Shanye Hudson - Director of Investor Relations Douglas R. Bettinger - Chief Financial Officer and Executive Vice President Martin B. Anstice - Chief Executive Officer, President and Director

Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division James Covello - Goldman Sachs Group Inc., Research Division Krish Sankar - BofA Merrill Lynch, Research Division Timothy M. Arcuri - Cowen and Company, LLC, Research Division Farhan Ahmad Chad Dillard - Deutsche Bank AG, Research Division Mahesh Sanganeria - RBC Capital Markets, LLC, Research Division Stephen Chin - UBS Investment Bank, Research Division Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division Edwin Mok - Needham & Company, LLC, Research Division Mark J. Heller - Credit Agricole Securities (USA) Inc., Research Division Terence R. Whalen - Citigroup Inc, Research Division Jagadish K. Iyer - Piper Jaffray Companies, Research Division

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Lam Research Corporation June 2013 Quarterly Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Shanye Hudson, Senior Director of Investor Relations. Please go ahead, ma'am.

Thanks, Sheryl. Good afternoon, everyone, and welcome to our quarterly conference call. With me today are Martin Anstice, President and Chief Executive Officer; and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will discuss our financial results for the June 2013 quarter and share our business outlook for the September 2013 quarter before opening up the call for your questions. The press release detailing our financial results was distributed over the wire services shortly after 1 p.m. this afternoon and can also be found in the Investor Relations section of the company's website along with the presentation slides accompanying today's call. Today's presentation and Q&A includes statements addressing our plans, strategies, expectations, beliefs, forecast and projections about company and industry performance, growth and opportunities and the factors affecting them. In addition, we're providing guidance. These are forward-looking statements based on current information and are subject to risks and uncertainties, including those stated today and those described in our 10-K and 10-Q filings with the SEC that may cause actual results to differ materially. We encourage you to review the risk factor disclosure in our public filings, and the company undertakes no obligation to update forward-looking statements. This call is scheduled to last until 3 p.m. Pacific time. [Operator Instructions] And with that, I'll turn the call over to Doug. Douglas R. Bettinger: Okay. Thank you, Shanye. Just before I get started, as a reminder, the results I will be discussing today are primarily our non-GAAP results. A reconciliation of our GAAP to non-GAAP results can be found in today's earnings press release and it's also available on the Lam Research website. The June quarter marked the successful completion of our first full year as a combined company with Novellus. We delivered strong performance with fiscal year shipments of $3.7 billion and revenue of $3.6 billion. Shipments, revenue and operating profit were all up between 30% and 40% for the fiscal year. We are truly operating as a single company today, thanks to the substantial effort from our dedicated workforce. For the June quarter, total shipments were up 21% sequentially to $1.1 billion, a record high for Lam Research. This result was driven by strength in the memory segment and particularly in DRAM, where our system shipments more than doubled quarter-over-quarter. For our system shipments, the entire memory segment made up 46%, which was up from 31% in March. Of that 46%, DRAM was 28% and NAND constituted the remaining 18%. Foundry shipments accounted for 43% of total system shipments, which is down from 56% last quarter, but it’s actually relatively flat on an absolute dollar basis as customers continued adding 28-nanometer capacity. The remaining 11% was comprised of logic and other shipments. So now let me turn to revenue, which was also a record high. Revenue was $986 million in the quarter, up 17% from the March quarter. Gross margin was 44.5%, a little bit better than we expected due to our richer mix, mainly from our installed base businesses. Gross margin was up from the prior quarter, which was 43.9%. The financial model that we presented during our investor event earlier this month, I think, provides a good medium- to long-term view of our targeted gross margin performance over time. But I think it's important to point out and to remember that we will see quarterly variations around that model. Operating expenses for the quarter came in at $297 million. This was up $1 million sequentially but it was lower than we expected due to a variety of factors, including the timing of certain R&D programs, as well as targeted and purposeful savings in the administrative areas. I would like to point out that we continue to grow our R&D spending while doing our best to contain SG&A. And just a related note, I know you guys have heard us speak about the ERP system integration project that we've been working on for a while now. As we sit here today, we're about a week away from the completion of that event. I'd personally like to take this opportunity to thank the people that have been focused on ensuring that this project be successful. Operating income was $142 million and operating margin was 14.4%. These results show a continued progression to the model that we presented during our investor event. Our tax rate for the quarter was approximately 1%, slightly lower than we expected. Contributing to this lower effective tax rate was the jurisdictional mix of income and the closure of certain worldwide tax audits. This tax result is compared with the negative 5.6% in the prior quarter. For the full fiscal year 2013, the tax rate was approximately 8%, and as we look forward to fiscal year 2014, our current expectation is for a tax rate in the mid-teens. Based on a share count of 170 million shares, earnings per share for the June quarter was $0.80. This is up from $0.44 in the March quarter and it exceeded our guided range. I'd like to point out that the share count includes the dilutive impact of approximately 4.5 million shares related to our 2041 convertible notes. And just to remind you, we posted the convertible note dilution schedule on our Investor Relations website for your reference, as well as to help you in your modeling. There were no share repurchases last quarter against our $250 million authorization due to the timing of approvals and program implementation. We are planning to begin executing on the program during the September quarter, and we continue to have plans to complete the authorization by the end of 2014. So now let me turn to the balance sheet. We ended the quarter with gross cash and short-term investments, which includes our restricted cash of $2.7 billion. This is up from $2.5 billion in the March quarter. Approximately 25% of the June quarter end balance was onshore. DSO was 56 days and inventory turns were 4.1. We ended the quarter with deferred revenue of $389 million, which excludes approximately $70 million in shipments to Japanese customers that will revenue in future quarters. Cash from operations was $175 million. Company noncash expenses include, among other items, $25 million for equity comp, $43 million for amortization and $33 million for depreciation. Capital expenditures were $43 million in the quarter and it was spent primarily on lab equipment, facility improvements and tool evaluation equipment for our customers. We exited the quarter with approximately 6,600 regular, full-time employees. The slight headcount growth is consistent with our increasing R&D investments on the technology inflections. With that, I'll conclude my remarks and turn the call over to Martin. Martin B. Anstice: Thanks, Doug, and good afternoon, everyone. We appreciate all of you joining today's earnings call. As the initial headline, we're really pleased with our performance for the June quarter and the solid financial and operational results we delivered for the fiscal year. For the quarter, we reported 48% non-GAAP operating income flow-through on incremental revenue growth sequentially and 18% cash from operations. Achievements both have formed the substance and value in our vision. Reflecting back on these past 12 months, I am inspired by this organization's execution to our integration plans and the progress we've made towards delivering on our growth strategies. Stated simply, our recent performance is generally consistent with our expectations, our stated market share ambition and the financial model reiterated earlier this month. During our Investor Analyst Meeting a few weeks ago, I remarked that Lam has transitioned from a mode of integrating 2 companies to competing successfully as one. As we embark on this next fiscal year, defense of past successes remains our foundation, but we are optimistic of our growth prospects and competitive strength long term. There is no doubt in my mind, we are stronger together than we were separately. Our ability to mitigate risks and exploit opportunities is greater today than our premerger operating state. Now let me offer a few perspectives on the industry relative to our forecasted wafer fab equipment spending range of $30 billion, plus or minus $2 billion for calendar year 2013. Proportionately, we still expect more than 50% of WFE spending to occur in the second half of this year. As is more customary than not, we've seen slight changes in the composition of those investments over the past several weeks, as customers adjust their individual investment plans to align more closely with their demand profile. But the basic headline of $30 billion, plus or minus $2 billion range, still seems a reasonable outlook for calendar year 2013. And although it is way too early to quantify 2014, we do consider our market opportunity increasing next year. Changes have been most prevalent in the Foundry space, where certain leading-edge capacity investments, predominately for the 20-nanometer node, are now expected in 2014 rather than second half of 2013 as originally expected. We still anticipate at least one Foundry