UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C.  20549
                               FORM 10-Q
                                
__X__     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
          SECURITIES EXCHANGE ACT OF 1934
          For the quarterly period ended September  30, 1998

                               OR
                                
_____     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
          THE EXCHANGE ACT OF 1934
          For the transition period from __________ to ____________

                    Commission file number 0-21321
                                
                              CYMER, INC.
          (Exact name of registrant as specified in its charter)
                                
          Nevada                                           33-0175463
(State or other jurisdiction of                         (I.R.S. Employer
     organization)                                     Identification No.)
16750 Via Del Campo Court, San Diego, CA                     92127
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code       (619) 451-7300

Former name, former address and former fiscal year, if changed
since last report.
  N/A

                                
Indicate  by check mark whether the registrant (1) has filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.

Yes   X   No

The  number  of  shares of Common Stock, with $0.001  par  value,
outstanding on November 5, 1998 was 27,124,024.


                           CYMER, INC.
                                
                            FORM 10-Q
                                
            For the Quarter Ended September 30, 1998
                                
                              INDEX
                                


                                                                 Page
PART I.   FINANCIAL INFORMATION                         
                                                     
ITEM 1.   Consolidated Financial Statements             

          Consolidated Balance Sheets as of                       3
          December 31, 1997 and September  30, 1998                  
                                                        
          Consolidated Statements of Income for                   4
          the three and nine months ended                   
          September 30, 1997 and 1998
                                                        
          Consolidated Statements of Cash Flows                   5
          for the nine months ended September 30,               
          1997 and 1998
                                                        
          Notes to Consolidated Financial                         7
          Statements
                                                        
ITEM 2.   Management's Discussion and Analysis                    11
          of Financial Condition and Results of Operations           
                                                        
PART II.  OTHER INFORMATION                                
                                                        
ITEM 1.   Legal Proceedings                                       27
                                                        
ITEM 2.   Changes in Securities                                   27
                                                        
ITEM 3.   Defaults upon Senior Securities                         27
                                                     
ITEM 4.   Submission of Matters to a Vote of                      27
          Security Holders
                                                        
ITEM 5.   Other Information                                       27
                                                     
ITEM 6.   Exhibits and Reports on Form 8-K                        27
                                                     
SIGNATURE PAGE                                                    28



                    PART I.  FINANCIAL INFORMATION
              Item1.  Consolidated Financial Statements
                                
                                
CYMER, INC.                                                             
CONSOLIDATED BALANCE SHEETS                                             
(In thousands, except share data)                                       
<TABLE>
<CAPTION>
                                                    December 31,   September 30,
                                                       1997            1998    
ASSETS                                                              (Unaudited)

<S>                                                   <C>             <C>
CURRENT ASSETS:                                                         
  Cash and cash equivalents                            $51,903         $65,030 
  Short-term investments                                80,387          14,571 
  Accounts receivable - net                             59,140          42,825 
  Foreign exchange contracts receivable                 31,267          18,182 
  Inventories                                           47,502          57,252 
  Deferred income taxes                                 12,690          12,652 
  Prepaid expenses and other                             2,847           3,864 
    Total current assets                               285,736         214,376 
                                                                        
PROPERTY - net                                          48,031          52,939 
LONG-TERM INVESTMENTS                                   42,667          86,405 
OTHER ASSETS                                             8,446           8,271 
TOTAL ASSETS                                          $384,880        $361,991 
                                                                        
LIABILITIES AND STOCKHOLDERS' EQUITY                                    
                                                                        
CURRENT LIABILITIES:                                                    
  Revolving loan                                                        $9,637 
  Accounts payable                                     $22,615          12,701 
  Accrued and other liabilities                         26,860          30,893 
  Foreign exchange contracts payable                    27,278          17,177 
  Income taxes payable                                   6,444           5,833 
    Total current liabilities                           83,197          76,241 
                                                                       
CONVERTIBLE SUBORDINATED NOTES                         172,500         172,500 
OTHER LIABILITIES                                        3,566           3,452 
MINORITY INTEREST                                        1,077           1,139 
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
                                                                        
STOCKHOLDERS' EQUITY:                                                   
  Preferred Stock - authorized 5,000,000                               
   shares; $.001 par value, no shares 
   issued or outstanding
  Common stock - authorized 50,000,000                                 
   shares; $.001 par value,
   issued and outstanding 28,724,000 and           
   27,182,000 shares                                        29              27
  Paid-in capital                                      109,367         110,526 
  Retained earnings                                     18,637          24,482 
  Accumulated other comprehensive loss                  (3,493)         (2,634)
  Treasury stock at cost (1,863,000 common                            
   shares)                                                             (23,742)
     Total stockholders' equity                        124,540         108,659
                                                                        
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $384,880        $361,991
                                
See notes to consolidated financial statements.
</TABLE>
        
                        
CYMER, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
                                                               
                                  For the three months     For the nine months
                                   ended September 30       ended September 30
                                   1997          1998       1997         1998
                                                               
<S>                               <C>          <C>          <C>        <C>
REVENUES:                                                             
  Product sales                   $56,062      $44,368      $142,538   $146,942
  Other                             1,406           80         2,033        207
    Total revenues                 57,468       44,448       144,571    147,149
                                                                
COSTS AND EXPENSES:                                             
  Cost of product sales            35,773       28,811        88,473     93,595
  Research and development          6,760        7,580        17,352     23,689
  Sales and marketing               3,306        3,014         8,321     10,894
  General and administrative        2,024        1,953         5,880      7,036
   Total costs and expenses        47,863       41,358       120,026    135,214
                                                                
OPERATING INCOME                    9,605        3,090        24,545     11,935
                                                                      
OTHER INCOME (EXPENSE):                                               
  Foreign currency exchange
   gain (loss) - net                 (311)         111          (396)      (641)
  Interest and other income         1,679        1,766         2,883      5,621
  Interest and other expense       (1,743)      (2,856)       (2,018)    (8,439)
                                                                      
   Total other income
    (expense) - net                  (375)        (979)          469     (3,459)
                                                                      
INCOME BEFORE PROVISION FOR INCOME                                          
TAXES AND MINORITY INTEREST         9,230        2,111        25,014      8,476
                                                                      
PROVISION FOR INCOME TAXES         (2,307)        (640)       (6,253)    (2,522)
MINORITY INTEREST                     124          (18)          124       (109)
                                                                      
NET INCOME                         $7,047       $1,453       $18,885     $5,845
                                                                      
EARNINGS PER SHARE:                                                  
Basic:                                                                
     Earnings per share             $0.25        $0.05         $0.67      $0.20
     Weighted average common                                    
      shares outstanding           28,469       28,280        28,111     28,591
Diluted:                                                              
     Earnings per share             $0.23        $0.05         $0.62      $0.19
     Weighted average common and                                      
      common equivalent shares                                     
      outstanding                  30,503       29,472        30,329     30,060
                                                                      
See notes to consolidated financial statements.
</TABLE>

CYMER, INC                                                            
CONSOLIDATED STATEMENTS OF CASH FLOWS                                 
(UNAUDITED)
(In thousands)                                                        
<TABLE>
<CAPTION>
                                                   For the nine months ended
                                                          September 30
                                                      1997            1998
<S>                                                <C>               <C>
OPERATING ACTIVITIES:                                                 
  Net income                                       $ 18,885          $ 5,845
   Adjustments to reconcile net income to net               
    cash provided by (used for) 
    operating activities:                       
     Depreciation and amortization                    4,866           10,966
     Minority interest                                 (124)             109   
     Deferred income taxes                           (3,159)   
     Change in assets and liabilities:                      
       Accounts receivable                          (37,190)          14,967
       Foreign exchange contracts receivable        (19,267)          11,868
       Inventories                                  (28,147)          (9,930)
       Prepaid expenses and other assets             (4,893)            (754)
       Accounts payable                              14,930           (9,214)
       Accrued and other liabilities                 21,929            3,124
       Foreign exchange contracts payable            19,324           (9,019)
       Income taxes payable                            (583)            (556)
       Other                                            255              
                                                                      
         Net cash provided by (used for)        
          operating activities                      (13,174)          17,406
                                                                      
INVESTING ACTIVITIES:                                                 
   Acquisition of property                          (30,587)         (15,677)
   Purchases of investments                         (78,532)         (70,843)
   Proceeds from sold or matured investments         26,179           92,872
                                                            
         Net cash provided by (used for) 
          investing activities                      (82,940)           6,352
                                                                      
FINANCING ACTIVITIES:                                                 
   Net borrowings (payments) under revolving
    loan and security agreements                     (1,750)           9,782
   Proceeds from issuance of convertible                    
    subordinated notes                              172,500
   Debt issue costs                                  (5,500)             593
   Proceeds from issuance of common stock             1,608            1,055
   Purchase of treasury stock                                        (23,742)
   Payments on capital lease obligations               (250)            (361)
                                                                      
      Net cash provided by (used for)
       financing activities                         166,608          (12,673)               
                                                                      
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND                           
  CASH EQUIVALENTS                                       84            2,042
                                                            
NET INCREASE IN CASH AND CASH EQUIVALENTS            70,578           13,127
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     55,405           51,903
                                                            
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $125,983          $65,030
                                                               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW                           
INFORMATION:
   Interest paid                                       $617          $ 6,750
   Income taxes paid                                 $7,855           $3,112
                                                                       
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING                           
  AND FINANCING ACTIVITIES:                                            
   Capital lease obligations incurred for           
    furniture and equipment                          $1,065              $82
                                                                      

See notes to consolidated financial statements.
</TABLE>

                           CYMER, INC.
                                
