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               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                               ----------------

                                   FORM 10-Q

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED OCTOBER 31, 1998          COMMISSION FILE NUMBER: 0-26968

                               ----------------

                              ETEC SYSTEMS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                NEVADA                               94-3094580
    (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER IDENTIFICATION NO.)
    INCORPORATION OR ORGANIZATION)

               26460 CORPORATE AVENUE, HAYWARD, CALIFORNIA 94545
             (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510)783-9210

  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

  21,161,945 shares of Common Stock were outstanding as of December 7, 1998.




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<PAGE>
Part 1.  Financial Information
Item 1.   Consolidated Financial Statements
                               ETEC SYSTEMS, INC.
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                     October 31,   July 31,
                                                     1998          1998
                                                     ------------  ------------
<S>                                                  <C>           <C>
ASSETS
Current assets:
Cash and cash equivalents..........................      $47,062       $63,600
Marketable securities..............................       37,210        36,689
Accounts receivable, less allowance for
 doubtful accounts of $1,276 and $1,226............       73,945        84,529
Inventory..........................................       87,784        86,512
Deferred tax assets................................       17,902        17,902
Other current assets...............................        8,485        11,322
                                                     ------------  ------------
 Total current assets..............................      272,388       300,554
Property, plant and equipment, net.................       49,607        48,970
Other assets.......................................        9,145         8,990
                                                     ------------  ------------
                                                        $331,140      $358,514
                                                     ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................      $23,230       $26,506
Accrued and other liabilities......................       47,506        60,804
Taxes payable......................................       16,051        18,132
                                                     ------------  ------------
 Total current liabilities.........................       86,787       105,442
Deferred gain on sale of asset.....................        2,605         2,649
Other liabilities..................................        4,059         3,754
                                                     ------------  ------------
 Total liabilities.................................       93,451       111,845
                                                     ------------  ------------
Commitments and contingencies

Stockholders' equity:
Preferred Stock, par value $0.01 per share; 
 10,000 shares authorized;
 none issued and outstanding.......................         --            --
Common Stock, par value $0.01 per share; 60,000,000
 shares authorized; 21,158,732 and 21,977,070
 issued and outstanding............................          212           220
Warrants...........................................          600           600
Additional paid-in capital.........................      181,689       201,327
Cumulative translation adjustments.................           17        (1,200)
Retained earnings..................................       55,171        45,722
                                                     ------------  ------------
 Total stockholders' equity........................      237,689       246,669
                                                     ------------  ------------
                                                        $331,140      $358,514
                                                     ============  ============
</TABLE>
    See the accompanying notes to these consolidated financial statements.
<PAGE>

                               ETEC SYSTEMS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                       October 31,
                                                  -------------------
                                                  1998      1997
                                                  --------- ---------
<S>                                               <C>       <C>
Revenue:
  Products.....................................    $68,829   $58,971
  Services.....................................     10,069     9,394
                                                  --------- ---------
                                                    78,898    68,365
                                                  --------- ---------
Cost of revenue:
  Products......................................    31,194    27,747
  Services......................................     8,007     7,084
                                                  --------- ---------
                                                    39,201    34,831
                                                  --------- ---------
Gross profit....................................    39,697    33,534
                                                  --------- ---------
Operating expenses:
  Research, development and
   engineering..................................    17,132    10,777
  Selling, general and
   administrative...............................     8,990     9,277
                                                  --------- ---------
                                                    26,122    20,054
                                                  --------- ---------
Income from operations..........................    13,575    13,480
Interest expense................................      (153)     (199)
Interest  income and other, net.................       894     1,025
                                                  --------- ---------
Income before income tax provision..............    14,316    14,306
Income tax provision............................     4,867     5,078
                                                  --------- ---------
Net income......................................    $9,449    $9,228
                                                  ========= =========

Net income per share - basic....................     $0.44     $0.42
                                                  ========= =========

Shares used in per-share calculation - basic.....    21,699    21,734
                                                  ========= =========

Net income per share - diluted...................    $0.43     $0.41
                                                  ========= =========

Shares used in per-share calculation - diluted ..   22,174    22,618
                                                  ========= =========
</TABLE>

