satisfied via reuse and conversions of existing fab capacity, versus how much will be needed from new equipment or from purchases of upgrades. And we'll have to see how that plays itself out, but clearly, we expect that both NAND and DRAM are going to be adding more leading-edge wafer starts in 2010 than what they're doing in 2009.

Thank you. Our next question comes from the line of Satya Kumar with Credit Suisse. Please go ahead.

Thanks, Steve. A few questions, what geographies and end-markets do you expect to drive growth in Q3, that's one. If I annualize your Q3 shipments, what do you think that will represent in terms of WFE? And lastly, in terms of Q4, how do you think your system shipments are tracking as we look into Q4, can you give us a sense of that? Thanks.

For your first question which was about Q3; the kind of I would say that the geographical orientation is obviously, significantly Asian oriented. And Korea is clearly strong, but Taiwan I think is going to be a little bit stronger in the September quarter than it was in June. But, we have to remember that June was a pretty strong quarter for some foundry shipments. And I think that we're seeing increases in memory investments across a broader basis, both in Korea, but also in Japan. And as it relates to, I answered the last question relative to the December quarter. At this point time, with the lead times, as short as they are, that customers are indicating that they will want deliveries of equipment in the December quarter. That would be similar to the levels that they're asking for in September, potentially a little bit less, potentially a little bit more. And the reality is that that kind of call back the customers hope forecast, because they really, they're adding as we talked about the shipment rates went up pretty good in June. They're going to go up very strongly in September. And what they're going to really want delivered in December is going to be a function of how does the demand environment manifest itself relative to their forecast. And I think that as much as we like to have confidence that December is known in my view, it's premature and we're just going have to see how it plays out. But, it's clear to me that the customers' think that the demand environment that systems that they would shift in December which would be primarily used to support the middle of the year needs in 2010, they're anticipate that they're going to have a reasonable demand environment. And the second question, I am sorry, I didn't catch it. So you're asking Satya, if we annualized the Q3 shipments, what would that mean? Well, I think that you would be kind of looking at... we'll have to kind of think about that a little bit. Probably, in environment that's 13 to 14 billion type of run-rate for WFE. Next question please.

Our next question comes from the line of Krish Sankar with Bank of America/Merill Lynch. Please go ahead.

Hey hi, thanks for taking my question. I had two questions, one is in terms of your visibility. You said there's limited visibility, I was just trying to see if you can characterize it by foundry, memory and logic, in terms of weeks or months? And also what percentage of the edge you're selling today on typical dimension edges versus others?

The limited visibility is not unique to any one segment. All of the semiconductor manufacturing customers are demand driven. And clearly, where the equipment purchases are occurring are with those customers who are the leaders in technology, who are the leaders with their customers in terms of providing leading-edge demand or they are customers who have a balance sheet that enables them to make the investments at the next technology node. And all of those customers are impacted by the macro global economic environment. All of them are in a situation where we're all fortunate in that because of leading-edge demand and because of the semiconductor device performance improvements that occur at the next technology nodes that they have customers that want to convert and take advantage of the reduction in the cost per bit or the cost per function and so, the semiconductor guys' benefit from standpoint of typically premium pricing at the leading-edge. But none of that can overcome the fundamental of macroeconomic demand environment which is 60%, consumer driven. And when you look at business driven investments, very much impacted by the fact that the consumers are not spending and business profitabilities are suppressed. And, so the expected PC refresh cycles have been delayed, investments and server capacity has been delayed; until it's not unique to anyone segment. In terms of the percentage of edge that's critical, as Ernie reported that that at 65 nanometer and below, we're shipping 93 or 94% of our products. Essentially, in this kind of environment, there is very little trailing technology types of capacity expansions, because the utilization of those technology nodes is running maybe 70%. And so, what you have is the investments going to leading-edge.

Thank you. Our next question comes from the line of Edwin Mok with Needham & Company. Please go ahead.

Hi, thanks for taking my question. Given that you are pretty close to breakeven, any update on that in terms of your breakeven model? And then just a quick follow-up, just on our past quarter, you guys had a memory just being 48% of your revenue, do you see that as the new norm for your business going forward? Or do you expect memory to bounce back in the coming quarters? Thank you.