customer to add 20-nanometer capacity this year and shipments starting to ramp this quarter. However, accounting for these adjustments, we now forecast Foundry WFE spend at slightly over $12 billion, approximately 5% to 10% lower than our view last quarter. We anticipate these changes will be partially offset by increased investments in the memory space, where supply conditions have remained very tight amidst strong demand for mobile products and connectivity generally. We currently estimate memory WFE in 2013 at the $11 billion level. As was apparent from our June quarter results, DRAM shipments increased sharply as manufacturers accelerated the pace of their capacity conversions to support strong demand for mobile DRAM. Based on our understanding of customers' plans today, we expect additional investments to occur later in the year. However, given the timing of these tools to come online, our projection for supply bit growth is still approximately 30%. For NAND, our customer spending forecast has not substantively changed with estimates for supply bit growth in the mid-40% range. We still project spending weighted to the second half of calendar 2013, with a split of roughly 40% and 60% first half versus second half. Although planar investments represent the majority of NAND spend in 2013, initial shipments for 3D device capacity is still expected to begin in the December quarter with Phase 1 equipment selections at the bearing stages of conclusion at this time. We have consistently forecasted a decline in microprocessor logic spend this year compared to 2012 which, we believe, aligns reasonably well with our customers' capital plans and expectations for investments to pick up in the second half of this year, predominantly for 14-nanometer capacity expansion. Given the influences over the second half noted here today, we would expect the December 2013 quarter to have stronger shipments than September. Against this reasonably stable and positive industry backdrop, all of our efforts are focused on continuing to execute on our strategic growth objectives, which collectively are designed to enable us to outperform the industry over the next several years. First, we are driving growth across our product portfolio by capitalizing on market expansion and technical inflection opportunities and innovating of the leading edge to deliver market share gains. For multiple years now, Lam has been steadfast in its commitment to sustain our levels of investments in new technology capabilities and to partner closely with our customers' development teams to address next-generation device requirements. Earlier this year, we began shipping our fifth-generation Kiyo conductor etch system, which further extends our leadership in CD and depth uniformity. Lam is the industry benchmark in this area, which has enabled us to maintain critical transistor-level applications and extend multiple patterning process steps, including 20-nanometer PTOR positions. For several quarters now, we've talked about gaining momentum in dielectric etch high-aspect ratio process steps for DRAM devices. Last year, we introduced the capability, enabling differentiated profile control of these deep structures, which enabled us to win PTOR selections for the majority of 2x DRAM device flows. These same capabilities have enabled us to capture a broad range of 3D NAND development positions and give us confidence in our ability to capture production tool decisions in the coming year. Given our strong etch market share today in NAND, the market expansion in the 3D transition creates accelerated growth opportunity, as we maintain our overall share position while at the same time focusing on capturing upside. Our latest VECTOR Strata PECVD platform enables significantly higher wafer output processing density than any other system on the market today. Lam's complete portfolio of high-productivity, 3D NAND, multilayer film stacks positions us well for the anticipated production tool selections. For Lam, this represents one of the single largest application and product-specific growth opportunities, defined by a very logic -- large market expansion, accompanied by our high-confidence market share plans. As market share leader for both of the metal deposition segments in which we compete, we focused on widening our competitive gap. In tungsten deposition, we are poised to benefit from the transition to 3D devices. Our ALTUS products provide low-resistivity films, which offer performance advantages for logic devices, and our ExtremeFill capabilities support some of the complex re-entrant profiles used in 3D NAND devices. In copper Electrofill, we're expanding into the advanced packaging space, having won a few applications already this year with our SABRE 3D products. Lam's long-held strategy has focused on the most technical and productivity-critical applications, and the sample of successes I've just described are the result of addressing our customers' needs on time, not early or late, and in a manner they can trust for the long term. As stated many times, we don't win or defend everything all of the time, but we have and plan to continue winning more than we do not. That history and belief in the substance of the competitiveness of our product roadmap today provides us the confidence in our ability to capture 1 to 2 points of shipped market share gain in both etch and deposition this calendar year, also to achieve our long-term growth targets. In single-wafer clean, we remain the market share leader for back-end processes and now have commitments from 2 of the top 3 capital spenders to shift our next-generation, single-wafer clean system, the first of which will ship in the coming weeks. Minimally, these customer decisions are recognitions that we have eliminated our productivity disadvantage and have the vision to optimize their running costs. It is also our belief that they represent a critical building block to extend our successes in back-end-of-line clean processing to front-end-of-line applications. These new applications are more technically challenging, where the value of Lam as a provider of etch, deposition and clean solutions combined, can present differentiated value to our customers. As a complement to growing our systems business, we are also strengthening our competitiveness through our customer support and service offerings. As previously stated, this component of our business can represent 1/4 of our total revenues across the cycle and provides a solid base for building competitive differentiation over the lifetime of our customers' investments, not just at the point of equipment selection. In addition, it creates an income stream that is as close to an annuity as possible in this business. And with an increased level of focus and innovation at Lam, we believe it represents an exciting opportunity for growth. We are targeting to create value for our customers and, in turn, deliver compound annual revenue growth in excess of 5% over the next 5 years in our installed base business. Our customer services and installed base business have served to strengthen our competitive profile through technical differentiation, productivity and capital efficiency solutions. As an example, we recently developed a proprietary path cleaning process for some etch components that are critical and used in leading-edge logic manufacturing. These efforts improve the mean time between chamber cleans by more than a factor of 3, which translates to a significant improvement in availability for our customer. Lam has an installed base business of more than 30,000 semiconductor equipment process modules globally. Our supports and improvements of this installed base, not only provides us with rapid cycles of learning, but also a source of revenue commensurate to the value of solutions provided to our customers. Moreover, we offer an upgrade path for our family of etch, deposition and clean products, which provides capital-efficient means for our customers to extend the life of their installed base of Lam equipment, a capability never worth more to our future differentiation. Combined, we believe these actions can provide in excess of $1 billion of incremental revenue for Lam in the 2016 time frame, assuming a WFE spend environment of approximately $35 billion. As we look ahead, we continue to invest in new technology and productivity capabilities in order to keep pace with our customers' evolving needs and remain focused on achieving the growth potential associated with the Novellus merger. We are already realizing synergies from some major projects. We've previously talked about our 450-millimeter development program and the significant savings we have been able to recognize in terms of resources, development time and driving commonality across products. We were also able to leverage design elements from our copper electroplating products, including the robotics to reduce development cycle time for our next-generation clean products by an estimated 30%. Today, our etch products utilize pulsing technology for processes requiring very high selectivity to underlying materials. We are benefiting from Novellus' knowledge and experience with atomic layer deposition to further enhance our etch capabilities and extend our differentiation to meet future technology needs. I would like to take the opportunity to thank each of our employees for their dedication and tireless efforts over this past year to integrate both companies. I would also like to thank our customers and suppliers for their continued partnership and trust through a significant period of change at Lam. Our opportunity for growth is significant and I believe, more than ever, that the substance of our vision, the quality and innovation of the Lam team and the operational execution of our companies together will prevail competitively. Turning now to our outlook. Non-GAAP guidance for the September 2013 quarter is as follows: shipments and revenues both of $1 billion, plus or minus $30 million; gross margin at 44%, plus or minus 1%; operating profit at 14%, plus or minus 1.5%; and earnings per share of $0.68, plus or minus $0.07, based on a share count of approximately 170 million shares. With that, Doug and I would be happy to take your questions.