    See the accompanying notes to these consolidated financial statements.
<PAGE>

                               ETEC SYSTEMS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               October 31,
                                                          ---------------------
                                                          1998       1997
                                                          ---------- ----------
<S>                                                       <C>        <C>
Cash flows from operating activities:
Net income...............................................    $9,449     $9,228
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization..........................     3,771      1,889
  Changes in assets and liabilities:
  Accounts receivable....................................    11,253    (15,483)
  Factoring of accounts receivable.......................        --      6,200
  Inventory..............................................      (505)    (2,142)
  Other assets...........................................     2,634     (1,489)
  Accounts payable.......................................    (3,276)    (3,868)
  Accrued and other liabilities..........................    (1,367)    17,098
                                                          ---------- ----------
    Net cash provided by operating activities..              21,959     11,433
                                                          ---------- ----------
Cash flows from investing activities:
  Purchases of marketable securities, net................      (521)    (6,610)
  Capital expenditures for property and equipment, net...    (4,360)    (4,265)
                                                          ---------- ----------
    Net cash used in investing activities................    (4,881)   (10,875)
                                                          ---------- ----------
Cash flows from financing activities:
  Repayment of debt and capital leases...................       (37)       (37)
  Financing from (repayment to) intermediary.............   (13,751)       114
  Issuance of notes receivable to stockholders...........        --        200
  Repurchase of Common Stock ............................   (19,823)        --
  Proceeds from issuance of Common Stock.................       143      1,334
                                                          ---------- ----------
    Net cash provided by (used in)financing activities...   (33,468)     1,611
                                                          ---------- ----------
Effect of exchange rate changes on cash..................      (148)      (278)
                                                          ---------- ----------
Net change in cash and cash equivalents..................   (16,538)     1,891
Cash and cash equivalents at the beginning
  of the period..........................................    63,600     55,975
                                                          ---------- ----------
Cash and cash equivalents at the end of the period.......   $47,062    $57,866
                                                          ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................      $191        $93
                                                          ========== ==========

Cash paid during the period for income taxes.............    $7,444     $3,371
                                                          ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Tax benefits from stock option transactions..............       $34     $1,101
                                                          ========== ==========
    See the accompanying notes to these consolidated financial statements.
<PAGE>


                               ETEC SYSTEMS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

In the opinion of the management of Etec  Systems, Inc. ("Etec" or the
"Company"), the  unaudited consolidated interim financial statements  included
herein have been prepared on the same  basis as the July 31, 1998 audited
consolidated  financial statements and include all adjustments,  consisting of
normal recurring adjustments,  necessary for a fair presentation of the interim
period results.

The results of operations for current interim  periods are not necessarily
indicative of results  to be expected for the current year or for any  other
period. 

These consolidated financial statements  should be read in conjunction
with the audited  consolidated financial statements and notes thereto  for the
fiscal year ended July 31, 1998 included in  the Company's Annual Report on
Form 10-K (File No.  0-26968).  The July 31, 1998 balance sheet included 
herein was derived from audited consolidated  financial statements, but does
not include all  disclosures required by generally accepted  accounting
principles.

For purposes of presentation, the Company has  indicated its interim
fiscal periods as ending  October 31, 1998 and October 31, 1997. 

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
disclosures of  contingent assets and liabilities at the date of  the financial
statements and the reported amounts  of revenues and expenses during the
reporting  periods.  Actual results could differ from those  estimates.

Net Income Per Share

The Company adopted Statement of Financial  Accounting Standards No. 128 (SFAS
128), "Earnings  Per Share," in the second quarter of fiscal 1998.  Under the
provisions of SFAS 128, primary earnings  per share have been replaced by basic
net income  per share, which does not include the dilutive  effect of stock
options in its calculation. In  addition, fully diluted earnings per share have
been replaced by diluted net income per share. All  prior period earnings per
share amounts have been  restated to reflect the requirements of SFAS 128. 
Basic net income per share has been computed using  the weighted average number
of common shares  outstanding during the period. Diluted net income  per share
has been computed using the weighted  average number of common shares and
equivalents  (representing the dilutive effect of stock options)  outstanding
during the period. Net income has not  been adjusted for any period presented
for purposes  of computing basic and diluted net income per  share.  