Edwin, I'll take the breakeven question. So, we've previously talked about P&L breakeven between 300 and 350 and certainly, we're on track with that sort of bias to the low-end of that range. So, pretty consistent with what we've previously talked about.

Well, in terms of the mix in memory for Lam, I anticipate that we will see that the total memory will come down somewhat, certainly in 2009. And I would anticipate that over time, we'll see it drift up from the 50 to 60% to probably somewhere around 65 or 70%. Again, that's in anticipation of expected demand for NAND flash and expected demand for 2 gigabit DRAM DDR3 type products. I think that kind of the wildcard will be from the logic standpoint, what's the robustness with which the logic players will look to add capacity at 32 nanometer. And obviously, that will also be something to watch very carefully in the foundries. But, I don't expect that we would see the 32 nanometer logic node investments to really accelerate with a few exceptions, until mid to late 2010.

Thank you. Our next question comes from the line of Atif Malik with Morgan Stanley. Please go ahead.

Hi, thanks for taking my question. Steve, it sounds like you're a bit more conservative on second half than peers like Novelis and ASML. How much of that is due to a large microprocessor customer and the outlook in second half? And you guys had talked about how that large customer will depress your shipments in Q1. So, how much of that is that or the mix has kind of caught up now to that deficiency?

Atif, the mix has improved significantly, because they don't have there large microprocessor customer. We don't tend to look at it all that much. But, I think that probably the differences that I look at the customer behaviors that have occurred historically over almost 30 years in this industry. And I think it's not unusual that customers coming off the bottom are hopeful that the bounce off of the bottom in the inventory correction and that the steady state level of demand that comes out of that will continue to increase. And I think that whether that occurs or not, is really a function of the macroeconomic environment. And may be part of how I look at things is that I am very cautious about how quickly the global economies are going to grow and as a function of that how quickly the demand is really going to move forward in the semiconductor world. And clearly, we have the ability that if it continues to build, we can rapidly deliver to short-term unanticipated demand increase as we commented about doing in June. And so, we're positioned to deal with any increases in business. And we're very well-positioned to manage cost in the event that the environment should kind of come up and then stabilize a bit. Next question please.

Our next question comes from the line of Steve O'Rourke with Deutsche Bank. Please go ahead. Stephen O'Rourke: Thank you, good afternoon. Steve could you give us an idea of the percentage of tool selections that are complete at the 4X and 3X nodes and kind of update us on your PC where wins of progress for some of those critical applications like high-k/metal gates or front end of line cleans?

That's a I think good question. It's a difficult one, because one of the interesting things that's occurring in this timeframe is, if you take the 4X decisions for DRAM, they're clearly finished for the leading DRAM market share player and they're largely finished for the rest of the DRAM players. But, since a number of those are really yet ramping their wafer starts there, it gives them an opportunity to change, if they so choose. The 3X decisions for NAND are the main and those will play themselves out over the coming quarters and will begin to increase as the percent of the investments that are made. In terms of 3X logic, certainly the leading microprocessor company has already finalized all of their decisions. I would say that, I'd say most of the 3X decisions in logic have been made. And what that means for us, is that in edge we're expecting that in 2009 we'll pick up three or four market share points. We expect to pick up another two, three, four points in 2010, as the 4X nodes really accelerate going forward as the 3X nodes accelerate. And then in clean, I think that part of what our market share situation will be, how big is the rising tide in terms of overall capacity expansion which we don't really know how that's going to play out in 2010. But certainly from the standpoint new application wins, particularly on the front end of the line as well as some other critical backend of the lines, we're targeting and expecting that we'll see five to seven market share points play themselves out in the 2010-2011. And then with the rising tide, we pick up about another five percentage points, where we're already the total of record, but we need capacity expansion purchases to kind of gain that additional market share back.

Thank you. Our next question comes from the line of Steven Chin with UBS. Please go ahead.

Okay, great. Thank you. Steve, I was wondering if you could elaborate more on the shipment made to some of the clean tools, are you modeling shipments to clean tools to increased demand at the September quarter guidance and be up at least 40% sequentially and are some, the strong shipment to foundry customers, is that also helping some of the clean tool shipments? Thanks.