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         Three and Nine Months Ended September 30, 1998
                           (Unaudited)

1.   BASIS OF PRESENTATION

     The accompanying consolidated financial information has been
prepared  by  Cymer, Inc.,  its wholly-owned subsidiaries,  Cymer
Japan,  Inc.,  (Cymer Japan), Cymer Singapore,  Pte  Ltd.  (Cymer
Singapore),  and Cymer B.V. in the Netherlands (Cymer  B.V.)  and
its  majority-owned subsidiaries, Cymer Korea, Inc. (Cymer Korea)
and  Cymer  Southeast Asia, Inc. (Cymer SEA)  (collectively,  the
"Company"), without audit, in accordance with the instructions to
Form  10-Q  and  therefore does not include all  information  and
footnotes   necessary  for  a  fair  presentation  of   financial
position, results of operations and cash flows in accordance with
generally accepted accounting principles.

      Principles  of  Consolidation - The consolidated  financial
statements  include the accounts of Cymer, Inc., its wholly-owned
subsidiaries,  Cymer Japan, Cymer Singapore and Cymer  B.V.,  and
its  majority-owned  subsidiaries, Cymer  Korea  and  Cymer  SEA.
Cymer,  Inc. owns 70% of Cymer Korea and 75% of Cymer  SEA.   The
Company sells its excimer lasers in Japan primarily through Cymer
Japan.   Cymer Korea, Cymer SEA, Cymer Singapore and  Cymer  B.V.
are  field  service offices for customers in those regions.   All
significant   intercompany  balances  have  been  eliminated   in
consolidation.

       Accounting  Estimates  -  The  preparation  of   financial
statements  in  conformity  with  generally  accepted  accounting
principles  requires management to make estimates and assumptions
that  affect  the reported amounts of assets and liabilities  and
disclosure  of contingent assets and liabilities at the  date  of
the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results may  differ
from those estimates.

      Statement of Financial Accounting Standards No.  132  -  In
February,  1998  the  Financial Accounting Standards  Board  (the
"FASB")   issued  Statement  of  Financial  Accounting  Standards
("SFAS")  No.  132,  "Employers' Disclosures about  Pensions  and
Other   Postretirement  Benefits,"  effective  for  fiscal  years
beginning  after  December  15,  1997.   SFAS  No.  132   revises
employers'  disclosures  about pension and  other  postretirement
benefit plans, but does not change the measurement or recognition
of  those  plans.  The Company adopted SFAS No. 132 for the  year
ended  December  31, 1998.  Management has determined  that  this
pronouncement  does not materially effect the  Company's  current
disclosures of its retirement plan.

      Unaudited  Interim  Financial Data  -  In  the  opinion  of
management,  the unaudited consolidated financial statements  for
the interim periods presented reflect all adjustments, consisting
of   only  normal  recurring  accruals,  necessary  for  a   fair
presentation of the financial position and results of  operations
as  of  and  for  such  periods  indicated.   These  consolidated
financial  statements  and  notes  thereto  should  be  read   in
conjunction with the consolidated financial statements and  notes
thereto  included  in the Company's Annual Report  on  Form  10-K
(including items incorporated by reference therein) for the  year
ended December 31, 1997 and the Quarterly Report on Form 10-Q for
the  fiscal  quarters ended March 31 and June 30, 1998.   Results
for  the  interim  periods presented herein are  not  necessarily
indicative of results which may be reported for any other interim
period or for the entire fiscal year.


2.   EARNINGS PER SHARE

     Earnings Per Share - In February 1997, the FASB issued  SFAS
No. 128, "Earnings Per Share," effective for financial statements
issued  after  December  15, 1997.  SFAS No.  128  requires  dual
presentation  of  "Basic"  and "Diluted"  EPS  by  entities  with
complex  capital  structures,  replacing  "Primary"  and   "Fully
Diluted"  EPS  under Accounting Principles Board ("APB")  Opinion
No.   15.    Basic  EPS  excludes  dilution  from  common   stock
equivalents  and  is  computed by dividing  income  available  to
common  stockholders  by the weighted-average  number  of  common
shares  outstanding  for the period.  Diluted  EPS  reflects  the
potential  dilution  from  common stock equivalents,  similar  to
fully  diluted EPS, but uses only the average stock price  during
the  period as part of the computation.  The Company adopted  the
new method of reporting EPS for the year ended December 31, 1997.
Reconciliation of the basic and diluted EPS is as follows:
<TABLE>
<CAPTION>
                               Three months ended          Nine months ended
                                  September 30               September 30
                                1997        1998            1997       1998
                                 (In thousands, except per share amounts)
                                                      
                                                      
<S>                           <C>          <C>            <C>         <C>
Net income                    $7,047       $1,453         $18,885     $5,845
                                                           
Basic earnings per share       $0.25        $0.05           $0.67      $0.20
Basic weighted average                                     
common shares outstanding     28,469       28,280          28,111     28,591
                                                           
Effect of dilutive 
 securities:
  Warrants                       124          114             122        117
  Options                      1,910        1,078           2,096      1,352
Diluted weighted average                                   
common and common equivalent
shares outstanding            30,503       29,472          30,329     30,060 
Diluted earnings per share     $0.23        $0.05           $0.62      $0.19
</TABLE>
     
3.   BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
                                              December 31,      September 30,
                                                 1997                1998
                                                      (in thousands)
<S>                                             <C>                 <C>
INVENTORIES:                                               
   Raw Materials                                $24,365             $22,944
   Work-in-progress                              18,394              16,779
   Finished goods                                 4,743              17,529
Total                                           $47,502             $57,252
                                                           
ACCRUED AND OTHER LIABILITIES:                             
   Warranty and installation reserves           $15,730             $18,800
   Payroll and payroll related                    2,735               3,133
   Interest                                       3,920               5,244
   Other                                          4,475               3,716
Total                                           $26,860             $30,893
</TABLE>

4.   STOCKHOLDERS' EQUITY

     Treasury Stock - On January 28, 1998, the Company's Board of
Directors  authorized  the  Company to  repurchase  up  to  $50.0
million  of the Company's common stock from time to time  on  the
open  market  or  in  privately negotiated transactions.   As  of
September 30, 1998, the Company had repurchased 1,863,000  shares
at  a  cost of $23.7 million.  Subsequent to September 30,  1998,
the  Company has purchased an additional 137,000 shares, bringing
the  total shares repurchased to date of 2.0 million shares at  a
cost of $24.9 million.


5.   REPORTING COMPREHENSIVE INCOME

  Effective  January 1, 1998, the Company adopted SFAS  No.  130,
"Reporting   Comprehensive  Income."   SFAS  No.   130   requires
reporting and displaying comprehensive income and its components,
which,  for  the  Company, include foreign  currency  translation
adjustments and unrealized holding gains and losses on  available
for  sale  securities that are currently being presented  by  the
Company as a component of stockholders' equity.  The adoption  of
SFAS No. 130 had no impact on the Company's results of operations
or  financial  position.  In accordance with SFAS  No.  130,  the
accumulated  balance  of  other comprehensive  income  (loss)  is
disclosed as a separate component of stockholders' equity.  Prior
year  financial statements have been reclassified to  conform  to
the requirements of SFAS No. 130.
  
  Comprehensive   income   consisted   of   the   following   (in
thousands):
<TABLE>
<CAPTION>
                                    Three months ended       Nine months ended
                                       September 30,           September 30,
                                     1997        1998         1997       1998
                                                           
<S>                                <C>         <C>         <C>         <C>
Net income                         $7,047      $1,453      $18,885     $5,845
Other comprehensive income                                 
(loss), net of tax:                                             
  Foreign currency 
   translation adjustments            (83)       (252)        (285)       471
  Total unrealized holding                                
   gains on available
   for sale investments                 8         104            5        131
Other comprehensive income                                 
  (loss), net of tax:                 (75)       (148)        (280)       602
Comprehensive income               $6,972      $1,305      $18,605     $6,447
</TABLE>

6.   CLASS ACTION LAWSUITS

  The  Company has been named as a defendant in several  putative
shareholder  class action lawsuits which were filed in  September
and  October,  1998 in the U.S. District Court for  the  Southern
District  of California. Certain executive officers and directors
of  the  Company  are also named as defendants.   The  plaintiffs
purport  to  represent a class of all persons who  purchased  the
Company's  Common Stock between April 24, 1997 and September  26,
1997  (the  "Class Period").  The complaints allege claims  under
the  federal securities laws and California law.  The  plaintiffs
allege  that  the Company and the other defendants  made  various
material  misrepresentations  and  omissions  during  the   Class
Period.   The  complaints do not specify the  amount  of  damages
sought.   The Company believes that it has good defenses  to  the
claims  alleged in the lawsuits and will defend itself vigorously
against  these actions.  These cases are in the early stages  and
no  trial  date has been set.  The defense of these  actions  may
cause  some disruption in the Company's operations and  may  from
time to time distract management from day-to-day operations.  The
ultimate outcome of these actions cannot be presently determined.
Accordingly,  no  provision for any liability or  loss  that  may
result  from adjudication or settlement thereof has been made  in
the accompanying consolidated financial statements.

  
7.   CONTINGENCIES

      The  Company's  Japanese  manufacturing  partner  has  been
notified  that its manufacture of the Company's laser systems  in
Japan  may  infringe a Japanese patent held by  another  Japanese
company.   The  Company  has  agreed to  indemnify  its  Japanese
manufacturing  partner against patent infringement  claims  under
certain  circumstances.   The Company believes,  based  upon  the
advice  of  counsel, that the Company's products do not  infringe
any valid claim of the asserted patent.