For purposes of computing diluted net income  per share, weighted average
potential common shares  do not include stock options with an exercise price 
that exceeds the average fair market value of the  Company's common stock for
the period. The number  of shares excluded from the computation for the 
respective quarters ended October 31, 1998 and 1997  were 1,944,375 and 134,670
shares at an average  market price of  $29.15 and $57.03, respectively. 

Recent Accounting Pronouncements

In June 1997, the Financial Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 131, "Disclosures about  Segments of an
Enterprise and Related Information"  (SFAS 131). SFAS 131 establishes standards
for  reporting information about operating segments in  annual and interim
financial statements and also  establishes standards for related disclosures
about  products and services, geographic areas and major  customers.  SFAS 131
is effective for fiscal years  beginning after December 15, 1997.  The Company
is  currently studying its provisions. 

In June 1998, the Financial Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 133, "Accounting for  Derivative
Instruments and Hedging Activities"  (SFAS 133). SFAS 133 establishes new
standards of  accounting and reporting for derivative instruments  and hedging
activities. SFAS 133 requires that all  derivatives be recognized at their fair
value in  the statement of financial position and the  corresponding gains or
losses be either reported in  the statement of operations or as a component of 
comprehensive income, depending on the type of  hedging relationship that
exists. The Company has  not yet determined the effect of adopting SFAS 133, 
which will be effective for the Company's fiscal  year 2000.

NOTE 2 - CASH EQUIVALENTS AND MARKETABLE SECURITIES

The Company considers all highly liquid debt  instruments having a maturity of
three months or  less on the date of purchase to be cash  equivalents. 

The Company has classified all investments as  available for sale. Investments
classified as  available for sale are recorded at fair value and  any temporary
difference between an investment's  cost and fair value is recorded as a
separate  component of stockholders' equity. At October 31,  1998, these
available for sale securities totaling  approximately $54.3 million were
included in cash  and cash equivalents or marketable securities.  The 
investment portfolio at October 31, 1998 is  comprised of money market funds,
corporate  debentures, and municipal obligations. Temporary  differences
between cost and fair value at October  31, 1998 and July 31, 1998 were not
material.

NOTE 3 - INVENTORY

</TABLE>
<TABLE>
<CAPTION>
                                                  October 31,   July 31,
                                                     1998         1998
                                                  -----------  -----------
                                                       (in thousands)
<S>                                               <C>          <C>
       Purchased parts............................   $27,154      $30,407
       Work-in-process............................    35,671       35,554
       Spares.....................................    24,959       20,551
                                                  -----------  -----------
                                                     $87,784      $86,512
                                                  ===========  ===========
</TABLE>


NOTE 4 - STOCKHOLDERS' EQUITY

In June 1998, the Board of Directors  authorized the repurchase of up to $30.0
million of  Common Stock. Shares may be repurchased at  prevailing market
prices from time to time. In the  first quarter of fiscal 1999, the Company 
repurchased 840,000 shares of Common Stock for  approximately $19.8 million. As
of October 31,  1998, the Company had repurchased a total of  1,005,000 shares
for approximately $25.4 million.

NOTE 5 - INCOME TAXES 

The Company recorded provisions for income  taxes for the three months ended
October 31, 1998  and 1997 of  $4.9 million and $5.1 million,  respectively.
The Company's provision for income  taxes for the three months ended October
31, 1998  reflects the utilization of research and  development tax credits and
tax benefits from the  use of a foreign sales corporation, partially  offset by
foreign earnings taxed at higher rates.  Management will continue to evaluate
the  recoverability of the deferred tax assets in future  periods.

NOTE 6 - COMPREHENSIVE INCOME

As of the first quarter of fiscal 1999, the  Company adopted Statement of
Financial Accounting  Standards No. 130 (SFAS 130), "Reporting  Comprehensive
Income," which establishes standards  for the reporting and display of
comprehensive  income and its components.  SFAS 130 requires that  unrealized
gains or losses on investments and  foreign currency translation adjustments be
included in other comprehensive income.  The  components of comprehensive
income, net of tax, are  as follows:

<TABLE>
<CAPTION>

                                                      Three Months Ended
                                                          October 31,
                                                  ------------------------
                                                  1998         1997
                                                  -----------  -----------
                                                       (in thousands)
<S>                                               <C>          <C>

       Net income.................................    $9,449       $9,228
       Change in cumulative translation
       adjustments................................     1,217         (399)
                                                  -----------  -----------
       Total comprehensive income.................   $10,666       $8,829
                                                  ===========  ===========
</TABLE>


NOTE 7 - SUBSEQUENT EVENT

In April 1997, the Company entered into an  amendment to its existing credit
agreement with  ABN-AMRO Bank, N.V. to expand its $20.0 million  revolving
credit line expiring May 31, 1998 to a  $50.0 million line of credit expiring
May 31, 1999.  In April 1998, the term of this credit line was  extended to
November 1999. In November 1998, the  term of this credit line was further
extended to  November 30, 2000.