Yeah. The clean tool shipments are accelerating. They are... I'm trying to find a piece of paper here that will give me what I'm looking for. The... this is not what I'm looking for. But anyway, I know it's increasing quarter-to-quarter and probably the best way to characterize, what we expect to happen in the total single-wafer clean market which for us would be spin clean or linear clean and are dry bevel clean is that we think the clean market will be down about 35% in 2009 for wafer fab equipment spending versus 2008. We think the overall wafer fab equipment market's going be down for 46%. And so, because of the conversions to single wafer, it's not going to be down as much. But, the most important point for us is that we expect that our clean business will grow year-over-year about 10% in a market that's declining 35%. So that's clear indication that we're winning market share and we are building our clean shipment outputs as the year progress.

Thank you. Our next question comes from the line of Ben Pang with Caris & Company. Please go ahead

Thank you for taking my question. First, on the clean you commented on the segment growth for 2010. Does that depend on what the actual level of capital spending is?

Yes, I think that when you look at the technology buys that are likely or expected to do occur in 2010, that's where we're targeting picking up five to seven market share points with new application wins, which occur at the 4X and 3X nodes that we're targeting. And then the additional 5%, which represents existing tool of record positions largely in the back-end of the line and back side cleaning in foundry and logic that we will benefit it from that when the overall purchases for capacity expansion occurs in the upturn. And again, maybe that occurs in 2010 or maybe that doesn't occur till 2011, it all depends on what happens to the demand environment in that timeframe.

Thank you. Our next question comes from the line of Gary Sway with Oppenheimer & Company. Please go ahead.

Yes, thank you. Steve, I think you ducked the question about 2010, just what is your view there in terms of what the overall wafer fab equipment spending environment could be in 2010? I think you laid out the case here that with shipment levels increasing in September; it's about a run rate equivalent to 13 or $14 billion CapEx or wafer fab equipment spending environment. What do we expect here in terms of 2010 and if you don't want to directly answer that, if you could help us to explain that for ourselves that would be helpful in your mind? And second question here for Ernie. I got the rationale why gross margin improved. But, if you look at the revenue level that you performed at above the high-end, certainly gross margin didn't come in at the high-end. So, just wondering kind of what sort of helped gross margin back? And looking at the midpoint for guidance in September, what gives you confidence you can kind of start tracking back then more than more of a 60% drop there?

Yes, so I think a couple of things Gary. One, we were kind of in the upper end of our guidance range. But, I think the things that's important, we've talked about this before is the fact that at these revenue levels, you really have to look at what drove the incremental revenue up over and up above the top-end of guidance. And so if you get a mix between the installed base business versus the system shipments business, it's going to tend to moderate the gross margin a little it. And so, what you're really looking at net-net is the function of mix in the incremental revenue from the March to June quarter, versus the next that we see going from the June to September quarter. So, relative to 2010, I mean I think we've all seen various forecast from a variety of people in the industry anywhere from 2010 should be 20 to 30% up, which could mean 13 to 14 billion, which would mean that we get up to the shipment levels that we're talking about in September and basically go flat and that would give you about a 20-25% increase in wafer fab equipment. And there people are forecasting 2010 ago, be up 50 or 60%. I don't know what its going to be. And I think it's way too early to tell. I think that what we want to see is that at a minimum coming of this inventory correction bottom that we experienced in March and the rebound in demand in terms of increased shipments in June and our expected increase shipments in September, that that is a sustainable rate of demand that would require that shipments stay at same level. I think we'll have see how that plays itself out. And as I said, I mean we're positioned, if it maintains the level in September, right. We'll try to generate the kind of earnings and manage our cash. If it gets better, we'll execute to it. And if gets weaker, I think we positioned our cost structure to where we've pending cash under balance sheet. And will be able to work our way through. So, we are not all that worried and all that focused on what 2010 might be, because we think it's just not possible to predict.

Thank you. Our next question comes from the line of Patrick Ho with Stifel Nicolas. Please go ahead.

Thanks a lot. In terms of your wet clean business on the margin profile, is that now on a going forward basis heavily dependent on volume or is it still additional restructuring efforts that you can do? And secondly, in terms of your... the DSOs that you mentioned in your prepared remarks, that they're going to remain at current levels through the end of this calendar year, what do you see the cash burn in September?

