STOCKREPORTS

Lam Research Corporation

Nasdaq Symbol LRCX

Recent Price 53.44 52 Wk Range 53.44 - 23.00

Yield Nil 12-Mo. P/E NM

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) 1- Fair Value 37.90 Risk HIGH Earn/Div Rank B
Technical Evaluation: BULLISH since 01/97 Rel. Strength Rank (1 Lowest - 99 Highest) 98 Insider Activity Neutral

Overview 30-APR-97

Revenues in FY 98 (Jun.) will be flat to up 5%. Although the semiconductor equipment industry has begun to recover from its recent slump, the company does not expect a substantial increase in orders until manufacturers of dynamic random access memory semiconductors (DRAMs) begin to add to capacity. LRCX has told analysts that it does not expect this to happen until the first quarter of FY 99. Margins will widen from depressed FY 97 levels, on higher volume and production design improvements. However, price competition in a still lackluster industry environment will continue to put pressure on results. Earnings will also be diluted if the proposed acquisition of OnTrak Systems is completed. Overall, we look for EPS of about $1.00 in FY 98. A projected loss of $0.93 for FY 97 includes non-recurring charges of approximately $1.30.

Valuation 30-APR-97

We have downgraded our rating on LRCX to hold, following company comments that it does not expect a significant recovery in operating results until FY 99. This is particularly disappointing in light of the fact that many of LRCX's industry peers have been reporting improved results. It appeared earlier in the year that the company might be able to achieve a relatively quick recovery from the current industry slump, but it now seems that the rebound will be more protracted. Nevertheless, we feel that LRCX is a good long-term holding for aggressive investors. Its price remains quite depressed, and we do not believe that the stock has any significant current downside risk. In addition, the proposed acquisition of OnTrak, while dilutive in FY 98, will give LRCX a foothold in the rapidly growing CMP market.

Key Stock Statistics

Fiscal Year Ending Jun. 30

Dividend Data: No cash has been paid. A three-for-two stock split was effected in September 1993.

Business Summary 30-APR-97

Lam Research Corporation develops, manufactures, markets and services semiconductor processing capital equipment used in the fabrication of integrated circuits. Its products are used to deposit special films on a silicon wafer (deposition) and selectively etch away portions of various films (etch) to create an integrated circuit. Deposition and etch processes, which are repeated many times during the fabrication cycle, are required to manufacture every semiconductor device produced today.

The etch process defines line-widths and other feature sizes on integrated circuits. Lam addresses the etch market with three major products: its AutoEtch series of single-wafer, plasma-etch systems; its advanced Rainbow series platform for submicron capabilities, eight-inch wafer handling and advanced automation; and its Transformer Coupled Plasma (TCP) product: a low pressure, high density, planar plasma etch source. Sales of etch systems, principally Rainbow products, contributed 77% of total revenues in FY 96 (Jun.).

Chemical vapor deposition (CVD) involves the deposition of thin films on a silicon wafer by exposing the wafer to various gases containing materials to be deposited. The company offers two CVD products: Deep SubMicron (DSM 9800, formerly Integrity) low pressure (LP) CVD system for pre-metal dielectric applications, and its Deep SubMicron (DSM 9900, formerly Epic) high density plasma (HDP) CVD system, which addresses advanced intermetal passivation dielectric applications for logic and microprocessor integrated circuits as well as shallow trenches for isolation in memory circuits.

Lam's products are sold through company personnel and a worldwide distribution network of independent representatives and distributors. Export sales represented 41% of net sales in FY 96. No customer accounted for more than 10% of sales in FY 96.

R&D spending was equal to 14%, 16% and 16% of revenues in FY 96, 95 and 94, respectively.

Important Developments

Mar. '97 The company signed a definitive agreement to acquire OnTrak Systems Inc. (NASDAQ: ONTK), a supplier of chemical mechanical planarization (CMP) systems used to fabricate semiconductors. Under terms of the agreement, each of ONTK's 7.6 million shares would be exchanged for 0.83 of a Lam share. In its fiscal year ended June 30, 1996, ONTK had revenues of $55.8 million, and net income of $4.8 million. The acquisition, which is subject to the approval of shareholders of each company, is expected to be completed by mid-year.

Capitalization

Long Term Liabilities: $57,294,000 (3/97).

Curr. Ratio	2.5	2.8	2.4	3.6	3.2	2.7	2.5	3.0	3.3	8.4
% LT Debt of Cap.	8.0	19.4	30.8	37.8	11.4	26.3	22.8	17.8	6.8	0.8
% Net Inc.of Revs.	11.1	11.2	7.6	7.1	5.8	4.2	NM	7.4	3.0	NM
% Ret. on Assets	17.1	16.8	11.6	8.8	6.5	5.4	NM	11.4	3.6	NM
% Ret. on Equity	28.1	31.2	24.6	15.7	10.8	10.4	NM	17.7	4.5	NM

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. Fully diluted earnings per share: FY'95: $3.06, FY'94: $1.51, FY'93: $0.79. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--4650 Cushing Pkwy., Fremont, CA 94538. Reincorporated--in Delaware in 1990. Tel--(510) 659-0200. E-mail--http://www.lamrc.com Chrmn & CEO--R. D. Emerick. Pres--H. Tu SVP-Fin, CFO & Secy--H. J. Evenhuis. Investor Contact--David Ringler. Dirs--D. G. Arscott, R. D. Emerick, J. R. Harris, G. M. Inman, O. Kano. Transfer Agent & Registrar--Chase Trust Co. of California, SF. Empl-- 4,500. S&P Analyst: Stephen T. Madonna, CFA

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997