<PAGE>















































                               ETEC SYSTEMS, INC.

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

A.      Results of Operations

Quarters Ended October 31, 1998 and October 31,  1997

Revenue. Total revenue increased 15% from $68.4  million in the first quarter
of fiscal 1998 to  $78.9 million in the first quarter of fiscal 1999.  Revenues
comprise primarily sales of the Company's  MEBES(R), CORE(R), and ALTA(R) mask
pattern generation  systems, accessories and upgrades, and the  provision of
technical support, maintenance and  other services on such products. Product
sales, as  a percentage of total revenue, increased from 86%  in the quarter
ended October 31, 1997 to 87% in the  quarter ended October 31, 1998, while
service  revenues decreased from 14% to 13% of total revenue  over the same
period. Service revenue has not  increased at the same rate as product revenue,
because average sales prices for the Company's  products have risen faster than
the prices that the  Company has been able to negotiate on service  contracts.
Moreover, revenue from service contracts  does not begin until after the
expiration of the  product warranty period, which is typically one  year. The
Company derives most of its revenues from  the sale of a small number of
systems and upgrades.  As such, any delay in the recognition of revenue  for a
single system or upgrade can have a material  adverse effect on the Company's
consolidated  results of operations in a particular period. 

Product revenue increased 17% to $68.8 million from  $59.0 million for the
quarters ended October 31,  1998 and 1997, respectively. This increase reflects
a change in mix towards new products, which have  higher selling prices
because of the significant  improvements they offer.  However, weak global 
demand for semiconductors has translated into  reduced demand for masks and for
the Company's  products, which will result in reduced revenue for  at least the
next quarter in comparison to the  second quarter of the prior fiscal year.  
Thereafter, the duration and impact of the reduced  demand is unclear, but the
Company expects to have  better insight by April 1999, when the Japanese 
semiconductor companies traditionally establish  their capital spending plans
for the following  twelve month period.

Service revenue increased 7% to $10.1 million from  $9.4 million for the
quarters ended October 31,  1998 and 1997, respectively, due primarily to an 
increase in the number of systems under service  contracts.

Gross Profit. Overall gross margin improved to 50%  for the first quarter of
fiscal 1999, compared to  49% for the first quarter of fiscal 1998. This 
reflects an increase in product gross margin,  partially offset by a decline in
service gross  margin. The Company's gross profit on product  revenue increased
21% to $37.6 million from $31.2  million for the quarters ended October 31,
1998 and  1997, respectively. The increase results from an  increase in product
revenue and the higher product  gross margin, which increased to 55% from 53%
for  the quarters ended October 31, 1998 and 1997,  respectively. The increase
in product gross margin  is primarily attributable to changes in product mix 
towards the Company's newer products, which  generally have higher gross
margins than older  products. This was partially offset by increases in 
inventory reserves resulting from a reduced demand  forecast and costs
associated with the production  ramp in the Interconnect Products Group. The 
Company anticipates that gross margin will decline  for at least the second
quarter of fiscal 1999.  Margins will be negatively impacted by lower  volumes
than previously expected. Thereafter,  margins will be affected by the extent
of recovery  of shipment volume as well as additional costs  associated with
new manufacturing facilities  starting in the fourth quarter of fiscal 1999. 
Margins could also be adversely affected by product  mix skewing towards older,
less expensive mask  pattern generation equipment or lower than  anticipated
margins in its new laser direct imaging  business (the Company's Interconnect
Products  Group), where the Company is still building its  base of experience.
Additional pressure on margins  could come from continued deterioration of
Asian  currencies relative to the dollar, which would  increase the effective
cost of the Company's  products to its customers in that region. 