   Item 2.  Management's Discussion and Analysis of Financial
                            Condition
                    and Results of Operations
                                

      AN  ASTERISK  ("*")  DENOTES  A  FORWARD-LOOKING  STATEMENT
REFLECTING   CURRENT   EXPECTATIONS  THAT   INVOLVE   RISKS   AND
UNCERTAINTIES.  ACTUAL RESULTS MAY DIFFER FROM THOSE DISCUSSED IN
SUCH  FORWARD-LOOKING STATEMENTS, AND STOCKHOLDERS OF CYMER, INC.
(THE   "COMPANY"  OR  "CYMER"  )  SHOULD  CAREFULLY  REVIEW   THE
CAUTIONARY STATEMENTS SET FORTH IN THIS FORM 10Q, INCLUDING "RISK
FACTORS" BEGINNING ON PAGE 18 HEREOF.  THE COMPANY MAY FROM  TIME
TO   TIME   MAKE  ADDITIONAL  WRITTEN  AND  ORAL  FORWARD-LOOKING
STATEMENTS,  INCLUDING  STATEMENTS  CONTAINED  IN  THE  COMPANY'S
FILINGS  WITH THE SECURITIES AND EXCHANGE COMMISSION AND  IN  ITS
REPORTS  TO  STOCKHOLDERS.  THE COMPANY  DOES  NOT  UNDERTAKE  TO
UPDATE  ANY FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM  TIME
TO TIME BY OR ON BEHALF OF THE COMPANY.

Results of Operations

  The  following table sets forth certain items in the  Company's
statements  of income as a percentage of total revenues  for  the
periods indicated:
<TABLE>
<CAPTION>
                                Three months ended        Nine months ended
                                  September 30,             September 30,
                                 1997        1998          1997       1998
<S>                            <C>         <C>           <C>         <C>
Revenues:                                                  
   Product sales                97.6%       99.8%         98.6%       99.9%
   Other                         2.4         0.2           1.4          .1
      Total revenues           100.0%      100.0%        100.0%      100.0%
                                                     
Cost and expenses:                                   
   Cost of product sales        62.2        64.8          61.2        63.6
   Research and development     11.8        17.1          12.0        16.1
   Sales and marketing           5.8         6.8           5.7         7.4
   General and administrative    3.5         4.4           4.1         4.8
      Total costs               83.3        93.1          83.0        91.9
                                                     
Operating income                16.7         6.9          17.0         8.1
Other income (expense) - net    (0.6)       (2.2)           .3        (2.3)
                                                     
Income before provision                              
for income taxes and                        
minority interest               16.1         4.7          17.3         5.8
                                                     
Provision for income taxes      (4.0)       (1.4)         (4.3)       (1.7)
Minority interest                 .2                        .1        (0.1)
                                                     
Net income                      12.3%        3.3%         13.1%        4.0%
                                                     
Gross margin on product                              
sales                           36.2%       35.1%         37.9%       36.3%
</TABLE>


Three Months Ended September 30, 1997 and 1998

     Revenues.   The Company's total revenues consist of  product
sales,  which include sales of laser systems and spare parts  and
service and training, and other revenues, which primarily include
revenues   from  funded  development  activities  performed   for
customers  and  for  SEMATECH.  Revenue  from  product  sales  is
generally  recognized  at the time of shipment,  unless  customer
agreements contain inspection or other conditions, in which  case
revenue  is recognized at the time such conditions are satisfied.
Funded development contracts are accounted for on the percentage-
of-completion method based on the relationship of costs  incurred
to  total  estimated costs, after giving effect to  estimates  of
costs to complete the development project.

     Product sales decreased 21% from $56.1 million in the  three
months  ended  September 30, 1997 to $44.4 million in  the  three
months  ended September 30, 1998, primarily due to a decrease  in
laser  system sales offset by higher average sales prices and  an
increase  in  spare  parts sales in 1998.  As  a  result  of  the
increase  in the Company's installed base of lasers, the  Company
believes  that  revenues  from  spares,  replacement  parts   and
services  will  be  an increasingly larger component  of  product
sales.*   Funded development revenues decreased from $1.4 million
for  the three months ended September 30, 1997 to $80,000 in  the
three   months  ended  September  30,  1998,  primarily  due   to
substantial   completion  of  various  laser  research   projects
sponsored  by  customers and SEMATECH. The Company  expects  that
funded  development  revenues will  continue  to  decrease  as  a
percentage  of total revenues as the Company focuses  on  product
sales.*
     
      The Company's sales are generated primarily by shipments to
customers  in  Japan,  the Netherlands, and  the  United  States.
Approximately  81%, 89% and 89% of the Company's sales  in  1996,
1997  and  the  first  nine  months of 1998,  respectively,  were
derived  from customers outside the United States.   The  Company
maintains a wholly-owned Japanese subsidiary which sells  to  the
Company's  Japanese customers.  Revenues from Japanese customers,
generated  primarily by this subsidiary, accounted for  61%,  65%
and 46% of revenues from 1996, 1997 and the first nine months  of
1998,  respectively.   The activities of the  Company's  Japanese
subsidiary are limited to sales and service of products purchased
by  the  subsidiary from the parent corporation.   All  costs  of
development  and production of the Company's products,  including
costs  of  shipment to Japan, are recorded on the  books  of  the
parent company.  The Company anticipates that international sales
will  continue to account for a significant portion  of  its  net
sales.*
     
     Cost  of  Product  Sales.   Cost of product  sales  includes
direct  material  and  labor, warranty  expenses,  license  fees,
manufacturing  and service overhead, and foreign  exchange  gains
and losses on foreign currency exchange contracts associated with
purchases  of  the Company's products by the Japanese  subsidiary
for resale under firm third-party sales commitments.
     
     Cost  of  product sales declined 19% from $35.8 million  for
the  three  months ended September 30, 1997 to $28.8 million  for
the  three  months ended September 30, 1998 due  to  lower  sales
volumes. The gross margin on these sales decreased from 36.2% for
the  three months ended September 30, 1997 to 35.1% for the  same
three month period in 1998.  This reduction was primarily due  to
lower  cost  absorption  of  fixed  production  and  field  costs
associated  with  the  decline in revenues, additional  inventory
costs,  additional  costs  of  the  Company's  new  manufacturing
facility,  which was completed in late 1997, the related  reduced
capacity  utilization of the manufacturing facility in the  first
nine  months  of  1998, as well as an increase in  field  support
overhead  costs as the Company continued to build  its  worldwide
field  support  infrastructure  in  order  to  provide  fast  and
responsive service to the semiconductor manufacturers.
     
     Net gains or losses from foreign currency exchange contracts
are  included  in  cost  of  product sales  in  the  consolidated
statements  of  operations as the related sales  are  recognized.
The  Company recognized a net loss on such contracts  of  $52,000
for  the three months ended September 30, 1997 as compared  to  a
net gain of $2.0 million for the three months ended September 30,
1998.
  
     Research and Development.  Research and development expenses
include  costs of internally-funded and customer-funded  projects
as  well  as continuing research support expenses which primarily
include  employee and material costs, depreciation  of  equipment
and  other  engineering related costs.  Research and  development
expenses  increased  12% from $6.8 million in  the  three  months
ended  September  30, 1997 to $7.6 million in  the  three  months
ended  September  30, 1998, due primarily to the development  and
introduction   of  the  Company's  new  ELS-5010  laser   system,
development efforts on the Company's next generation 6000 (formerly
known as the Orion Project) laser system,  product  support efforts 
associated with  the  Company's 5000 series lasers,  the hiring of 
additional technical personnel and the continued development of new  
laser  products.   As a percentage of total revenues, such expenses 
increased from  11.8% to  17.1%  in the respective periods as the 
Company continues to invest in the development of new  products
and product enhancements.*
  
     Sales  and Marketing.  Sales and marketing expenses  include
the  expenses of the sales, marketing and customer support staffs
and  other  marketing  expenses.  Sales  and  marketing  expenses
decreased  9%  from  $3.3  million for  the  three  months  ended
September  30,  1997  to $3.0 million in the three  months  ended
September  30,  1998,  due  primarily to  a  decline  in  travel,
advertising  and  in-house training.  As a  percentage  of  total
revenues,  such  expense  increased from  5.8%  to  6.8%  in  the
respective periods due to the new product introduction of the ELS-
5010  and  the continuing infrastructure development in order  to
support system integrators as well as chip manufacturers.
  
     General  and  Administrative.   General  and  administrative
expenses  consist  primarily  of  management  and  administrative
personnel   costs,   professional  services  and   administrative
operating  costs.   General and administrative expenses  remained
relatively  flat  at  $2.0  million in  the  three  months  ended
September  30, 1997 and 1998.  As a percentage of total revenues,
such  expenses increased from 3.5% to 4.4% from 1997 to 1998  due
to lower sales volumes.
  
     Other  Income  (Expense) - net.  Net other income  (expense)
consists  primarily  of interest income and expense  and  foreign
currency   exchange   gains  and  losses  associated   with   the
fluctuations in the value of the Japanese yen against the  United
States dollar. Net other expense increased from $375,000 for  the
three  months ended September 30, 1997 to $979,000 for the  three
months ended September 30, 1998, primarily due to the increase in
interest  income associated with the investment of  excess  cash,
offset  by  interest  expense  associated  with  the  convertible
subordinated notes issued in August 1997, and a foreign  currency
exchange  loss for the three month period in 1997 versus  a  gain
for  the  same  period in 1998.  Foreign currency  exchange  loss
totaled  $311,000,  interest  income  totaled  $1.7  million  and
interest expense totaled $1.7 million for the three months  ended
September  30,  1997, compared to an exchange gain  of  $111,000,
interest  income  of  $1.8 million and $2.9 million  in  interest
expense for the three months ended September 30, 1998.
  
