Exhibit 99.1

Contacts:		William H. Kurtz		Robin Yim
		Executive Vice President and Chief Financial Officer		Investor Relations
		Novellus Systems, Inc.		Novellus Systems, Inc.
		Phone: (408) 943-9700		Phone: (408) 943-9700

FOR IMMEDIATE RELEASE

NOVELLUS SYSTEMS REPORTS THIRD QUARTER 2006 RESULTS

SAN JOSE, Calif., October 17, 2006—Novellus Systems, Inc. (NASDAQ: NVLS) today reported net sales and results of operations for its third quarter ended September 30, 2006. Net sales for the third quarter were $444.0 million, up $34.0 million or 8.3 percent from second quarter 2006 net sales of $410.1 million, and up $105.2 million or 31.0 percent from third quarter 2005 net sales of $338.9 million. Net income for the third quarter was $70.0 million, or $0.57 per diluted share, up $17.3 million or 32.9 percent from second quarter 2006 net income of $52.7 million, and up $46.6 million or 199.0 percent from third quarter 2005 net income of $23.4 million.

The third quarter 2006 results did not include any unusual charges or benefits. The third quarter 2005 net income would have been $28.7 million, or $0.21 per diluted share, excluding any unusual charges or benefits. The third quarter 2005 results included a pre-tax inventory write-down of $5.2 million within cost of goods sold and $6.3 million of other pre-tax costs associated with the restructuring, partially offset by a pre-tax reversal of $3.0 million of a previously recorded restructuring accrual. A reconciliation of pro forma operating results and U.S. generally accepted accounting principals (“GAAP”) results is included in the financial statements below.

Bookings in the third quarter were $470.3 million, up 2.8 percent over second quarter 2006 bookings of $457.5 million. Shipments of $414.2 million in the third quarter represent a decrease of $43.1 million or 9.4 percent from $457.3 million reported for the second quarter 2006. Deferred revenue at the end of the third quarter was $148.6 million, a decrease of $29.8 million or 16.7 percent from $178.5 million at the end of the second quarter of 2006.

The financial measures set forth above that present net income excluding certain charges and benefits, revenue on a shipments basis and bookings, are not in accordance with GAAP. The Company believes that these non-GAAP financial measures provide further insight into the results of operations and enhance the comparability of those results to results in prior periods because they assist shareholder understanding of the effects of certain charges and benefits on the quarter’s results.

Cash, cash equivalents, restricted cash and short-term investments as of September 30, 2006 were $807.6 million, an increase of $136.6 million or 20.3 percent from the second quarter of 2006 ending balance of $671.1 million.

“We are pleased with our continued progress to improve our operational and financial results in the third quarter,” said Richard S. Hill, chairman of the board and CEO. “Our reported Net Profit after Tax in the third quarter has exceeded our target model of 15%, resulting from the initiatives we have taken to strengthen our product portfolio and improve our financial operating model.”

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the statements regarding (i) our continued progress to improve our operational and financial results and (ii) our initiatives to strengthen our product portfolio and improve our financial operating model, as well as other matters discussed in this news release that are not purely historical data, are forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by such statements. These risks and uncertainties include, but are not limited to, inaccurate assessment of the performance metrics’ usefulness in understanding the Company’s ongoing operations; quarterly fluctuations in customer demand and the timing and volume of orders and shipments, whether due to economic and geopolitical conditions, competition, pricing pressures, or other factors; inaccurate projections regarding future capacity expansion in the semiconductor industry; unanticipated economic downturns; weakening demand for our products; failure of our products to effectively and timely respond to industry developments and customer demands, and other risks indicated in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2005, our Quarterly Reports on Form 10-Q for the quarters ended April 1, 2006 and July 1, 2006 and our Current Reports on Form 8-K and amendments to such reports. Forward-looking statements are made and based on information available to us on the date of this press release. We do not assume, and expressly disclaim, any obligation to update this information.

About Novellus:

Novellus Systems, Inc. (NASDAQ: NVLS) is a leading provider of advanced process equipment for the global semiconductor industry. The company’s products deliver value to customers by providing innovative technology backed by trusted productivity. An S&P 500 company, Novellus is headquartered in San Jose, Calif. with subsidiary offices across the globe. For more information please visit www.novellus.com

NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended												Nine Months Ended
(In thousands, except per share amounts)		September 30				July 1				October 1				September 30				October 1
(Unaudited)		2006				2006				2005				2006				2005
Net sales		$	444,032			$	410,073			$	338,878			$	1,220,011			$	1,008,203
Cost of sales			217,507				205,309				191,684				621,182				549,578
Gross profit			226,525				204,764				147,194				598,829				458,625
%			51.0	%			49.9	%			43.4	%			49.1	%			45.5	%
Operating expenses:
Selling, general and administrative			67,664				66,311				53,365				192,457				155,450
Research and development			60,645				63,298				61,263				187,726				186,823
Restructuring and other charges (benefits)			—				—				3,361				12,629				3,287
Legal settlement			—				—				—				3,250				—
Total operating expenses			128,309				129,609				117,989				396,062				345,560
%			28.9	%			31.6	%			34.8	%			32.5	%			34.3	%
Income from operations			98,216				75,155				29,205				202,767				113,065
%			22.1	%			18.3	%			8.6	%			16.6	%			11.2	%
Other income, net			9,574				7,611				2,405				23,264				9,548
Income before income taxes and cumulative effect of a change in accounting principle			107,790				82,766				31,610				226,031				122,613
Provision for income taxes			37,770				30,061				8,195				79,537				35,496
Income before cumulative effect of a change in accounting principle			70,020				52,705				23,415				146,494				87,117
Cumulative effect of a change in accounting principle, net of tax			—				—				—				948				—
Net income		$	70,020			$	52,705			$	23,415			$	147,442			$	87,117
Net income per share:
Basic
Income before cumulative effect of a change in accounting principle		$	0.57			$	0.42			$	0.17			$	1.16			$	0.63
Cumulative effect of a change in accounting principle, net of tax			—				—				—				0.01				—
Basic net income per share		$	0.57			$	0.42			$	0.17			$	1.17			$	0.63
Diluted
Income before cumulative effect of a change in accounting principle		$	0.57			$	0.42			$	0.17			$	1.15			$	0.62
Cumulative effect of a change in accounting principle, net of tax			—				—				—				0.01				—
Diluted net income per share		$	0.57			$	0.42			$	0.17			$	1.16			$	0.62
Shares used in basic per share calculation			122,150				125,124				137,848				126,125				138,602
Shares used in diluted per share calculation			123,357				125,910				138,895				127,177				139,646

NO VELLUS SYSTEMS, INC.
RECONCILIATION OF THE STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN CHARGES AND BENEFITS) ⁽¹⁾

		Three Months Ended												Nine Months Ended
(In thousands, except per share amounts)		September 30				July 1				October 1				September 30				October 1
(Unaudited)		2006				2006				2005				2006				2005
Net income excluding certain charges and benefits		$	70,020			$	52,705			$	28,686			$	156,260			$	92,336
Charges and benefits:
Cumulative effect of a change in accounting principle			—				—				—				1,542				—
Restructuring and other charges benefits			—				—				(3,361	)			(12,629	)			(3,287	)
Inventory write-down			—				—				(5,250	)			—				(5,250	)
Legal settlement			—				—				—				(3,250	)			—
Total charges and benefits			—				—				(8,611	)			(14,337	)			(8,537	)
Adjustments on provision for income taxes			—				—				3,340				5,519				3,318
Net income		$	70,020			$	52,705			$	23,415			$	147,442			$	87,117
Net income per diluted share excluding certain charges and benefits		$	0.57			$	0.42			$	0.21			$	1.23			$	0.66
Charges and benefits:
Cumulative effect of a change in accounting principle			—				—				—				0.01				—
Restructuring and other charges benefits			—				—				(0.02	)			(0.10	)			(0.02	)
Inventory write-down			—				—				(0.04	)			—				(0.04	)
Legal settlement			—				—				—				(0.03	)			—
Adjustments on provision for income taxes			—				—				0.02				0.05				0.02
Net income per diluted share		$	0.57			$	0.42			$	0.17			$	1.16			$	0.62

NOVELLUS SYSTEMS, INC.
SCHEDULE OF SHARE-BASED COMPENSATION

(In thousands)		Three Months Ended												Nine Months Ended
		September 30				July 1				October 1				September 30				October 1
(Unaudited)		2006				2006				2005				2006				2005
		(1)				( 3 )				(2)				(1)				( 2 )
Cost of sales		$	400			$	538			$	76			$	1,246			$	472
Selling, general and administrative			5,516				5,590				225				16,545				1,390
Research and development			2,741				2,664				136				8,466				837
Total share-based compensation expenses			8,657				8,792				437				26,257				2,699
Benefit from income taxes			3,333				3,385				168				10,109				1,039
Net share-based compensation expenses		$	5,324			$	5,407			$	269			$	16,148			$	1,660

NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
		2006				2005
(In thousands)		(Unaudited)				*
ASSETS
Current assets:
Cash and short-term investments		$	662,788			$	649,240
Accounts receivable, net			410,512				397,534
Inventories			198,425				193,787
Deferred taxes and other current assets			127,520				122,951
Total current assets			1,399,245				1,363,512
Property and equipment, net			369,839				423,749
Restricted cash			144,857				140,212
Goodwill			259,838				255,584
Intangible and other assets			112,326				107,192
Total assets		$	2,286,105			$	2,290,249
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	268,099			$	253,984
Deferred profit			74,506				68,718
Income taxes payable			7,417				5,898
Current obligations under lines of credit			24,681				15,744
Total current liabilities			374,703				344,344
Long-term debt			127,010				124,858
Other liabilities			43,469				41,764
Total liabilities			545,182				510,966
Shareholders’ equity:
Common stock			1,341,580				1,393,805
Retained earnings and accumulated other comprehensive income			399,343				385,478
Total shareholders’ equity			1,740,923				1,779,283
Total liabilities and shareholders’ equity		$	2,286,105			$	2,290,249