[Operator Instructions] And our first question comes from the line of Patrick Ho with Stifel, Nicolas. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: Martin, first in terms of the outlook you provided on the memory side, can you give us a little bit of color in terms of what you're going to see in the September quarter in terms of the mix between DRAM and NAND? Do you see any shifts there? Or is this still going to be a little stronger toward the DRAM side for the September quarter? Martin B. Anstice: I'll actually take -- it's Doug, Patrick. I'll actually take that one. When you look at the back half of the year broadly, it's going to be stronger in NAND than the first half was. DRAM was actually, we think, a little bit stronger in the first half than the second half. So when you go through the remainder of the calendar year, our expectation is memory is going to be stronger in the second half but it's going to be a NAND story more than anything else. Patrick J. Ho - Stifel, Nicolaus & Co., Inc., Research Division: And maybe specifically for you in terms of the operating model, you did a pretty good job in terms of the June quarter on the OpEx line. I guess, how do you balance the continued investments in R&D, particularly with a lot of these process technology transitions that we're seeing today offsetting it on the SG&A line to keep that OpEx around that $300 million level mark you've talked about in the past? Douglas R. Bettinger: Yes, Patrick, it's a good question and it's a delicate balancing act that the management team and the company really gets paid to execute to. You can’t just trade things off all the time. We do the best that we can to rationalize what we absolutely need to spend and not anymore on the administrative side, such that we can spend a little bit more on R&D to invest in these technology inflections where we see market opportunities that have nice return. But you kind of work your way through at each quarter and it's -- you got to make tradeoffs and that's what we're doing today.