The Company's gross profit on service revenue  declined 11% to $2.1 million
from $2.3 million for  the quarters ended October 31, 1998 and 1997, 
respectively. Gross margin on service revenue was  20% and 25% for the quarters
ended October 31, 1998  and 1997, respectively. The decreased gross profit  and
gross margin reflect higher costs due to  increased personnel required to
service the growing  installed base and to improve customer  satisfaction. 
Margins were also negatively  impacted by the amortization of the additional 
spares inventory required to improve the Company's  response to customer
service needs.   

Research Development and Engineering. The Company's research, development and
engineering  expenses continue to reflect its commitment to  higher levels of
product development effort. These  expenses, net of third-party funding under 
cooperative development agreements, increased to  $17.1 million, representing
22% of revenue, from  $10.8 million, representing 16% of revenue, for the 
quarters ended October 31, 1998 and 1997, respectively. The increase is
primarily due to  expenses incurred in the development of future  generation
ALTA and MEBES systems, together with  costs associated with preparing the
initial beta  versions of the Company's new DigiRite TM 2000 laser  direct
imaging system for shipment from the  Interconnect Products Group. Funding
received under  cooperative development contracts was $2.1 million  and $1.6
million for the quarters ended October 31,  1998 and 1997, respectively. The
Company intends to  continue its research and development effort for  the
remainder of fiscal 1999 at a similar rate.  However, research and development
expense for the  balance of fiscal 1999 could be higher than  currently
expected to the extent that the Company  is unable to meet milestones necessary
to secure  funding under its cooperative development  contracts.

Selling, General and Administrative. Selling,  general and administrative
expenses decreased 3% to  $9.0 million, representing 11% of revenue, from  $9.3
million, representing 14% of revenue, for the  quarters ended October 31, 1998
and 1997,  respectively. The decrease in selling, general and  administrative
expenses was primarily due to  reduced sales commissions payable on sales into 
Asia due to the expiration of some agreements  during fiscal 1998. For the
remainder of fiscal  1999, selling, general and administrative expenses  are
expected to increase due to a number of  factors, including higher distribution
overhead for  the direct laser imaging products and the costs of  implementing
improved management information  systems. 

Interest Expense. Interest expense for the quarters  ended October 31, 1998 and
1997 was $0.2 million in  each quarter. 

Interest Income and Other, Net. Interest and other  income was $0.9 million for
the quarter ended  October 31, 1998, compared with $1.0 million in the  quarter
ended October 31, 1997. The small decrease  is mainly due to lower average cash
balances  available for investment.

Income Tax Provision. The Company recorded  provisions for income taxes for the
quarters ended  October 31, 1998 and 1997 of $4.9 million and $5.1  million,
respectively.  The Company's effective tax  rate decreased from 35.5% in the
quarter ended  October 31, 1997 to 34% in the quarter ended  October 31, 1998,
primarily due to increased  research and development tax credits and increased 
benefits from the use of a foreign sales  corporation.

B. Liquidity and Capital Resources

In addition to its operational cash flows, in  fiscal 1998 the Company entered
into agreements  with its landlords under which they agreed to make 
investments of up to $121.0 million for the  construction of additional
manufacturing facilities  under operating lease arrangements. The Company has 
used $38.0 million of the $121.0 million total in  fiscal 1998 and the first
quarter of fiscal 1999.  In fiscal years 1996 and 1997, the Company raised 
approximately $108.0 million from sales of its  common stock in an initial
public offering, two  additional public offerings, and a private  placement. In
fiscal 1997, the Company also  received $5.0 million from the sale and
leaseback  of its headquarters campus.

The Company has spent approximately $4.4 million  for net capital expenditures
in the quarter ended  October 31,1998, primarily to purchase testing and 
process equipment. 

In October 1997, the Company purchased  approximately 4.2 acres of land in
Hayward,  California for $0.9 million. This site provides the  Company
flexibility for future expansion of its  Hayward-based operations. In addition,
in November  1997, the Company completed the purchase of  approximately 15.2
acres of land in Hillsboro,  Oregon for approximately $2.4 million.  The
Company  is having a new facility constructed on this site  to meet development
and manufacturing requirements  for its laser mask pattern generation products
and  to back up its electron-beam manufacturing  capabilities in Hayward,
California. The new  facilities in Hayward and Hillsboro are scheduled  to be
completed in the middle of calendar year  1999. The amortization of the cost of
these  facilities will increase the Company's  manufacturing costs, starting in
the fourth quarter  of fiscal 1999. There can be no assurance that  revenue
growth and maintenance of product price  levels will be adequate to completely
offset these  costs.