     The   Company's  results  of  operations  are   subject   to
fluctuations in the value of the Japanese yen against the  United
States  dollar.  Sales by the Company to its Japanese  subsidiary
are  denominated  in  dollars, and sales  by  the  subsidiary  to
customers  in  Japan  are  denominated  in  yen.   The  Company's
Japanese subsidiary manages its exposure to such fluctuations  by
entering  into foreign currency exchange contracts to  hedge  its
purchase  commitments to the Company.  The gains or  losses  from
these  contracts are recorded as a component of cost  of  product
sales,  while the remaining foreign currency exposure is recorded
as  other  income  (expense)  in the consolidated  statements  of
operations.   Gains  and losses resulting from  foreign  currency
translation   are   accumulated  as  a  separate   component   of
consolidated stockholders' equity.
  
     Provision for Income Taxes.  The provision for income  taxes
of  $2.3  million for the three months ended September  30,  1997
reflects an annual effective tax rate of 25%.  The provision  for
income  taxes for the three months ended September  30,  1998  of
$640,000  reflects an annual effective tax rate  of  30%  as  the
Company  had no additional loss or valuation allowance carryovers
from previous periods to be applied in 1998.
     

Nine Months Ended September 30, 1997 and 1998

     Revenues.  Product sales increased 3% from $142.5 million in
the nine months ended September 30, 1997 to $146.9 million in the
nine  months ended September 30, 1998, primarily due to increased
sales  of  laser  system spare parts and a rise in  average  sale
price  of laser systems in 1998.  As a result of the increase  in
the Company's installed base of lasers, the Company believes that
revenues from spares, replacement parts and services will  be  an
increasingly   larger  component  of  product   sales.*    Funded
development  revenues decreased from $2.0 million  for  the  nine
months  ended September 30, 1997 to $207,000 in the  nine  months
ended September 30, 1998, primarily due to substantial completion
of  various  laser research projects sponsored by  customers  and
SEMATECH.  The  Company expects that funded development  revenues
will  continue to decrease as a percentage of total  revenues  as
the Company focuses on product sales.*
     
     Cost  of Product Sales.  Cost of product sales rose 6%  from
$88.5  million for the nine months ended September  30,  1997  to
$93.6 million for the nine months ended September 30, 1998 due to
the  increase  in  spares sales volume and  additional  inventory
reserves  of  approximately $4.4 million.  The  gross  margin  on
these  sales  decreased  from 37.9% for  the  nine  months  ended
September  30,  1997 to 36.3% for the same nine month  period  in
1998.  In addition to the inventory reserves, this reduction in gross
margin was primarily due to the additional  costs of the Company's 
new manufacturing facility, which was completed in  late 1997,  
the related reduced capacity utilization  of  the manufacturing 
facility in the first nine months of 1998, as  well as an increase 
in field support overhead costs as  the  Company continued to build 
its worldwide field support infrastructure in order to provide fast 
and responsive service to the semiconductor manufacturers.
     
     The   Company  recognized  net  gains  on  foreign  currency
exchange  contracts associated with the sale of laser systems  of
$3.3 million and $5.2 million for the nine months ended September
30, 1997 and 1998, respectively.
  
     Research   and   Development.    Research  and   development
expenses  increased  37% from $17.4 million in  the  nine  months
ended  September  30, 1997 to $23.7 million in  the  nine  months
ended  September  30, 1998, due primarily to the development  and
introduction   of  the  Company's  new  ELS-5010  laser   system,
development efforts on the Company's next generation 6000 (formerly 
known as the Orion Project) laser system,  product  support efforts 
associated with  the  Company's 5000 series lasers,  the hiring of 
additional technical personnel and the  continued  development of
new laser  products.   As a percentage of total revenues, such
expenses increased from  12.0% to  16.1% in the respective periods
as the Company continues to invest in the development  of  new  
products and product enhancements.*
  
     Sales   and   Marketing.    Sales  and  marketing   expenses
increased  31%  from  $8.3  million for  the  nine  months  ended
September  30,  1997 to $10.9 million in the  nine  months  ended
September  30, 1998 due primarily to increased product management
and sales support efforts and marketing activities as more lasers
were  placed  in  the field.  As a percentage of total  revenues,
such  expenses  increased from 5.7% to  7.4%  in  the  respective
periods  due to the new product introduction of the ELS-5010  and
the  continuing  infrastructure development in order  to  support
system integrators as well as chip manufacturers.
  
     General  and  Administrative.   General  and  administrative
expenses increased 20% from $5.9 million in the nine months ended
September  30,  1997 to $7.0 million for the  nine  months  ended
September   30,  1998,  due  to  an  increase  in   general   and
administrative   support   as   the   Company's   sales   volume,
manufacturing capacity, employee headcount, and overall level  of
business  activity increased.  As a percentage of total revenues,
such expenses increased from 4.1% in 1997 to 4.8% in 1998.
  
     Other  Income  (Expense) - net.  Net other income  decreased
from  $469,000 for the nine months ended September  30,  1997  to
$3.5  million  of  net other expense for the  nine  months  ended
September  30,  1998, primarily due to the increase  in  interest
income  associated with the investment of excess cash, offset  by
interest  expense  associated with the  convertible  subordinated
notes  issued  in  August  1997, and a  larger  foreign  currency
exchange  loss  for  the  first nine  months  of  1998.   Foreign
currency  exchange  losses  totaled  $396,000,  interest   income
totaled  $2.9  million and interest expense totaled $2.0  million
for  the  nine  months ended September 30, 1997, compared  to  an
exchange  loss of $641,000, interest income of $5.6  million  and
$8.4  million  in  interest expense for  the  nine  months  ended
September 30, 1998.
  
     Provision for Income Taxes.  The provision for income  taxes
of  $6.3  million  for the nine months ended September  30,  1997
reflects  a  25%  annual  effective tax rate  due  to  a  partial
reduction  of  a  deferred tax asset valuation allowance  carried
over  from  1996.  The provision for income taxes  for  the  nine
months  ended  September  30, 1998 of $2.5  million  reflects  an
annual  effective  tax  rate  of  30%,  as  the  Company  had  no
additional  loss or valuation allowance carryovers from  previous
periods to be applied in 1998.
     
     To  date, inflation has not had a significant effect on  the
Company or its results of operations.


Liquidity and Capital Resources

     Since  inception,  the  Company has  funded  its  operations
primarily through the private sale of equity securities  totaling
approximately  $27.1  million, borrowings  from  certain  of  its
investors  for bridge financings, bank borrowings, the  September
18,  1996 initial public offering, which resulted in net proceeds
to  the  Company  of  approximately  $29.7  million,  the  public
offering on December 12, 1996, which resulted in net proceeds  of
approximately  $50.0 million, and net proceeds of $167.0  million
in  a  convertible subordinated note offering on August 6,  1997.
As  of  September  30, 1998, the Company had approximately  $65.0
million in cash and cash equivalents, $14.6 million in short-term
investments,  $86.4  million  in  long-term  investments,  $138.1
million in working capital and $9.6 million in bank debt.
  
     Net  cash  used  for operating activities was  approximately
$13.2  million  for  the  nine months ended  September  30,  1997
compared  to  cash  provided  by operating  activities  of  $17.4
million  for  the  nine  months ended September  30,  1998.   The
increase  in  cash  from  operations for the  nine  months  ended
September 30, 1998 as compared to 1997 was primarily attributable
to  an  increase in depreciation, smaller increase  in  inventory
from  period to period, and a decrease in accounts receivable
during the period.
  
     Net  cash   used  for investing activities was approximately
$82.9  million for the nine months ended September  30,  1997  as
compared  to  net cash provided by investing activities  of  $6.4
million  for the nine months ended September 30, 1998.  The  cash
used for investing activities during 1997 primarily reflects  the
investment  activity  of  funds received  through  the  Company's
convertible  subordinated note offering in August, 1997  and  the
purchase  of  computer  equipment, test equipment,  research  and
development  tools,  manufacturing process machinery  and  tenant
improvements   to  the  manufacturing  facility   in   order   to
accommodate the business expansion for the period.  The net  cash
provided by investing activities during the first nine months  of
1998  primarily  reflects  continued  property  acquisitions   to
accommodate  the  business expansion and  focus,  offset  by  the
timing  of  short  and long term investments maturing  and  being
reinvested  during  the  period and  an  increase  in  long  term
investments.
  
     Net  cash provided by financing activities was approximately
$166.6  million for the nine months ended September 30, 1997,  as
compared  to  net  cash used for financing  activities  of  $12.7
million for the nine months ended September 30, 1998.  During the
nine  months ended September 30, 1997, the Company decreased it's
bank  borrowings  by $1.8 million, and received net  proceeds  of
approximately $167.0 million on the subordinated convertible note
offering and $1.6 million from the issuance of common stock.  For
the nine months ended September 30, 1998, the Company received  a
net  $1.1 million through the issuance of common stock, and  $9.8
million  in bank borrowings offset by  treasury stock repurchases
of $23.7 million.
  
     The Company requires substantial working capital to fund its
business,  particularly  to  finance  inventories  and   accounts
receivable  and  for capital expenditures.  The Company's  future
capital  requirements will depend on many factors, including  the
rate  of  the Company's manufacturing expansion, the  timing  and
extent  of  spending to support product development  efforts  and
expansion  of sales and marketing and field service and  support,
the  timing of introductions of new products and enhancements  to
existing   products,  and  market  acceptance  of  the  Company's
products.*   The Company believes that it has sufficient  working
capital  and  available  bank credit to  sustain  operations  and
provide for the future expansion of its business for at least the
next 12 months.*
     
Recent Accounting Pronouncements

      In  June  1997, the FASB issued SFAS No. 131,  "Disclosures
about  Segments of an Enterprise and Related Information."   SFAS
No.  131  establishes  standards for disclosure  about  operating
segments  in annual financial statements and selected information
in  interim financial reports.  It also establishes standards for
related disclosures about products and services, geographic areas
and  major  customers.  This statement supersedes  SFAS  No.  14,
"Financial Reporting for Segments of a Business Enterprise."  The
new  standard  becomes  effective for the Company  for  the  year
ending   December   31,  1998,  and  requires  that   comparative
information  from  earlier years be restated to  conform  to  the
requirements  of  this  standard.   Interim  reporting  of   this
standard  is  not  required. The Company  does  not  expect  this
pronouncement   to   materially  change  the  Company's   current
reporting and disclosures.*

      In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative  Instruments and Hedging Activities."   SFAS  No.  133
establishes  accounting  and reporting standards  for  derivative
instruments  and for hedging activities.  The new  standard  will
become effective for the Company for the year ending December 31,
2000.  Interim reporting of this standard will be required.   The
Company has not yet assessed the effect of this standard  on  the
Company's current reporting and disclosures.
  
