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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 11-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO
FEE REQUIRED)
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
 For the transition period from  to
 Commission File Number 1-8514
 A.
    
    Full title of the plan and the address of the plan, if different from that
of the issuer named below:
 SMITH INTERNATIONAL, INC.
401(k) RETIREMENT PLAN
 B.
    
    Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
 Smith International, Inc.
411 North Sam Houston Parkway, Suite 600
Houston, Texas 77060




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Index to Financial Statements and Supplementary Information
 PageReport of Independent Registered Public Accounting Firm
    
    
    3Financial Statements:Statements of Net Assets Available for Benefits as of December 31, 2006 and 2005
    
    
    4Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2006
    
    
    5Notes to Financial Statements
    
    
    6Supplemental Schedule:Form 5500, Schedule H, Part IV, Line 4i  Schedule of Assets (Held at End of Year) December 31, 2006
    
    
    11Exhibit:23.1
 Consent of Independent Registered Public Accounting Firm
    
    
    14
  2




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3




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2006
    
    
    2005ASSETS:Investments, at fair value
    
    $
    342,108,935
    
    
    $
    286,155,478Receivables-Company contributions
    
    
    12,066,257
    
    
    
    8,348,775Participant contributions
    
    
    8,620
    
    
    
    4,236Total receivables
    
    
    12,074,877
    
    
    
    8,353,011NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE
    
    
    354,183,812
    
    
    
    294,508,489Adjustments from fair value to contract
value for fully benefit-responsive
investment contracts
    
    
    30,431
    
    
    
    25,337NET ASSETS AVAILABLE FOR BENEFITS
    
    $
    354,214,243
    
    
    $
    294,533,826
  4




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ADDITIONS:Income -Interest and dividend income
    
    $
    16,115,489Net appreciation in fair value of investments (Note 6)
    
    
    23,338,897Net investment gain
    
    
    39,454,386Contributions-Company, net of forfeitures
    
    
    21,933,251Participant
    
    
    16,999,947Rollover
    
    
    1,575,828Total contributions
    
    
    40,509,026Transfers from other plans, net
    
    
    514,883Total additions
    
    
    80,478,295DEDUCTIONS:Benefits paid to participants
    
    
    20,671,419Administrative expenses
    
    
    126,459Total deductions
    
    
    20,797,878Net increase
    
    
    59,680,417NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR
    
    
    294,533,826NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR
    
    $
    354,214,243
  5




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SUMMARY OF SIGNIFICANT PLAN PROVISIONS
  General and Eligibility
  Administration and Trustee
  Contributions
 1 2
 Vesting
   6




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Investment Options
  Administrative Expenses
  Plan Termination
  Loans
  Withdrawals and Forfeitures
   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Accounting
  7




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Recent Accounting Pronouncements
  Investment Valuation and Income Recognition
   Participant Account Valuation
   Use of Estimates
  8




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FEDERAL INCOME TAX STATUS
   RISKS AND UNCERTAINTIES
  2006
    
    2005Domestic Stock Funds
    
    
    33.5
    %
    
    
    35.2
    %Balanced Funds (Stocks and Bonds)
    
    
    23.2
    
    
    
    22.5Smith International, Inc. common stock
    
    
    17.0
    
    
    
    16.6Money Market Fund
    
    
    13.4
    
    
    
    13.5International Stock Funds
    
    
    4.8
    
    
    
    3.7Participant loans and other
    
    
    3.8
    
    
    
    4.2Bond Funds
    
    
    3.4
    
    
    
    3.6Stable Value Fund
    
    
    0.9
    
    
    
    0.7100.0
    %
    
    
    100.0
    %
 RELATED-PARTY TRANSACTIONS
  9




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INVESTMENTS
  2006
    
    2005Smith International, Inc. common stock
    
    $
    58,037,729
    
    
    $
    47,436,254Vanguard Wellington Fund
    
    
    53,539,277
    
    
    
    45,191,572Vanguard PRIMECAP Fund
    
    
    52,715,463
    
    
    
    48,967,191Vanguard Prime Money Market Fund
    
    
    45,850,170
    
    
    
    38,628,317Vanguard Windsor Fund
    
    
    28,485,988
    
    
    
    23,651,912Vanguard 500 Index Portfolio Fund
    
    
    28,379,138
    
    
    
    24,698,557
  2006Equity funds
    
    $
    9,668,723Smith International, Inc. common stock
    
    
    8,656,986Balanced funds
    
    
    5,013,188$
    23,338,897
 RECONCILATION OF FINANCIAL STATEMENTS TO FORM 5500
  Net assets available for benefits per financial statements, contract value
    
    $
    354,214,243Less: Adjustment from fair value to contract value for fully
benefit-responsive investment contracts
    
    
    (30,431
    )Net assets available for benefits per Form 5500, fair value
    
    $
    354,183,812
  Increase in net assets available for benefits per financial statements
    
    $
    59,680,417Less: Adjustment from contract value to fair value
    
    
    (30,431
    )Increase in net assets available for benefits per Form 5500
    
    $
    59,649,986
 10




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(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)Description of Investment, IncludingIdentity of Issue, Borrower,
    
    Maturity Date, Rate of Interest,
    
    
    
    CurrentLessor or Similar Party
    
    Collateral, Par or Maturity Value
    
    Cost
    
    Value*
    
    Smith International, Inc.
    
