BUSINESS COMBINATIONS

3 Months Ended

Sep. 23, 2012

BUSINESS COMBINATIONS

NOTE 16 – BUSINESS COMBINATIONS

On June 4, 2012 (“the acquisition date”), the Company acquired all of the outstanding common shares of Novellus in an all-stock transaction valued at approximately $3.0 billion. The results of Novellus’ operations have been included in the consolidated financial statements from the date of acquisition. Lam’s primary reasons for this acquisition were to complement existing product offerings and to provide opportunities for revenue and cost synergies. Novellus’ primary business focus is to develop, manufacture, sell and support equipment used in the fabrication of integrated circuits, commonly called semiconductors. Customers for this equipment manufacture semiconductors for sale or for incorporation in their own products, or provide semiconductor-manufacturing services to third parties. Novellus also develops, manufactures, sells and supports grinding, lapping and polishing equipment for a broad spectrum of industrial applications.

Consideration Transferred

The table below details the consideration transferred to acquire Novellus:

(in thousands, except per share amounts)	Conversion Calculation		Estimated Fair Value
Lam common stock issued at merger		82,689
Per share price of Lam common stock as of June 4, 2012	$	35.99	$	2,975,977
Estimated fair value of vested Lam equivalent restricted stock (1)			$	9,599
Estimated fair value of vested Lam equivalent stock options (2)				41,412
Estimated purchase price consideration			$	3,026,988

(1) The fair value of Lam Research equivalent restricted stock as of the acquisition date was estimated based upon the per share price of Lam Research common stock as of June 4, 2012, and giving effect to the exchange ratio of 1.125.

(2) The fair value of the Lam Research equivalent stock options as of the acquisition date was estimated using the Black-Scholes valuation model. Assumptions used are the same as those for acquired awards as disclosed in Note 11 of Notes to Condensed Consolidated Financial Statements.

Net Assets Acquired

The transaction has been accounted for using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the assets acquired and liabilities assumed as of the acquisition date:

	June 4, 2012
	(in thousands)
Cash and investments	$	1,059,859
Accounts receivable		241,924
Inventory		309,213
Other current assets		56,314
Property and equipment		289,126
Intangible assets		1,219,100
Goodwill		1,277,121
Other long-term assets		35,826
Total assets acquired		4,488,483
Accounts payable		(83,028	)
Accrued expenses and other current liabilities		(196,677	)
Deferred revenue		(20,388	)
Debt		(509,805	)
Other long-term liabilities		(323,471	)
Convertible notes—equity component		(328,126	)
Net assets acquired	$	3,026,988

The goodwill recognized is attributable primarily to expected synergies and other benefits that the Company believes will result from combining the operations of Novellus with the operations of Lam. The $1.3 billion goodwill that was acquired is not expected to be deductible for income tax purposes. As of September 23, 2012, there were no changes in the recognized amounts of goodwill resulting from the acquisition of Novellus.

Preliminary Pre-Acquisition Contingencies Assumed

We have evaluated and continue to evaluate pre-acquisition contingencies relating to Novellus that existed as of the acquisition date. We have determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date and, accordingly, have preliminarily recorded our best estimates for these contingencies as a part of the purchase price allocation for Novellus. We continue to gather information for and evaluate these pre-acquisition contingencies, primarily related to tax positions that we have assumed from Novellus. If we make changes to the amounts recorded or identify additional pre-acquisition contingencies during the remainder of the measurement period, such amounts recorded will be included in the purchase price allocation during the measurement period and, subsequently, in our results of operations.