Impact of Year 2000 Issue

           The Year 2000 Issue ("Y2K") is primarily the result of
computer systems using a two-digit format rather than four-digits
to  indicate the year.  Such computer systems will be  unable  to
differentiate  between the year 1900 and the year  2000,  causing
errors  and  system failures which may disrupt the operations  of
such systems.  The Company has been addressing this issue and has
been  focusing  its  efforts through a five  step  approach:  (1)
identification of the systems which may be vulnerable to Y2K problems;
(2)  assessment  on  the  impact of the systems  identified;  (3)
remediation   of   non-compliant  systems  and   components   and
determination  of  solutions  for  non-compliant  suppliers;  (4)
testing of systems and components following remediation; and  (5)
documentation.

       The  Company  is  approximately  95%  complete  with   the
identification of systems which may be vulnerable to the Y2K issue,
and  is  approximately 90% complete with the  assessment  of  the
impact   on  these  systems.   The  assessment  includes  factory
systems,  desktop  PC's,  fax  machines,  printers,  and   common
software  packages  in  use  at the Company.   In  addition,  all
suppliers  have been contacted for their Y2K plans  and  all  new
software   licenses  include  Y2K  statements.    Remediation   is
approximately  85%  complete  and  is  currently   targeted   for
completion by the end of November, 1998.*  The testing of systems
and  components is approximately 50% complete and is expected  to
be complete by the end of December, 1998.*

       The Company's ongoing plan is to continue the process of
working with suppliers and customers to verify their Y2K readiness
by June 30, 1999, as well as to obtain their then-current Y2K
related public statements of Y2K compliance.*  The Company plans
to evaluate any issues raised in this process in terms of any special
actions the Company should consider taking to reduce related risks,
including further follow up with suppliers and customers as the year
2000 approaches.*  These and other issues will be included in the
Company's Y2K ongoing action plan.*

       The  Company's  Y2K  contingency  plan  consists  of   the
following: (1) offsite backup of all critical data and  software;
(2)  multiple redundant suppliers for all critical data communication
and telecommunications services; (3) readiness planning  for  support
personnel;   (4)   outside  consultants  identified   for   rapid
availability;  and  (5)  ongoing  evaluation  and  planning   for
contingencies.*

      The  Company's current laser systems are not Y2K  compliant
per  SEMATECH  standards.   The laser  systems  currently require
manual  intervention to reset the internal clock to  account  for
leap  year  in the year 2000.  The Company's customers have  been
informed  of  the  non-compliance and  have  been  provided  with
instructions  for  the  manual correction  of  the  date  between
January  1  and  February 28, 2000.  Not resetting  the  internal
clock would have no material impact on the operation of the laser
system.*  The Company has demonstrated and is currently testing a
software fix to bring the lasers to full SEMATECH Y2K compliance.
These  tests  are  currently not complete and no  date  has  been
determined for full deployment of the software upgrade out to the
field,  but  the Company currently has no reason to  believe  the
software upgrade will not be implemented prior to the year 2000.*

      Based  on the assessment efforts to date, the Company  does
not  believe  that  the Y2K issue will have  a  material  adverse
effect  on  the  Company's consolidated financial  condition  and
results of operations.*  The cost of the Y2K process is estimated
at  approximately $250,000.*  However, the Company's beliefs  and
expectations are based on certain assumptions that ultimately may
prove  to  be inaccurate.  Aside from global infrastructure Y2K
requirements, the Company's worst case scenario may include: 
supplier and customer purchase, delivery and payment delays; server
and desktop computer failures; one or more critical software systems
failures, including embedded control systems; and failure of one or 
more internal and external communications systems such as telephones,
networks, voice mail and paging systems.*  Additional, potential 
sources of risk include (a) the inability of key suppliers and
customers to be Y2K compliant, (b) the disruption of global transportation
channels as a result of general  system  failures, and (c) an overall
failure of necessary  infrastructure  such  as  electricity  and
telecommunications.  If any of these were to occur, there could be
a material adverse effect on the Company's consolidated financial
condition and results of operations.*


  RISK FACTORS
  
      Likely  Fluctuations in Operating Results.   The  Company's
operating  results have in the past fluctuated and are likely  in
the future to fluctuate significantly depending upon a variety of
factors.  Such factors may include: the demand for semiconductors
in  general  and,  in particular, for leading edge  devices  with
smaller  circuit  geometries;  the rate  at  which  semiconductor
manufacturers  take delivery of photolithography tools  from  the
Company's  customers; cyclicality in the market for semiconductor
manufacturing equipment; the timing and size of orders  from  the
Company's small base of customers; the ability of the Company  to
manufacture, test and deliver laser systems in a timely and  cost
effective  manner; the mix of shipments between  new  lasers  and
lower-margin  replacement  parts; the ability  of  the  Company's
competitors  to  obtain orders from the Company's customers;  the
entry of new competitors into the market for DUV photolithography
illumination  sources; the ability of the Company to  manage  its
costs  as  it  supplies its products in higher volumes;  and  the
Company's  ability to manage effectively its exposure to  foreign
currency exchange rate fluctuations, principally with respect  to
the  Japanese  yen  (in  which sales by  the  Company's  Japanese
subsidiary   are  denominated).   In  addition,   the   Company's
operating results may be affected by reductions in customer laser
inventories as customers become more efficient at integrating the
Company's lasers into their photolithography tools.

      The  Company has historically derived a substantial portion
of  its  quarterly  and  annual  revenues  from  the  sale  of  a
relatively  small number of systems.   As a result,  the  precise
timing  of the recognition of revenue from an order for  a  small
number  of systems can have a significant impact on the Company's
total  revenues  and  operating results for a particular  period.
The Company's operating results for a particular period could  be
adversely  affected if orders for a small number of  systems  are
canceled or rescheduled by customers or cannot be filled in  time
to  recognize  revenue during that period due  to,  for  example,
unanticipated   manufacturing,  testing,  shipping   or   product
acceptance  delays. The Company's expense levels  are  based,  in
large  part, on the Company's expectations as to future  revenues
and  are,  therefore, relatively fixed in  the  short  term.   If
revenue  levels  fall  below expectations,  net  income  will  be
disproportionately and adversely affected.  The impact  of  these
and other factors on the Company's revenues and operating results
in  any  future  period cannot be forecast  with  any  degree  of
certainty.

      The  Company believes that semiconductor manufacturers  are
currently   developing  capability  for  production   and   pilot
production  of  0.25um  and  below devices.*   The  Company  also
believes   that   demand   for  its  excimer   lasers   for   DUV
photolithography tools is currently being driven by  the  efforts
to  develop  such capability.*  Once semiconductor  manufacturers
have  acquired  such capability, the Company believes  that  they
will  continue to invest in DUV photolithography tools to  expand
their capacity to manufacture these devices only to the degree to
which  their  sales forecasts and  manufacturing  process  yields
justify  such  investment.  Accordingly,  the  Company  currently
expects that demand for its DUV excimer lasers will be subject to
such demand and process development constraints.*

      Recently,  the  Company has decreased some aspects  of  its
operations in response to unfavorable industry conditions.  Those
reductions may not be sufficient to sustain profitable operations
should revenue declines experienced recently continue.

     Due to the foregoing factors, as well as other unanticipated
factors,  it is likely that in some future quarter the  Company's
operating results will be below the expectations of public market
analysts or investors.  In such event, the price of the Company's
Common Stock would be materially adversely affected.

      Dependence  on  Single Product Line.   The  Company's  only
product  line is excimer lasers, the primary market for which  is
for use in DUV photolithography equipment for manufacturing deep-
submicron   semiconductor  devices.   Demand  for  the  Company's
products  will  depend in part on the rate at which semiconductor
manufacturers adopt excimer lasers as the illumination source for
their  photolithography  tools.   Impediments  to  such  adoption
include  a  shortage  of engineers with experience  implementing,
utilizing  and  maintaining  DUV  photolithography  systems  that
incorporate  excimer laser illumination sources,  instability  of
photoresists  used  in DUV photolithography  and  a  shortage  of
specialized glass used in DUV optics.  There can be no  assurance
that such impediments can or will be overcome, and, in any event,
such  impediments  may  materially  reduce  the  demand  for  the
Company's  products.   In  addition,  to  the  extent  that  such
manufacturers  are  able to produce semiconductors  with  smaller
critical  feature sizes by extending the performance capabilities
of  mercury  lamp  illumination  sources  used  in  existing  DUV
photolithography  tools, the demand for  the  Company's  products
would  also  be  materially reduced.  Further, if  the  Company's
customers  experience  reduced demand  for  DUV  photolithography
tools,  or  if  the  Company's  competitors  are  successful   in
obtaining  significant orders from such customers, the  Company's
financial condition and results of operations would be materially
adversely affected.