As of October 31, 1998, the Company had cash, cash  equivalents and marketable
securities of $84.3  million. The Company believes that existing cash  balances
(including cash equivalents and marketable  securities), together with other
sources of  liquidity, including cash flows from operating  activities and
amounts available under the existing  $50.0 million revolving line of credit
(all of  which was available at October 31, 1998), will  provide adequate cash
to fund its operations for at  least the next twelve months. The Company also 
believes that success in its industry requires  substantial capital to maintain
the flexibility to  take advantage of opportunities as they arise. As  such,
the Company may effect additional equity or  debt financings from time to time
in the future.

Cash Flows from Operations

Net cash provided by operations for the three  months ended October 31, 1998
and 1997 was $22.0  million and $11.4 million, respectively. 

Cash flows from operating activities in the three  months ended October 31,
1998 primarily reflected  net income of $9.4 million, depreciation and 
amortization of $3.8 million, and decreases in  accounts receivable of $11.3
million, offset by  decreases in accounts payable of $3.3 million. 

Cash flows from operating activities for the three  months ended October 31,
1997 primarily reflected  net income of $9.2 million; depreciation and 
amortization of $1.9 million; increases in accounts  receivable of $15.5
million, increases in inventory  of $2.1 million, decreases in accounts payable
of  $3.9 million, and increases in accrued and other  liabilities of $17.1
million (primarily due to  increases in advances from customers of $13.0 
million).

Fluctuations in accounts receivable and current  liabilities for the previously
mentioned periods  were caused primarily by the timing of system  orders, the
timing of revenue recognition,  variations in unit shipments and the timing of 
payments to vendors. The decrease in accounts  receivable in the three months
ended October 31,  1998 is due to an increased rate of collections  during the
quarter. However, in the remainder of  fiscal 1999 receivables could increase 
disproportionately to revenues due to slower than  normal collections from the
Company's customers.   The Company is actively managing its inventory  balances
to ensure they are appropriate to meet  current and forecast demand levels. 
However,  inventories for the balance of fiscal 1999 could be  adversely
affected by some further deterioration in  order rates, coupled with an
inability to cancel or  delay orders for raw materials.

Prior to the shipment of a system, the Company  generally receives payment
covering a portion of  the system sales price. Partial payments are  usually
received when the Company accepts an order  and at various points while a
system is being  installed and thereafter. Therefore, the amount of  customer
advances at each reporting period  fluctuates based on the number of systems
that are  on order, the timing of order acceptance, and the  status of each
system within the manufacturing  cycle. Advances from customers decreased to
$6.1  million at October 31, 1998 from $10.3 million at  July 31, 1998. 

Cash Flows from Investing Activities

Net cash used in investing activities for the three  months ended October 31,
1998 and 1997 was $4.9  million and $10.9 million, respectively. Cash flows 
used in investing activities in the three months  ended October 31, 1998
consisted of net purchases  of marketable securities of $0.5 million and net 
capital expenditures of $4.4 million. Cash flows  used in investing activities
for the three months  ended October 31, 1997 consisted of net purchases  of
marketable securities of $6.6 million and net  capital expenditures of $4.3
million.



Cash Flows from Financing Activities

Net cash used in financing activities for the three  months ended October 31,
1998 was $33.5 million.   Net cash provided by financing activities for the 
three months ended October 31, 1997 was $1.6  million. Cash flows used in
financing activities  for the three months ended October 31, 1998  primarily
reflected repayments of $13.8 million to  a third-party financing intermediary
and open  market purchases of the Company's stock which  totaled $19.8 million.
Cash flows from financing  activities for the three months ended October 31, 
1997 primarily reflected proceeds from issuance of  common stock of $1.3
million. 

Certain Factors that May Affect Future Results 

Statements in this report that are prefaced with  words such as "expects,"
"anticipates," "believes"  and similar words and other statements of similar 
sense, are forward-looking statements.  These  statements are based on the
Company's current  expectations and estimates as to prospective events  and
circumstances that may or may not be within the  Company's control and as to
which there can be no  firm assurances.  These forward-looking statements, 
like any other forward-looking statements, involve  risks and uncertainties
that could cause actual  results to differ materially from those projected or
anticipated.