Our next question comes from the line of Jim Covello with Goldman Sachs. James Covello - Goldman Sachs Group Inc., Research Division: Martin, I guess, first question, just in terms of kind of reconciling the bullishness that we heard from the whole industry at SEMICON West, we fast-forward a couple of weeks to earnings and now a couple of companies maybe give guidance that doesn't quite meet the Street in the September quarter numbers. Is that just a function of Street being ahead of itself? Is it a function of the timing? Because you did -- you did refer to the fact that the December quarter would be better. Has something changed? Has there been some movement since SEMICON West? Just -- and I think we're all struggling a little bit with the difference between what we all thought we heard then and kind of what we're seeing in the numbers now. Martin B. Anstice: Yes, I think, that is pretty kind of normal. The subtleties of one quarter to another are pretty complex for any of us to get precisely right. But from our perspective, the tone that we're communicating today qualitatively and quantitatively, we don't regard in any way, shape, or form as different from the conversation we had 3 to 4 weeks ago in our Analyst Meeting. I do think, and I kind of made a qualitative statement in my prepared comments about the December outlook, we don't specifically give guidance for December and I don't really want to do that today. But if it helps put the September context -- September guidance in context, I would expect the shipments of our company to exceed $1.1 billion in the December quarter. And in large part, that reflects the momentum in memory. And to Doug's point, the dollars of investments in memory are very biased to NAND flash but the strength that we're seeing, that showed up in the June quarter, first and foremost, but also repeats at some level in the second half, is DRAM driven being by the kind of mobile requirements there. James Covello - Goldman Sachs Group Inc., Research Division: That's helpful. And then just in terms of pricing, particularly in etch, I mean, as always, when we go to see all the different companies, everybody in etch says they're gaining share and obviously, the proof is in the pudding and you guys have demonstrated that in the numbers that you are actually gaining share. But in an environment where everybody is trying to gain share, have you seen any more -- everybody's trying to gain share, is there any more pricing than normal in that area? Martin B. Anstice: I don't know if I would say, frankly, that the biggest influence over pricing is the competitive dynamic. I think the bigger influence over pricing, frankly, is the consolidation of the semiconductor industry and the fact that 65% to 70% of wafer fabrication equipment spending is in the hands of the 3 companies today. So on a case-by-case basis, I'm sure any one of us feels an ebb and a flow of pricing intensity. But my fundamental impression today is that the competitive environment is exactly kind of where it has been and where we'd expect it to be and nothing kind of fundamental to report in terms of pricing for that reason today.