    Smith International, Inc. common stock
    
    **
    
    $
    58,037,729*
    
    Vanguard Group
    
    Vanguard Wellington Fund
    
    **
    
    
    53,539,277*
    
    Vanguard Group
    
    Vanguard PRIMECAP Fund
    
    **
    
    
    52,715,463*
    
    Vanguard Group
    
    Vanguard Prime Money Market Fund
    
    **
    
    
    45,850,170*
    
    Vanguard Group
    
    Vanguard Windsor Fund
    
    **
    
    
    28,485,988*
    
    Vanguard Group
    
    Vanguard 500 Index Portfolio Fund
    
    **
    
    
    28,379,138*
    
    Vanguard Group
    
    Vanguard International Growth Fund
    
    **
    
    
    16,398,043*
    
    The Plan
    
    Participant loans (highest and lowest
interest rates are 10.50% and 4.00%,
respectively)
    
    **
    
    
    13,031,060*
    
    Vanguard Group
    
    Vanguard Long-Term Investment Grade Fund
    
    **
    
    
    9,824,388*
    
    Vanguard Group
    
    Vanguard Target Retirement 2015 Fund
    
    **
    
    
    7,963,478*
    
    Vanguard Group
    
    Vanguard Target Retirement 2025 Fund
    
    **
    
    
    6,993,223*
    
    Vanguard Group
    
    Vanguard Target Retirement 2035 Fund
    
    **
    
    
    5,152,612*
    
    Vanguard Group
    
    Vanguard Retirement Savings Trust
    
    **
    
    
    3,162,400*
    
    Vanguard Group
    
    Vanguard Extended Market Index Fund
    
    **
    
    
    2,623,795*
    
    Vanguard Group
    
    Vanguard Target Retirement 2005 Fund
    
    **
    
    
    2,471,744*
    
    Vanguard Group
    
    Vanguard Target Retirement 2045 Fund
    
    **
    
    
    2,392,285*
    
    Vanguard Group
    
    Vanguard Explorer Fund
    
    **
    
    
    2,229,962*
    
    Vanguard Group
    
    Vanguard Total Bond Market Index Fund
    
    **
    
    
    1,120,366*
    
    Vanguard Group
    
    Vanguard Target Retirement Income Fund
    
    **
    
    
    465,021*
    
    Vanguard Group
    
    Vanguard Target Retirement 2020 Fund
    
    **
    
    
    418,979*
    
    Vanguard Group
    
    Vanguard Short-Term Treasury Fund
    
    **
    
    
    284,687*
    
    Vanguard Group
    
    Vanguard Long-Term Treasury Fund
    
    **
    
    
    186,643*
    
    Vanguard Group
    
    Vanguard Intermediate-Term Treasury Fund
    
    **
    
    
    138,984*
    
    Vanguard Group
    
    Vanguard Target Retirement 2030 Fund
    
    **
    
    
    122,753*
    
    Vanguard Group
    
    Vanguard Brokerage Option Fund
    
    **
    
    
    105,606*
    
    Vanguard Group
    
    Vanguard Target Retirement 2050 Fund
    
    **
    
    
    10,905*
    
    Vanguard Group
    
    Vanguard Target Retirement 2010 Fund
    
    **
    
    
    4,236Total investments
    
    
    
    $
    342,108,935
 
 *
    
    Party-in-interest.**
    
    Cost information is not required for participant-directed investments and, therefore, is not
included. 11




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SIGNATURES
  Date: June 28, 2007
    
    SMITH INTERNATIONAL, INC.401(k) RETIREMENT PLANBy:
    
    Administrative Committee
for
the Smith International, Inc.
401(k) Retirement PlanBy:
    
    /s/ Richard E. Chandler, jr.Richard E. Chandler, MemberBy:
    
    /s/ Malcolm W. AndersonMalcolm W. Anderson, Member
 12




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EXHIBIT INDEX
 ExhibitNumber
    
    Description23.1
    
    Consent of Independent Registered Public Accounting Firm
 13