In addition to other risks and uncertainties that  may be described elsewhere
in this document,  certain risks and uncertainties that could affect  the
Company's financial results include, but are  not limited to, the following:
significant  variations in quarterly or annual results due to  factors
affecting even a small number of systems,  such as a delay in completion of
manufacturing or  testing of a single system to a future fiscal  period;
reduced orders or backlog due to changes in  capital spending decisions of
customers or  potential customers; the timely development, market  acceptance
and successful production of new  products and enhancements in an environment
of  rapid technological change; damage to the Company's  manufacturing
facilities caused by an earthquake or  other natural disaster; the ability of
the Company  to successfully integrate acquired businesses and  their
technologies into its operations; and risks  associated with foreign
operations, such as foreign  exchange risk, general market conditions, import-
export controls and political risks.  (See  additional discussion contained in
"Management's  Discussion and Analysis of Financial Condition and  Results of
Operations-Other Factors Affecting  Company Results," set forth in Part II,
Item 7 of  the Company's Report on Form 10-K for the year  ended July 31, 1998,
which is incorporated  herein by reference.)

Year 2000 Readiness Disclosure

Computer programs and systems that make use of  dates represented by only two
digits (98 rather  than 1998) may not operate properly after the year  2000.
Two-digit fields can cause problems with  sorting, mathematical calculations
and comparisons  when working with years outside the range of 1900  through
1999. The problem also potentially extends  to any systems or devices that
include embedded  technology, such as microchips.

The Company has established a formal project with a  project office and project
team to address this  issue and achieve Year 2000 (Y2K) readiness. The  Company
has chosen the U.S. Government Accounting  Office (GAO) Program Management
Model, as modified,  to manage and measure its progress. The project  focuses
on four key readiness areas: 1) product  readiness, addressing product
functionality; 2)  supplier readiness, addressing the preparedness of  our
suppliers; 3) internal infrastructure  readiness, addressing mission-critical
internal  information technology (IT) and non-IT systems; and  4) customer
readiness, addressing customer  preparedness and the Company's customer
support.  For each readiness area, the Company is  systematically performing an
enterprise-wide risk  assessment, implementing the GAO Program Management 
Model as a project and developing contingency plans  to mitigate unknown risk.
The Company is also  communicating with its customers, suppliers,  employees,
and other third-party business partners  to reinforce awareness and to inform
them of its  progress toward Y2K readiness. The Company is doing  this through
a variety of media, including regular  updates to the Y2K section of the
corporate web site (www.Etec.com). The Awareness and Assessment phases of the 
project have been substantially completed and the  Renovation phase commenced
in May 1998. The Company  has engaged a third party to assist in its effort  to
ensure a comprehensive effort is made to address  the Y2K issue.

Product Readiness: A single test suite is used to  test all of the Company's
products. This provides a  complete assessment of potential Y2K impacts and 
precludes inefficient use of resources that would  result from the performance
of individual customer  test suites. Etec is performing its testing in 
accordance with SEMATECH Year 2000 Test Scenarios.  The Company has
communicated to its customers the  current status for each of its products, as
well as  a proposed remediation plan and schedule. 

Customer Readiness: The Company plans to commence  making Y2K compliant updates
to its customers'  systems through its standard Service Update Plan  process by
January 1999, with completion planned by  June 1999. A Monitoring phase of the
program is  planned as well, which provides for the contingency  of customers
experiencing issues with the  validation and implementation phases of the 
project.

Supplier Readiness: This aspect of the program is  focused on minimizing risk
associated with the  Company's suppliers in two areas: first, the  supplier's
capability to provide Y2K compliant  products and second, the supplier's
business  capability to continue to provide the required  products and
services. The Company is using the  SEMATECH Year 2000 Readiness Supplier
Questionnaire  as an aid in assessing risk. A supplier action list  and
contingency plans are being developed based on  this assessment. Supplier
issues that potentially  affect the Company's products are targeted to be 
resolved by December 1998.