Our next question comes from the line of Krish Sankar with Bank of America Merrill Lynch. Krish Sankar - BofA Merrill Lynch, Research Division: I have 2 of them. If I look at your September quarter guidance, what is the reason for the gross margin, off margin being slightly below your June run rate? Martin B. Anstice: I think the simple answer is that it isn't that much different from the June run rate. I mean, if we want to have a discussion about 0.4%, I guess we can. But the complexity of individual products really kind of has us approaching this in much the same way we did last quarter, and we got a range on the guidance for that reason. We got a point or so around the 44%. And certainly, the most important message is a message of consistency to the model that Doug presented at our Analyst Meeting. And so we feel that at the billion-dollar level of shipments and revenue, the 44 percentage points is a very good place for us to be against the objective, which really is, kind of 6 months from now, is kind of end of December run rate's performance of 45% that's in our model. So we actually feel pretty good about it frankly. Douglas R. Bettinger: Yes, Krish, this is Doug. I'll just add, in my view, we're consistent with that model. You always have ebbs and flows. As Martin was pointing out, different things have different profitability and you sell more or less of 1 quarter-to-quarter. It's hard to predict that sometimes. But within a range, we're pretty comfortable with where we are. Krish Sankar - BofA Merrill Lynch, Research Division: Got it. All right. And then just to follow up on that, it looks like you guys are still working on lowering the COGS, working with your suppliers to boost your gross margins. So if I just take your September or even June revenue run rate, roughly $1 billion, assuming the same mix of products between legacy Lam and Novellus, how will the gross margin look like, let's say, 1 year, 1.5 years from now? Douglas R. Bettinger: That's a pretty hard question to answer, Krish, because mix is never exactly the same. The synergies that I showed you earlier this month are coming to fruition. We're on track with the things that we expect. So everything else was equal. Every single tool, percentage was the same and going down the pricing stack, we would be a decent amount, call it, maybe a percentage point higher in gross margin, again, consistent with that model. But I caution you on that. The mix is never the same every single quarter. Things ebb and flow every quarter but that's where we're at.

Our next question comes from the line of Tim Arcuri with Cowen and Company. Timothy M. Arcuri - Cowen and Company, LLC, Research Division: I had 2 questions. First, Martin, you've pretty consistently been talking all year about the year being 55/45 back-half loaded. So if I just do that math, your shipments in Q4 should be even better than $1.1 billion. They had to be like $1.2 billion. So I'm wondering whether that 55/45 math still holds, and then I had a follow-up. Martin B. Anstice: I think I have tended more often than not to kind of say high 40s, low 50s rather than the specific numbers you've described. So maybe there's 1 point in 10 where I've done exactly what you just said. As I said, I -- it is rather unusual for us to put a stake in the sand for December. I've done it because I think it's relevant to communicating the outlook of the company certainly, in light of the questions that have already been raised today. And certainly, when we approach signaling our outlook for December, we're doing it with a level of risk, which is different than the outlook for September and our commentary is consistent with that. So whether it is higher than $1.1 billion or not, time will tell but at a minimum, we can see $1.1 billion on the horizon. Timothy M. Arcuri - Cowen and Company, LLC, Research Division: Got it, okay. And then a follow-up on the NAND, specifically 3D NAND, is there a way that you can determine what portion of the bookings as you look out into next year, what portion -- whatever the NAND is 3 quarters and whatever WFE is next year, what portion of NAND WFE will be 3D versus planar? Because it sounds like there's another customer, not just the big one, that is now pushing forward with some plans on 3D. So I'm wondering if you can give us some mix commentary next year. Martin B. Anstice: Yes, that's a really tough one. I'm not sure that there's sufficient public disclosure from our customers to really do that, Tim. I mean, unquestionably, there is kind of a learning experience for everybody here in front of us with the first set of investments in a very complex transition. And as is true in every complex transition, it's all about yield and it's all about the performance delivered from the devices. And there isn't obviously, today, production evidence of any of that. And so presuming that all plays out, presuming there's demonstrated performance advantage from the device, presuming it is yielding in a manner consistent with delivering the economics, then I'd expect the proportion to go up. And whether it's more than half or less than half, time will tell. But it is easy to visualize it in that kind of area. But as you guys all know, the public commentary from customers around transition from planar to 3D devices in NAND flash memory kind of tracks over a 1- to 3-year timeline. So there's a lot of questions still outstanding I think.

Our next question comes from the line of John Pitzer with Crédit Suisse.

This is Farhan Ahmad asking the question on behalf of John. I wanted to talk to you about the Foundry shipments in second half. As you look into the second half, how do you see the Foundry shipments tracking in your September and December quarter? Martin B. Anstice: Right. I think the biggest message is the one that has been kind of talked about, I think, for the last 3 or 4 weeks. The 28-nanometer spending is broadening, and the 20-nanometer transition is beginning. And we kind of expected more than one customer to be transitioning to 20-nanometer, and we now expect there to be essentially one. And I did put a range out there originally of 30,000 to 50,000 wafer starts of investments at 20-nanometer. And I would say, in light of what we've communicated today, we'd be at the low end of that range in terms of our expectations. And that's the basis of the guidance that's given for September and the outlook that I've shared for December.

Got it. And then in regards into your NAND shipments, should we -- just based on the commentary, is it fair to expect that shipments would be up in September and again, in December as well? Douglas R. Bettinger: Yes. They very likely will be up sequentially each quarter. I'm not going to quantify it for you but that's the direction we expect it to go.