     Dependence on Semiconductor Industry.  Substantially all  of
the  Company's  revenues are derived from  photolithography  tool
manufacturers  that  in  turn depend  on  the  demand  for  their
products   from   semiconductor   manufacturers.    Semiconductor
manufacturers   correspondingly  depend  on   the   demand   from
manufacturers of end-products or systems that use semiconductors.
The   semiconductor   industry  is  highly   cyclical   and   has
historically  experienced  periodic  and  significant  downturns,
which  often  have  had  a  severe  effect  on  the  demand   for
semiconductor manufacturing equipment, including photolithography
tools.   The Company believes that downturns in the semiconductor
manufacturing industry will continue to occur, and will result in
decreased demand for semiconductor manufacturing equipment.*   In
addition,  the  Company  believes  that  its  ability  to  reduce
expenses in a future downturn will be constrained by the need for
continual investment in research and development, and the need to
maintain   extensive   ongoing  customer  service   and   support
capability.*    Accordingly,  downturns  in   the   semiconductor
industry  could have a material adverse effect on  the  Company's
business, financial condition and results of operations.
     
      Dependence  on  Small Number of Customers.   The  Company's
primary   customer  base  is  composed  of  a  small  number   of
manufacturers of DUV photolithography tools.  Four  large  firms,
ASM  Lithography, Canon, Nikon and SVG Lithography (a  subsidiary
of  Silicon  Valley  Group, Inc.), dominate the  photolithography
tool  business and collectively accounted for approximately  90%,
94%,  and 95% of the Company's total revenues in 1996, 1997,  and
the  first  nine  months  of 1998, respectively.   Sales  to  ASM
Lithography,  Canon,  Nikon  and SVG  Lithography  accounted  for
approximately  40%,  21%,  28% and  6%,  respectively,  of  total
revenues for the first nine months of 1998 and 24%, 25%, 39%  and
6%, respectively, of total revenues in 1997.  The Company expects
that  sales  of its systems to these customers will  continue  to
account  for substantially all of its revenues in the foreseeable
future.*   None  of  the  Company's  customers  is  obligated  to
purchase a minimum number of the Company's products.  The loss of
any  significant business from any one of these  customers  or  a
significant reduction in orders from any one of these  customers,
including   reductions  caused  by  changes   in   a   customer's
competitive position, a decision to purchase illumination sources
from  other suppliers or economic conditions in the semiconductor
and  photolithography  tool industries,  would  have  a  material
adverse effect on the Company's business, financial condition and
results of operations.

     Need  to  Manage a Changing Business.  The Company  recently
has  dramatically  expanded  and  contracted  the  scope  of  its
operations  and the number of employees in most of its functional
areas.   For  example, the Company increased the  number  of  its
employees  from 136 at December 31, 1995 to 336 at  December  31,
1996,  to  809  at  December 31, 1997 and  decreased  to  709  at
September   30,  1998.   The  Company  installed  new  management
information  systems  and  has also  substantially  expanded  its
facilities  and  manufacturing  capacity.   For  example,   since
December  31,  1996  the  Company has occupied  three  additional
buildings  covering  approximately  187,000  square  feet.  In  a
cyclical  environment  of  dramatic growth  or  contraction,  the
Company  will be required to continue close management  of  these
areas,  to  improve  its  management, operational  and  financial
systems,  including  accounting  and  other  internal  management
systems,  its  quality control, delivery and  field  service  and
customer   support   capabilities.*   The   Company   must   also
effectively manage its inventory levels, including assessing  and
managing  excess  and  obsolete inventories associated  with  the
changing  environment and new product introductions. The  Company
will  be  required  to  attract, train,  retain  and  manage  key
technical  personnel  in order to support  the  Company's  growth
and/or contraction.*  The Company will also be required to manage
effectively   its   international   operations,   including   the
operations of its Japan, Korea, Taiwan, Singapore and Netherlands
subsidiaries, its field service and support presence in Asia  and
Europe  and its relationship with Seiko as a manufacturer of  its
photolithography  lasers.*  The Company must also  effect  timely
deliveries  of its products and maintain the product quality  and
reliability   required  by  its  customers.    Any   failure   to
effectively  manage  the Company's growth or  contraction   would
materially adversely affect the Company's financial condition and
results of operations.

     Risk  of  Excessive  Inventory Buildups by  Photolithography
Tool Manufacturers.  Substantially all of the Company's customers
are photolithography tool manufacturers, which in turn sell their
systems   to   semiconductor   manufacturers.    Current   market
conditions in the industry are causing the Company's customers to
reduce  their orders for new laser systems as they try to  manage
their  inventories  to  appropriate levels which  better  reflect
their expected sales forecasts.  The Company is working with  its
customers   to  better  understand  end  user  demand   for   DUV
photolithography tools.  However, there can be no assurance  that
the  Company  will  be  successful in this regard,  or  that  its
customers  will not build excessive laser inventories.  Excessive
customer laser inventories could result in a material decline  in
the Company's revenues and operating results in future periods as
such inventories are brought into balance.
     
     Competition.   The  Company currently has three  significant
competitors   in  the  market  for  excimer  laser  systems   for
photolithography applications, Lambda-Physik, Komatsu, Ltd ("Komatsu")
and Ushio. All of these companies are larger than the Company, have 
access to greater financial, technical and other resources than does 
the Company and  are  located in closer proximity to  the  Company's
customers  than  is the Company.  Although the  Company  believes
that these competitors are not yet supplying excimer  lasers  in
volume  for  photolithography applications, the Company  believes
that Lambda-Physik and Komatsu are aggressively seeking to  gain
larger positions in this market.  The Company  believes that  its 
customers  have each purchased one  or  more  products offered by 
these competitors and that its customers will continue to actively 
qualify these competitors' lasers in their search for a second 
source.*   If competitors successfully  qualify  their lasers for
use with chipmakers, the Company could  lose  market share and its 
growth could slow or even decline.  In the future, the Company will
likely  experience  competition  from  other technologies,  such  
as EUV,  X-ray,  electron  beam  and  ion projection   processes.   
To  remain  competitive,  the Company believes that  it  will be 
required to manufacture  and  deliver products to customers on a 
timely basis and without significant defects and that it will also 
be required to maintain a high level of investment in research and 
development and in sales  and marketing.*  There can be no assurance 
that the Company will have sufficient  resources to continue to make
the investments necessary to maintain its competitive position.  In 
addition, the market  for excimer lasers is still small and immature 
and there can be no assurance that larger competitors with substantially
greater  financial  resources, including other  manufacturers  of
industrial  lasers, will not attempt to enter the market.   There
can be no assurance that the Company will remain competitive.   A
failure  to  remain  competitive would have  a  material  adverse
effect on the Company's business, financial condition and results
of operations.

     Dependence on Key Suppliers.  Certain of the components  and
subassemblies  included in the Company's  products  are  obtained
from  a  single  supplier or a limited group  of  suppliers.   In
particular, there are no alternative sources for certain  of  the
components   and   subassemblies,   including   certain   optical
components  and  pre-ionizer tubes used in the Company's  lasers.
In   addition,  the  Company  is  increasingly  outsourcing   the
manufacture  of  various subassemblies.   Although  to  date  the
Company  has  been  able  to  obtain  adequate  supplies  of  the
components  and  subassemblies used  in  the  production  of  the
Company's laser systems in a timely manner from existing sources,
due   to   the   nature  of  the  Company's  product  development
requirements, it is often necessary for key suppliers to  rapidly
advance  their own technologies in order to support the Company's
new  product introduction schedule.  These suppliers may  or  may
not  be  able  to satisfy the Company's schedule requirements  in
providing new modules and subassemblies to the Company.   If  the
Company  is  unable  to  obtain  sufficient  quantities  of  such
materials, components or subassemblies, or if such items  do  not
meet  the  Company's quality standards, delays or  reductions  in
product  shipments could have a material adverse  effect  on  the
Company's   business,   financial  condition   and   results   of
operations.
     
     Limited Production Use of Excimer Lasers.  The Company first
shipped  its  lasers for photolithography applications  in  1988.
There  can be no assurance that the Company's products will  meet
production  specifications over time when subjected to  prolonged
and   intense   use   in  volume  production   in   semiconductor
manufacturing processes. If any semiconductor manufacturer is not
able  to successfully achieve or sustain volume production  using
the Company's lasers, the Company's reputation with semiconductor
manufacturers  or  the  limited number of  photolithography  tool
manufacturers  could  be damaged, which  would  have  a  material
adverse effect on the Company's business, financial condition and
results of operations.

      Need to Expand Field Service and Support Organization.  The
Company  believes  that the need to provide fast  and  responsive
service  to the semiconductor manufacturers using its  lasers  is
critical  and  that it will not be able to depend solely  on  its
direct   customers   to   provide  this   specialized   service.*
Therefore,  the  Company believes it is essential  to  establish,
through trained third-party sources or through its own personnel,
a  rapid response capability to service its lasers throughout the
world.   Accordingly,  the  Company is  currently  expanding  its
direct  support  infrastructure in  the  United  States,   Japan,
Europe,  Korea,  Singapore,  Taiwan  and  Southeast  Asia.   This
expansion entails recruiting and training qualified field service
personnel and building effective and highly trained organizations
that  can  provide service to customers in various  countries  in
their assigned regions.  The Company has historically experienced
difficulties  in  effectively training field  service  personnel.
There  can  be  no  assurance that the Company will  be  able  to
attract   and  train  qualified  personnel  to  establish   these
operations successfully or that the costs of such operations will
not  be  excessive.  A failure to implement this plan effectively
could  have a material adverse effect on the Company's  business,
financial condition and results of operations.