Internal Infrastructure Readiness: The Company has  completed an assessment of
its IT and non-IT  applications and its business processes. Some  applications
and processes have already been made  Y2K compliant, while others are being
prioritized  and assigned resources based upon their importance  to the
Company's ability to conduct business. All  implementations are scheduled to be
completed no  later than July 1999.  

The Company estimates that the total Y2K costs will  range from $5 to $8
million, with the majority of  these costs to be incurred over the next five 
fiscal quarters. The Company is continuing its  assessment and is developing
alternatives that will  result in a further refinement of this estimate  over
time. There can be no assurance that actual  costs will not differ materially
from the current  estimate.

If computer systems used by the Company or its  suppliers, or the software
applications used in  systems manufactured and sold by the Company, fail  or
experience significant difficulties, the  Company's results of operations could
be materially  adversely affected.




Item 3. Quantitative and Qualitative Disclosures  About Market Risk       



The Company's market risk exposures as set forth in  Item 7A of its Annual
Report on Form 10-K for the  year ended July 31, 1998 have not changed 
significantly.


Part II - Other Information

Item 2.  Changes in Securities

On September 9, 1998, the Board of Directors  adopted a number of changes to
the Company's  Bylaws.  Such changes were recommended by counsel  and did not
require shareholder approval under the  terms of the Bylaws or under the Nevada
General  Corporation Law. A copy of the complete Bylaws, as  amended, is filed
with this Quarterly Report on  Form 10-Q as Exhibit 3.1.

The amendments included:  (i) the elimination of  the ability of shareholders
to act by written  consent in most cases;  (ii) the elimination of the  right
of holders of 10% or more of the outstanding  stock to call a shareholder
meeting;  (iii) the  addition of a requirement for advance notice of 
shareholder business to be brought before a meeting  and of persons proposed to
be nominated for  director by a shareholder from the floor at the  annual
shareholder meeting;  (iv) the expansion of  permissible methods of giving
notice of Board  meetings and shareholder meetings;  (v) the  elimination of
the ability of shareholders to  participate in meetings by conference
telephone;   (vi) amendment of the director removal provisions  so as to permit
the removal of directors by the  shareholders only with a two-thirds vote of
all  outstanding shares;  (vii) the deletion of some  antiquated provisions;
and (viii) additional  changes designed generally to conform the Company's 
Bylaws more closely to the Nevada General  Corporation Law, as currently in
effect.  For the  details of these changes, reference is made to  Exhibit 3.1
filed herewith.


Item 6.  Exhibits and Reports on Form 8-K

(a)     The following exhibits are filed herewith:

Exhibit 
No.                               Description

3.1   Amended and Restated By-Laws of the Registrant dated September
      9, 1998.

10.1  Amendment dated September 29, 1998 to Participation  Agreement 
      (Tranche A) by and between Etec Systems, Inc. and Lease Plan North
      America, Inc. and the Participants Named Herein and ABN Amro Bank,N.V.,
      as agent for the Participants dated December 5, 1997. 

10.2  Amendment dated September 29, 1998 to Credit Agreement among Registrant
      and the Lender named therein and ANB-AMRO Bank, N.V. as agent for
      Lenders, dated May 24, 1996.

27    Financial Data Schedule.

See Echibit Index on page 17.

(b)     Reports on Form 8-K.


None.











































                     ETEC SYSTEMS, INC.

SIGNATURE

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, on December 11, 1998.



                     ETEC SYSTEMS, INC.
                      (Registrant)


                    By  /s/  William D. Snyder                   


                             William D. Snyder
                             Vice President and Chief Financial Officer
                             (Principal Financial Officer and Principal
                              Accounting  Officer)




<PAGE>






























                               ETEC SYSTEMS, INC.

                               INDEX OF EXHIBITS

Exhibit 
No.                               Description

3.1   Amended and Restated By-Laws of the Registrant dated September
      9, 1998.

10.1  Amendment dated September 29, 1998 to Participation  Agreement 
      (Tranche A) by and between Etec Systems, Inc. and Lease Plan North
      America, Inc. and the Participants Named Herein and ABN Amro Bank,N.V.,
      as agent for the Participants dated December 5, 1997. 

10.2  Amendment dated September 29, 1998 to Credit Agreement among Registrant
      and the Lender named therein and ANB-AMRO Bank, N.V. as agent for
      Lenders, dated May 24, 1996.

27    Financial Data Schedule.