Our next question comes from the line of Vishal Shah with Deutsche Bank. Chad Dillard - Deutsche Bank AG, Research Division: This is Chad going online for Vishal. Could you just talk about what your expectations are for 60-nanometer? Are you seeing any pull in towards 2013? Or is it going to be much more of a 2014 phenomenon? Martin B. Anstice: You have to ask that again. I didn't catch it. Chad Dillard - Deutsche Bank AG, Research Division: Oh, what are your expectations for 60-nanometer? Are you seeing any pull into the 2013? Or will it be just a 2014 phenomenon? Martin B. Anstice: You're talking a FinFET transition in the Foundry. Is that the question? Chad Dillard - Deutsche Bank AG, Research Division: Correct. Martin B. Anstice: Okay. I think, frankly, they -- I guess they have to deliver those headlines. But I -- certainly, one of the things I'll share with you is that when a customer dialogues with us today, and I suspect this is probably quite true for every equipment company, the separation and the conversation between the final planar generation and the first FinFET generation is very subtle, and so we're almost kind of indifferent to it. I mean, there are clearly some new application areas. There are clearly some process times that go up, and the stamp [ph] of the company increases in the planar or the FinFET transition, but it doesn't increase for any of us to the same extent that the 28-nanometer to 20-nanometer conversion was. So I would say that there is clearly a race in the Foundry community to a FinFET. But certainly, the spending that's in front of us is a 20-nanometer, planar-biased spending. Chad Dillard - Deutsche Bank AG, Research Division: Got it. And maybe a little bit too early, but maybe you could talk about how you expect the spending mix to trend between Foundry and logic versus memory when you're thinking about 2014 versus 2013? Martin B. Anstice: Yes, I mean, I think the first part of your question was right on. It's too early. But I'll -- at the risk of being held to this, certainly, we see for a bunch of reasons, the discipline of our customers' sort of process of adding capacity, particularly in memory, where clearly the pricing environment tells us all how imbalanced supply and demand is today, and also a more positive outlook in terms of general consumer electronic demand and adoption of various technologies. But 2014 is a stronger WFE year than 2013. Now use your math and change between now and then, but as a basic outlook in the middle of calendar '13, that will be our commentary. And consistent with my -- the first part of my answer, we would expect that the memory proportion of spending increases. And certainly for Lam Research, that's a net positive because the bias, the strength of the company historically has been more in memory than in logic, although that is normalized a little bit through the integration of Lam and Novellus. But still, we are more memory-biased as a company and so as the expectation for a higher-memory content in WFE exists, that's positive for the company. If that assumption is wrong, then the positive I just described doesn't exist.

Our next question comes from Mahesh Sanganeria with RBC Capital Markets. Mahesh Sanganeria - RBC Capital Markets, LLC, Research Division: Martin, I have a question on the comments you made on clean in your opening remarks. You said you have commitment from 2 customers to evaluate the new clean system for the front end of the line. Did I hear that correctly? And if you can provide some more color on that, that would be helpful. Martin B. Anstice: Yes, I didn't actually articulate the specific application areas in my prepared comments and nor will I, just to preserve the competitive component of things. But certainly, it's a very big milestone for the company, being able to make the statement that I just did. As you all understand, we're in a kind of critical juncture relative to the economics of the clean business, and we have had a productivity disadvantage for the last 5 years. We've been essentially the only large, clean company limited to an 8-chamber platform. And we've been able to address that to a level of satisfaction, at least to accomplish the first result, which is getting a couple of very large customers committed to partner with us, to evaluate and hopefully, qualify that capability. And the product has been designed with the objective in mind to open up the front end-of-line application space, which is a huge part of the clean market space, which has more generally not been available to us with the Da Vinci prime product. And so we will, in an R&D environment, be validating on a mix of back-end of the line and front-end of the line application areas I expect. And certainly, the business objective is we're successful in both segments of single-wafer clean. Mahesh Sanganeria - RBC Capital Markets, LLC, Research Division: Okay, that's helpful. And just wanted to follow up on your Foundry commentary again. I guess you mentioned that you had multiple -- you were expecting multiple customers to start ramping 20-nanometer and now you're down to 1. I'm just -- the question I have is, is it related to more of your -- the customers making the decision to skip 20 and go directly to 14-nanometer? Or is it the difficulty with the 20-nanometer NAND? Can you give us some... Martin B. Anstice: I think only they can answer that question. My impression is not a statement of jumping, but that's just an impression.

Our next question comes from the line of Stephen Chin with UBS. Stephen Chin - UBS Investment Bank, Research Division: Just a follow-up question on the operating expenses. So if Lam's December shipments can possibly hit this $1.1 billion level, do you think Lam can come close to the target model for OpEx, which is I think 28% in that December quarter, since I think the ERP system will be fully implemented and... Douglas R. Bettinger: Yes. There's upward bias on the numbers certainly and yes, I think we have a decent shot at getting to the target in the December quarter. We've got some work left to do, but I think we've got a shot at getting there. Stephen Chin - UBS Investment Bank, Research Division: Okay. And then a follow-up question on the growing NAND shipments that you're expecting in the second for the year, can you share some color on the split that you think you'll see across technology upgrades versus any capacity additions for NAND in the second half for this year? Douglas R. Bettinger: I think you're still going to see a lot of conversion spending, which has been what you've seen over the last, I don't know, several quarters -- several years, actually, hopefully. There will be some capacity additions and some conversions, so it'll be a blend.