      Rapid  Technological  Change;  New  Product  Introductions.
Semiconductor manufacturing equipment and processes  are  subject
to  rapid  technological change.  The Company believes  that  its
future  success will depend in part upon its ability to  continue
to   enhance  its  excimer  laser  products  and  their   process
capabilities  and  to develop and manufacture new  products  with
improved  capabilities.*   In order to enhance  and  improve  its
products  and  develop  new products,  among  other  things,  the
Company must work closely with its customers, particularly in the
product  development  stage, to integrate  its  lasers  with  its
customers'  photolithography tools.  There can  be  no  assurance
that  future technologies, such as EUV, X-ray, electron beam  and
ion  projection processes, will not render the Company's  excimer
laser  products  obsolete or that the Company  will  be  able  to
develop  and  introduce  new  products  or  enhancements  to  its
existing  products and processes in a timely manner that  satisfy
customer needs or achieve market acceptance.  The failure  to  do
so  could  materially  adversely affect the  Company's  business,
financial condition and results of operations.

       Dependence  on  Key  Personnel.   The  Company  is  highly
dependent on the services of a number of key employees in various
areas, including engineering, research and development, sales and
marketing and manufacturing.  In particular, there are a  limited
number  of  experts  in  excimer laser technology  and  there  is
intense competition for such personnel, as well as for the highly-
skilled  hardware  and software engineers the  Company  requires.
The  Company  has  in  the  past experienced,  and  continues  to
experience, difficulty in hiring personnel, including experts  in
excimer laser technology.  The Company believes that, to a  large
extent,  its  future  success  will  depend  upon  the  continued
services of its engineering, research and development, sales  and
marketing  and  manufacturing and service personnel  and  on  its
ability to attract, train and retain highly skilled personnel  in
each  of  these  areas.*  The Company does  not  have  employment
agreements with most of its employees, and there is no  assurance
that  the Company will be able to retain its key employees.   The
failure  of the Company to hire, train and retain such  personnel
could  have a material adverse effect on the Company's  business,
financial condition and results of operations.

     Uncertainty  Regarding Patents and Protection of Proprietary
Technology.   The  Company  believes  that  the  success  of  its
business  depends more on such factors as the technical expertise
of  its  employees,  as  well  as  their  innovative  skills  and
marketing  and  customer  relations  ability,  than  on  patents,
copyrights,   trade  secrets  and  other  intellectual   property
rights.*  Nevertheless, the success of the Company may depend  in
part  on patents, and as of September 30, 1998, the Company owned
29  United  States patents covering certain aspects of technology
associated with excimer lasers which expire from January 2008  to
May  2017 and had applied for 49 additional patents in the United
States,  eight of which have been allowed.  One of  Cymer's  U.S.
patents  is currently being challenged in the U.S. Patent  Office
by attorneys representing Komatsu.  As of September 30, 1998, the
Company  owned  six  foreign patents and  had  filed  138  patent
applications in other countries.  There can be no assurance  that
the   Company's  pending  patent  applications  or   any   future
applications will be approved, that any patents will  provide  it
with  competitive advantages or will not be challenged  by  third
parties,  or that the patents of others will not have an  adverse
effect  on the Company's ability to do business. In this  regard,
due  to  cost constraints, the Company did not begin  filing  for
patents  in  Japan or other countries with respect to  inventions
covered  by  its  United States patents and  patent  applications
until  recently and has therefore lost the right to  seek  patent
protection  in  those countries for certain  of  its  inventions.
Additionally, because foreign patents may afford less  protection
under  foreign  law than is available under United States  patent
law,  there can be no assurance that any such patents  issued  to
the  Company  will  adequately protect the Company's  proprietary
information.  Furthermore, there can be no assurance that  others
will  not  independently develop similar products, duplicate  the
Company's  products  or, if patents are issued  to  the  Company,
design around the patents issued to the Company.

      Others  may  have filed and in the future may  file  patent
applications  that  are  similar or identical  to  those  of  the
Company.   To  determine the priority of inventions, the  Company
may  have to participate in interference proceedings declared  by
the  United States Patent and Trademark Office that could  result
in  substantial cost to the Company.*  No assurance can be  given
that  any  such  patent application will not have  priority  over
patent applications filed by the Company.

      The  Company  also  relies  upon trade  secret  protection,
employee  and  third-party  nondisclosure  agreements  and  other
intellectual   property  protection  methods   to   protect   its
confidential and proprietary information.  Despite these efforts,
there  can  be  no  assurance that others will not  independently
develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain access  to  the  Company's  trade
secrets  or  disclose  such technology or that  the  Company  can
meaningfully protect its trade secrets.

      The Company has in the past funded a significant portion of
its   research   and  development  expenses  from  research   and
development   revenues   received  from   photolithography   tool
manufacturers   and  from  SEMATECH,  a  semiconductor   industry
consortium,  in  connection with the design  and  development  of
specific products. The Company currently funds a small portion of
its development expenses through SEMATECH. Although the Company's
arrangements   with   photolithography  tool  manufacturers   and
SEMATECH  seek  to  clarify  the ownership  of  the  intellectual
property arising from research and development services performed
by  the Company, there can be no assurance that disputes over the
ownership  or rights to use or market such intellectual  property
will  not  arise between the Company and such parties.  Any  such
dispute could result in restrictions on the Company's ability  to
market  its products and could have a material adverse effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

      The Company has in the past been, and may in the future be,
notified  that it may be infringing intellectual property  rights
possessed   by   third   parties.*    The   Company's    Japanese
manufacturing partner, Seiko Instruments, Inc. ("Seiko"), has been 
notified by  Komatsu, one of the Company's competitors, that certain  
aspects of the Company's lasers might infringe three patents  that
have been issued to Komatsu in Japan, and that Komatsu intends to
enforce its rights under the Komatsu Patents against Seiko if Seiko
engages   in  manufacturing  activities  for  the  Company.    In
connection  with  its  manufacturing agreement  with  Seiko,  the
Company  has agreed to indemnify Seiko against such claims  under
certain  circumstances.  The Company has engaged  in  discussions
with  Komatsu with respect to the Komatsu Patents, in the  course
of  which Komatsu has also identified to the Company a number  of
pending  applications and additional patents.  The  Company,   in
consultation   with  Japanese  patent  counsel,   has   initiated
oppositions to the Komatsu Patents and  the applications  in  the
Japanese Patent Office.  However, there can be no assurance  that
litigation will not ensue with respect to these claims, that  the
Company and Seiko would ultimately prevail in any such litigation
or  that  Komatsu  will  not  assert  infringement  claims  under
additional patents.

     Any patent litigation would at a minimum be costly and could
divert the efforts and attention of the Company's management  and
technical  personnel, which could have a material adverse  effect
on  the  Company's business, financial condition and  results  of
operations.   Furthermore, there can be no assurance  that  other
infringement  claims  by  third  parties  or  other  claims   for
indemnification  by  customers or  end  users  of  the  Company's
products  resulting from infringement claims will not be asserted
in the future or that such assertions, if proven to be true, will
not materially adversely affect the Company's business, financial
condition  and  results of operations.  If any  such  claims  are
asserted  against the Company, the Company may seek to  obtain  a
license  under  the third party's intellectual  property  rights.
There  can  be  no  assurance, however, that a  license  will  be
available  on  reasonable terms or at  all.   The  Company  could
decide,  in the alternative, to resort to litigation to challenge
such  claims  or to design around the patented technology.   Such
actions  could  be  costly  and  would  divert  the  efforts  and
attention  of  the Company's management and technical  personnel,
which  would materially adversely affect the Company's  business,
financial condition and results of operations.

     The Company has registered the trademark CYMER in the United
States  and  certain  other countries and is  seeking  additional
registrations  in  certain countries.  In  Japan,  the  Company's
application for registration was rejected on the grounds that  it
is  similar  to a trademark previously registered by  a  Japanese
company for a broad range of products.  The Company is seeking  a
partial  nullification of the other registration with respect  to
laser  devices and related components and does not  believe  that
the  holder  of  the other trademark is engaged in  any  business
similar to that of the Company.  For this reason, the Company  is
continuing to use the trademark CYMER in Japan and believes  that
it  will  ultimately be permitted to register such mark  for  use
with  its  products  and  that it is  not  infringing  the  other
company's trademark.*  There can be no assurance that the Company
will  ultimately succeed in its efforts to register its trademark
in  Japan  or  that  it will not be subjected to  an  action  for
trademark infringement, which could be costly to defend  and,  if
successful,  would require the Company to cease use of  the  mark
and, potentially, to pay damages.

      Risks Associated with Japan Manufacturing.  The Company has
qualified Seiko of Japan as a contract manufacturer of its 
photolithography lasers.  Seiko has been advised by Komatsu, a 
competitor  of  the Company,  that certain  aspects of the Company's 
lasers might infringe certain patents that have been issued to Komatsu
in Japan and that Komatsu intends to enforce its rights under such patents 
against Seiko if Seiko engages in manufacturing activities  for  the 
Company.  In the event that, notwithstanding its  manufacturing 
agreement  with  the  Company,  Seiko  should determine not to 
continue manufacturing the Company's  products until  resolution
of  the  matter with  Komatsu,  the  Company's ability  to  meet  
any  heavy demand for its  products  could  be materially  adversely
affected.  See  -  "Uncertainty  Regarding Patents and Protection 
of Proprietary Technology."