Okay. For first of all, Let's look to the clean business, and clearly there is going to be a volume impact of that, a very positive volume impact, as factory utilization goes up. Our factory utilization has been a significant factor in the gross margin performance at these low shipment levels. And we also believe that there is some further work to do relative to the cost side of the equation, both on the product cost level, as well as just an operating expense level. So, I think you're going to see improvement as a function of all three things that you mentioned. Relative to cash burn in September, we expect that on an ongoing operations basis that we're going to a be within 10 million or so of zero and that includes a substantial investment in accounts receivable that we're going to have to make in order to fundamentally support the increased level of shipment that Steve talked about. And the DSO performance is really a function of the rate of acceleration of shipments versus the payment terms that are associated with our shipments. So, you have shipments increasing very rapidly, revenue tends to lag in periods where shipments accelerate very rapidly and that have a drag on overall DSO performance.

And then Patrick, I think that if you look at our historical performance relative to DSO being in the 60s and low 70s and now that we're up over 100, clearly a part of it is what Ernie said. You get this rapid acceleration in shipments, particularly if they're later in the quarter. And those are not going to be collected in the period and that will drive DSO. I think the other factor is that customers clearly are looking for ways in which they can bolster their weak balance sheets with what some of the top equipment suppliers have relative to the strength of our balance sheet. And there is no question just like in all significant downturns that we end up utilizing the strength of our balance sheet and in absence delaying the timing of payments for some of our customers and that contributes to be DSO. So, the good news is that as we come out of this and as cash flows improve for our customers, we will have an opportunity to see significant positive cash flows occur as the customers start paying faster and the shipments start to smooth out a little bit, that will be very beneficial for the timing of cash flow as well as for DSO.

Thank you. Our next question is follow-up question from the line of Tim Arcuri with Citi. Please go ahead.

Hi, hi. Two more things. One, Steve what sort of other 350,000 wafers have utilized memory currently, what portion is being refurb per quarter. I'm just trying to figure out how long you'll take to kind of chew through that?

Well, it's a function of how many wafers starts they're adding per quarter and so on the leading edge. And so, if you kind of look at 5X wafer starts will probably somewhere around 50,000. And by the end of June, they're probably up to a 150,000. And so, if you took that 100,000 that they added, it's probably 50% of that, so 50,000 came from conversions. And I think as you go forward for the rest of this year, we're anticipating that as you move up and add a total for the year of around 250,000 that, they'll convert about a 125,000 of their existing wafer starts from trailing edge to that 5X. And then they'll purchase the rest in the form of either new equipment or they'll buy upgrade chambers that they will, they'll put on their tools. And so, a lot depends on how fast the conversion to 5X occurs and what the demand levels are for DRAM products, the NAND products that are running at the N -1, even the N -2 node. And that's why we say that as demand picks up and start running those lines, because if the pricing moves up, then they can generate cash from those lines and that makes less equipment available to be converted on to a new line and they have to purchase more new equipment. We'll see how that plays itself out, but at this point time it's about 50%. So, we have a time for maybe one more question.

All right, thank you. Our next question comes from the line of C.J. Muse with Barclays Capital. Please go ahead. C.J. Muse: Yeah, hi, thanks. A quick follow-up. In terms of tax rate for both the September quarter and all of fiscal '10, can you provide some help that?

Sure, for the September quarter we're actually thinking about a tax rate of right around the 100% of the operating loss. So it's again a negative tax rate. And I think, just to put some context around that, we talked about the fact that as our operating losses begin to approach zero, the tax rates as long as we're on the south side of zero, the tax rates move astronomically north in terms of the rates. And, obviously the dollars are going to be much, much smaller. So, we are modeling a tax rate of about a 100% for the September quarter and our view for all of fiscal year '10 is hovering in that same range as well, because as we think about where the profits are going be generated and the overall level of profitability, we're going to be bumping along that norm of the line as we think about it right now.

And so, 100% sounds no toe good, but just we're targeting our operating loss at 10 million, as Ernie said to maybe 100%. But, it's smaller number. C.J. Muse: Right.

And so, we will definitely gain the benefit when we turn profitable. But, we'll just have to see when that's going to occur.

All right. I'd like to thank you for joining us today. Please be advised that the webcast of today's call be available on our website later this afternoon. Thank you for your interest in Lam Research and for participating in today's call.

Ladies and gentlemen, this concludes the Lam Research Corporation June 2009 quarterly financial results conference call. You may now disconnect. Thank you for using ACT Teleconference.