Our next question comes from the line of Mehdi Hosseini with Susquehanna International Group. Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division: I have 2 questions. One for Doug, when you look at your internal capacity and given what you have in place, what kind of a maximum revenue can you generate before having to add more headcount? Douglas R. Bettinger: More headcount? Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division: More headcount or more overhead. Douglas R. Bettinger: Well, you -- volume does -- or headcount does scale to a certain extent with headcount. Now from a facility standpoint, we can add a lot of volume before we need to add any facilities. But that's one statement. And then second, you need to understand that a lot of our manufacturing is outsourced, so it varies with volume. Martin B. Anstice: I would estimate that probably 1/3 of the headcount of the company is flexed to volume. Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division: Okay. So in terms of total expense, is it just the R&D and investment that maybe you're adding the risk of the overhead and the headcount is pretty much flexible and you have plenty of headroom in terms of how much revenue you can generate, is that the right way of thinking about it? Douglas R. Bettinger: Yes, that's true. Martin's comment is right about kind of the manufacturing volume. We are investing more in R&D resources because we see opportunities for profitable growth. And then we do our best to squeeze the administrative functions or let revenue grow without adding anything in that area. That's kind of how we think about it. Martin B. Anstice: So obviously, one of the things we have the benefit of is a lot more information about Lam Research than you do. And so we ask the same question that you do and try to share our best perspective with you using the financial model. So all of the questions that are relevant to the future economics of the company are try -- are incorporated to the best of our abilities in the financial model. So I would encourage you and others to keep referring back to that model presented by Doug in the Analyst Meeting. Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division: Got it. And then one other question in terms of the big picture, as you commented in the prepared remark or early on, you said that, yes, there was 1 or 2 Foundry order or customer that were going to do 20. But now things have changed over the past couple of weeks since SEMICON West announced that has been pushed out to next gen. How quickly things change, especially since your customers have consolidated. If I were to take that and apply it to a 3D NAND, which is a subjective debate that is coming up over the past month, there are 2 groups, 1 group Koreans, they keep talking about adding parallel [ph] and 3D and then to others outside of Korea, they think the 1Z [ph] Should be doable for the next couple of years. So to that extent, what gives confidence that all of this hype around 3D is nothing but hype and we're going to have working examples out by Q1 or Q2 of next year? Martin B. Anstice: Well, I think, the only thing that we can ever do, whether it's a transition commentary or not, whether it's memory or logic, is dialogue with our customers and trust that they're communication to us is authentic. And what we're communicating to you today is our interpretation of this due to the customer. So I think there is legitimacy. I think even the most committed customer in the world would say it's a complex transition, and there's a lot to learn in the pilot line. And based on the learning in production and in the marketplace relative to performance benefits, this will either speed up, it will either slow down or it will either hold the projections that are commonly anticipated. But right now, our belief is that we're shipping products into a 3D environment this calendar year. Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division: And do we know for sure that these equipments are going to be used for 3D and not just planar? Martin B. Anstice: Well, I -- again, I can only believe what I'm told by my customer.

Our next question comes from the line of Edwin Mok with Needham & Company. Edwin Mok - Needham & Company, LLC, Research Division: So a question on the Foundry side, I think you talked about this year shaping up to really the -- less than what you have previously forecast. Should we read that as some of these 20-nanometer projects that you were expecting got pushed out in 2014 and potentially even in the first half of 2014? Or are these just on hold until there's some technical challenges there? How do you kind of think about that? Douglas R. Bettinger: My impression is pushed. Edwin Mok - Needham & Company, LLC, Research Division: Great. Okay, okay, great. That's, okay, helpful. It's a straightforward answer there. I guess second question I have on the wet clean side, I think you talked about new products there that you guys position in the marketplace, right? With this new product, right, do you believe that you've closed the gap? And maybe a different way of asking that is, if this new product is -- takes more time to get adopted by the customer, is there any risk that your customer will qualify competitive product even in the back end of the line, which you, like you said, historically, you guys are stronger? Martin B. Anstice: Well, there's always a risk but there's always an opportunity. I mean, I -- at the fundamental level, I believe the decisions by our customers are about as influential as anything I could share with you around the fundamental capability of the company and the differentiation that's available in terms of productivity and then results on wafer. And results on wafer is defined around particle-removal efficiency, it's defined around collapse-free drying and a lot of the market transitions and technical inflections that we've talked about today and in our Analyst Meeting create very significant challenges in the cleaning segment. And so, I think, again, consistent with what we've said that previously, the clean business unit in the portfolio of our 3, right? We have etch, we have dep, we have clean, simply stated. The clean market share progression -- the long-term progressions are likely to be more hockey stick than the other 2, which are likely to be more linear in their expansion. So that's about the best, I guess, I could share at this point.