      Risks of International Sales and Operations.  Approximately
81%,  89% and 89% of the Company's revenues in 1996, 1997 and the
nine  months ended September 30, 1998, respectively, were derived
from  customers  located outside the United  States.   Because  a
significant  majority  of the Company's principal  customers  are
located  in  other  countries,  particularly  Asia,  the  Company
anticipates that international sales will continue to account for
a  significant portion of its revenues.*  In order to support its
overseas customers, the Company maintains subsidiaries in  Japan,
Korea,  Taiwan, Singapore and the Netherlands, is  expanding  its
field service and support operations worldwide, and will continue
to  work  with Seiko as a manufacturer of its products in Japan.*
There can be no assurance that the Company will be able to manage
these operations effectively or that the Company's investment  in
these  activities  will  enable it  to  compete  successfully  in
international markets or to meet the service and support needs of
its  customers.   Additionally,  a  significant  portion  of  the
Company's sales and operations could be subject to certain risks,
including  tariffs and other barriers, difficulties  in  staffing
and  managing foreign subsidiary and branch operations,  currency
exchange  risks  and exchange controls, potentially  adverse  tax
consequences  and  the  possibility  of  difficulty  in  accounts
receivable  collection.  Because many of the Company's  principal
customers,  as  well as many of the end-users  of  the  Company's
laser  systems, are located in Asia, the recent economic problems
and  currency fluctuations affecting that region could  intensify
the Company's international risk.  Further, while the Company has
experienced no difficulty to date in complying with United States
export controls, these rules could change in the future and  make
it  more  difficult or impossible for the Company to  export  its
products  to  various countries.  There can be no assurance  that
any  of these factors will not have a material adverse effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

       The  Company's  results  of  operations  are  subject   to
fluctuations  in the value of the Japanese yen against  the  U.S.
dollar  due  to  sales by the Company to its Japanese  subsidiary
being  dominated  in  dollars, and sales  by  the  subsidiary  to
customers  in  Japan  being  dominated  in  yen.   The  Company's
Japanese subsidiary manages its exposure to such fluctuations  by
entering  into foreign currency exchange contracts to  hedge  its
purchase  commitments.   Although  management  will  continue  to
monitor  the  Company's exposure to currency  fluctuations,  and,
when  appropriate, use financial hedging techniques  to  minimize
the  effect of these fluctuations, there can be no assurance that
exchange  rate  fluctuations will not  have  a  material  adverse
effect  on  the  Company's  results of  operations  or  financial
condition.  In the future, the Company could be required to  sell
its products in other currencies, which would make the management
of currency fluctuations more difficult and expose the Company to
greater risks in this regard.*

      The  Company's  products are subject  to  numerous  foreign
government  standards and regulations that are continually  being
amended.    Although  the  Company  endeavors  to  meet   foreign
technical  and  regulatory standards, there can be  no  assurance
that  the Company's products will continue to comply with foreign
government standards and regulations, or changes thereto, or that
it  will  be  cost  effective for the  Company  to  redesign  its
products  to  comply  with such standards and  regulations.   The
inability of the Company to design or redesign products to comply
with  foreign standards could have a material adverse  effect  on
the  Company's  business,  financial  condition  and  results  of
operations.

      Environmental  and Other Government Regulations.   Federal,
state  and  local  regulations impose  various  controls  on  the
storage, handling, discharge and disposal of substances  used  in
the Company's manufacturing process and on the facility leased by
the Company.  The Company believes that its activities conform to
present governmental regulations applicable to its operations and
its current facilities, including those related to environmental,
land  use,  public  utility utilization and  fire  code  matters.
There can be no assurance that such governmental regulations will
not  in  the  future  impose  the  need  for  additional  capital
equipment  or  other  process requirements upon  the  Company  or
restrict  the  Company's ability to expand its  operations.   The
adoption of such measures or any failure by the Company to comply
with  applicable  environmental and land use  regulations  or  to
restrict the discharge or hazardous substances could subject  the
Company  to  future  liability or could cause  its  manufacturing
operations to be curtailed or suspended.

      Risks  of  Product Liability Claims.  The Company  faces  a
significant risk of exposure to product liability claims  in  the
event that the use of its products results in personal injury  or
death,  and there can be no assurance that the Company  will  not
experience material product liability losses in the future.   The
Company maintains insurance against product liability claims, but
there can be no assurance that such coverage will continue to  be
available  on  terms  acceptable to  the  Company  or  that  such
coverage  will  be  adequate for liabilities  actually  incurred.
Also, in the event that any of the Company's products prove to be
defective, the Company may be required to recall or redesign such
products.   A  successful claim brought against  the  Company  in
excess  of available insurance coverage, or any claim or  product
recall that results in significant adverse publicity against  the
Company,  could have a material adverse effect on  the  Company's
business, financial condition and results of operations.

     Possible Price Volatility of Common Stock.  The market price
of  the Company's Common Stock has been, and may continue to  be,
extremely  volatile.   The market price of Common  Stock  may  be
significantly  affected by factors such as actual or  anticipated
fluctuations in the Company's operating results, announcements of
technological innovations, new products or new contracts  by  the
Company  or its competitors, developments with respect to patents
or  proprietary rights, conditions and trends in the laser device
and  other  technology industries, changes in financial estimates
by  securities  analysts, general market  conditions,  and  other
factors.   In addition, the stock market has experienced  extreme
price and volume fluctuations that have particularly affected the
market  price  for many high technology companies and  that  have
often  been  unrelated  to  the operating  performance  of  these
companies.   The market price of the Company's Common  Stock  has
fluctuated  substantially in recent periods, rising from  $4  3/4
(all  prices are adjusted to reflect the Company's 2-for-1  stock
split  effective as of August 21, 1997) at the Company's  initial
public  offering on September 18, 1996 to $48 3/4 on  August  22,
1997,  and declining to $5 7/8 on October 8, 1998.  In the  past,
following  periods  of  volatility  in  the  market  price  of  a
particular   company's   securities,  securities   class   action
litigation  has  often been brought against that  company.   Such
litigation  can  result in substantial costs and a  diversion  of
management's attention and resources.

     Legal Matters.  The Company has been named as a defendant in
several  putative  shareholder class action lawsuits  which  were
filed  in September and October, 1998 in the U.S. District  Court
for  the  Southern  District  of  California.  Certain  executive
officers  and  directors  of  the  Company  are  also  named   as
defendants.  The plaintiffs purport to represent a class  of  all
persons  who  purchased the Company's Common Stock between  April
24,  1997  and  September  26, 1997 (the  "Class  Period").   The
complaints  allege claims under the federal securities  laws  and
California law.  The plaintiffs allege that the Company  and  the
other  defendants  made  various material misrepresentations  and
omissions during the Class Period.  The complaints do not specify
the  amount of damages sought.  The Company believes that it  has
good  defenses  to  the claims alleged in the lawsuits  and  will
defend itself vigorously against these actions.  These cases  are
in  the early stages and no trial date has been set.  The defense
of  these  actions  may cause some disruption  in  the  Company's
operations and may from time to time distract management from day-
to-day  operations. The ultimate outcome of these actions  cannot
be  presently  determined.  Accordingly,  no  provision  for  any
liability or loss that may result from adjudication or settlement
thereof  has been made in the accompanying consolidated financial
statements.

     Anti-Takeover  Effect of Nevada Law and  Charter  and  Bylaw
Provisions; Availability of Preferred Stock for Issuance.  Nevada
law  and  the  Company's  Articles of  Incorporation  and  Bylaws
contain provisions that could discourage a proxy contest or  make
more  difficult  the acquisition of a substantial  block  of  the
Company's  Common Stock.  In addition, the Board of Directors  is
authorized  to  issue,  without  shareholder  approval,   up   to
5,000,000  shares of Preferred Stock with voting, conversion  and
other rights and preferences that may be superior to those of the
Common Stock and that could adversely affect the voting power  or
other  rights  of the holders of Common Stock.  The  issuance  of
Preferred Stock or of rights to purchase Preferred Stock could be
used to discourage an unsolicited acquisition proposal.

                   PART II.  OTHER INFORMATION
                                
ITEM 1.   Legal Proceedings

               The  Company  has  been named as  a  defendant  in
          several  putative  shareholder  class  action  lawsuits
          which were filed in September and October, 1998 in  the
          U.S.  District  Court  for  the  Southern  District  of
          California. Certain executive officers and directors of
          the   Company  are  also  named  as  defendants.    The
          plaintiffs purport to represent a class of all  persons
          who  purchased the Company's Common Stock between April
          24,  1997  and September 26, 1997 (the "Class Period").
          The   complaints  allege  claims  under   the   federal
          securities  laws  and California law.   The  plaintiffs
          allege  that the Company and the other defendants  made
          various   material  misrepresentations  and   omissions
          during the Class Period.  The complaints do not specify
          the  amount  of  damages sought.  The Company  believes
          that it has good defenses to the claims alleged in  the
          lawsuits  and  will  defend itself  vigorously  against
          these actions.  These cases are in the early stages and
          no  trial  date has been set.  The ultimate outcome  of
          these   actions   cannot   be   presently   determined.
          Accordingly,  no  provision for any liability  or  loss
          that may result from adjudication or settlement thereof
          has   been   made  in  the  accompanying   consolidated
          financial statements.

ITEM 2.   Changes in Securities

          None.

ITEM 3.   Defaults upon Senior Securities

          None.

ITEM 4.   Submission of Matters to a Vote of Security Holders

          None.

ITEM 5.   Other Information

          None.

ITEM 6.    Exhibits And Reports On Form 8-K
          
          (a)  Exhibits

                  Financial Data Schedules (submitted for SEC use
                   only)
     
          (b)  Reports on Forms 8-K.

               1.   Current Report on Form 8-K filed on September
                 18,  1998,  reporting the information set  forth
                 in  the Company's press releases dated September
                 4,  1998  regarding a shareholder  lawsuit,  and
                 September   11,  1998  regarding   a   workforce
                 reduction.

               

                           SIGNATURES
                                
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.



                                   CYMER, INC.
                                   (Registrant)


Date:  November 10, 1998                By:    /s/  WILLIAM A. ANGUS, III

                                            William A. Angus, III
                                            Sr. Vice President and
                                            Chief Financial Officer