Lam Research (LRCX)

NOTE 9 — OTHER INCOME (EXPENSE), NET

The significant components of other income (expense), net, are as follows:

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Other Income (Expense), Net

Other income (expense), net consisted of the following:

Interest income decreased during the three and nine months ended March 29, 2009 compared with the same periods in the prior year and during the three months ended March 29, 2009 compared with the December 2008 quarter and was primarily attributable to decreases in interest rate yields and to a lesser extent decreases in our average cash and investment balances. Average cash and investment balances were lower year over primarily as the result of our acquisition of SEZ in March 2008.

During the three and nine months ended March 29, 2009, our interest expense decreased compared with the corresponding three month period ended December 28, 2008 and the three and nine month periods ended March 30, 2008 primarily as a result of decreases in interest rates.

Included in foreign exchange gains during the three months ended March 29, 2009 was $6.7 million of gains associated with the Company’s accelerated tax planning strategy and $4.2 million of gains primarily due to changes in the value of our foreign currency denominated assets and liabilities with non-U.S. dollar functional subsidiaries due to the U.S. dollar’s weakening against the Euro and strengthening against the Japanese yen.

Included in the foreign exchange gains during the nine months ended March 29, 2009 was $4.0 million of deferred net losses associated with ineffectiveness of our cash flow hedges related to forecasted transactions that were no longer considered probable of occurring due to a significant decline in the market and $5.5 million of gains primarily due to changes in the value of our foreign currency denominated assets and liabilities with non-U.S. dollar functional subsidiaries due to the U.S. dollar’s weakening against the Euro and Taiwanese dollar and strengthening against the Japanese yen.

Included in foreign exchange gains during the three and nine months ended March 30, 2008 are gains associated with the acquisition of SEZ of $49.3 million relating primarily to the settlement of a hedge of the Swiss franc. For the nine months ended March 30, 2008, this gain is partially offset by an unrealized loss recognized during the quarter ended December 23, 2007, representing the change in fair value of $7.2 million on the hedge of the Swiss franc related to the acquisition of SEZ. These net foreign exchange gains were offset by foreign exchange losses of approximately $8.6 million during the three months ending March 30, 2008 and $13.6 million during the nine months ending March 30, 2008. These foreign exchange losses were primarily due to the changes in value of our foreign currency denominated liabilities with non-U.S. dollar functional subsidiaries due to the U.S. dollar weakening against certain currencies, primarily the Euro and Taiwan dollar.

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A description of our exposure to foreign currency exchange rates can be found in the Risk Factors section of this Quarterly Report on Form 10-Q under the heading “Our Future Success Depends on International Sales and Management of Global Operations.”