Our next question comes from the line of Mark Heller with CLSA. Mark J. Heller - Credit Agricole Securities (USA) Inc., Research Division: Doug, just had a quick question. You gave some guidance on the shipments for the fourth quarter -- calendar fourth quarter. But looking back at the presentation from the Analyst Day, you're talking about, maybe about $4.1 billion in revenue in context of a $30 billion WFE, does that still hold? Or would you come in below that model? Douglas R. Bettinger: Yes, that commentary, Mark, and I'm sorry if I wasn't clear about describing it, it was kind of a '13, '14 statement. In a $30 billion WFE, we would expect to be around $4.1 million for the year. It's not necessarily a statement around the current year. Martin B. Anstice: So I'll supplement my comment. I think if you take the guidance and you take the December reference that I provided on shipments, you're going to see mathematically a number that looks very similar to the one that Doug stated. And the timing of revenue acceptance is all about specific shipment days and weeks in the quarter, and that's a little hard to predict at this point and the timing of the acceptance cycle. Frankly, we don't worry so much about that. We worry about taking orders from our customers as soon as they're available, and we worry about shipping products and meeting their demand and getting the systems installed. Acceptance cycles take care of themselves usually. Mark J. Heller - Credit Agricole Securities (USA) Inc., Research Division: Got it. And did you disclose a backlog number? Martin B. Anstice: No. Douglas R. Bettinger: No. No, we didn't, Mark. Mark J. Heller - Credit Agricole Securities (USA) Inc., Research Division: Can I ask one more question then? You talked about, previously, a competitive win in the logic side of the business. How should we expect the logic shipments to trend over the next quarter or 2? Martin B. Anstice: But I think it's a trend you should assume is highly correlated to the outlook of our customers. I mean the Foundry components of logic is a reasonably evenly distributed first half, second half, not precisely today, but reasonably so and the microprocessor environment increases. And so you should expect the trend for Lam is consistent with that. Obviously at a product level, the other side of the memory strength for the company is a little less than normal profile in microprocessor logic, but I think you guys have -- are well practiced in modeling that at this point.

Our next question comes from the line of Terence Whalen with Citigroup. Terence R. Whalen - Citigroup Inc, Research Division: This question goes back to questions on the clean market. I believe the product introduction for front-end-of-line clean against DNS is slated for, perhaps, later this year. Also wanted to just understand correct timing of that, and then also wanted to understand your perspective on DNS's introduction of its back-end-of-line product as well, which I think is slated for end of year? Martin B. Anstice: Well, I think relative to our competition in any of our markets, we regard DNS with respect. They have a tremendous history in batch cleaning and successfully leveraged that strength into the front-end-of-line cleaning space particularly. I think the installed base in the history of Lam Research is a tremendous value proposition in the back-end-of-line space. And frankly, we're winning business today with the Da Vinci-Prime product. And so I think there's only upside for the company in terms of competitive strength with the next-generation product there. But we have to be sensitive to all competitive threats, where they come from, whether it's DNS, whether it's Intel. And certainly, our really most important focus right now is on making a success, given that our customers have voted and accepted our next-generation system into their R&D environment and to take advantage of that opportunity to demonstrate the substance of our vision. And we have a lot of people invested in the success of this, and we'll do our very best to deliver on that promise. Terence R. Whalen - Citigroup Inc, Research Division: And just the final aspect, I just wanted to understand timing of when we begin to see revenue progress from the newer product. Martin B. Anstice: Well, we're shipping the first of a few in weeks and quite when that translates itself from an R&D environment into a production buy it’s, frankly, a little early for us to communicate right now. But ask the question again, if you still think it's important in 3 months from now, and we'll see if we're any closer to answering it.

And our last question comes from the line of Jagadish Iyer with Piper Jaffray. Jagadish K. Iyer - Piper Jaffray Companies, Research Division: Two questions. Martin, I just wanted you to clarify, you had some remarks about the PTOR positions in 3D NAND. I just wanted to make sure, are all decisions for 3D NAND finalized as of now? Martin B. Anstice: No. Jagadish K. Iyer - Piper Jaffray Companies, Research Division: And second question is, one of your peer group companies indicated that the memory shipments or memory orders could go back to some normalized levels probably in the Q4 timeframe -- calendar Q4 timeframe. I was just wondering, how sustainable is the memory spend going into the first half of 2014? Martin B. Anstice: Yes, I'm not really sure these days to make that kind of references to normalized. But I do think we deliver a very consistent message in terms of strengthening of memory spending and for all of the reasons that we've been communicating pain in the last 12 months, the discipline of our customers, we'd expect that discipline to continue. So I think sustainability in an environment of discipline is usually pretty good. And certainly, the penetration roadmaps and the adoption and the replenishment cycles and bit growth assumptions in and around mobile and connectivity-related electronic products, I think, kind of bodes reasonably well for our future. But we'll see.

There are no further questions in the queue. I would like to hand the call over to Shanye Hudson for closing remarks.

Okay. I'd like to thank everyone on the call for spending this last hour here with us today. As a reminder, a webcast replay of this call will be available later this afternoon on our website. And on behalf of the entire management team, we appreciate your interest in Lam Research.

Ladies and gentlemen, this concludes the Lam Research Corporation June 2013 Quarterly Results Conference Call. We thank you for your participation. And at this time, you may now disconnect.