**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-Q**

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(Mark One)

**[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934**

**For the Quarter Ended October 31, 1999**

**OR**

**[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934**

**For the transition period from ________to _________**

**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 Incorporation or Organization) | (I.R.S. Employer Identification Number)

**26460 Corporate Avenue, Hayward, California    94545**(Address of Principal Executive Offices including Zip Code)

**(510)783-9210**(Registrant's Telephone Number, Including Area Code)







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 reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X]      NO [   ]

21,570,604 shares of Common Stock were outstanding as of December 1, 1999.







**ETEC SYSTEMS, INC.
                                    FORM 10-Q
                                TABLE OF CONTENTS**

**PART I.  FINANCIAL INFORMATION**

Item 1.  Consolidated Financial Statements:

> Consolidated Balance Sheets --
>              July 31, 1999 and October 31, 1999Consolidated Statements of Income -- Three
>              Months ended October 31, 1998 and 1999Consolidated Statements of Cash Flows --
>              Three Months ended October 31, 1998 and 1999Notes to Consolidated Financial Statements

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

> Results of OperationsLiquidity and Capital ResourcesCertain Factors that May Affect Future Results

Item 3.   Quantitative and Qualitative Disclosure about Market Risks

**PART II. OTHER INFORMATION**

Item 1:  Legal Proceedings

Item 2:  Changes in Securities and Use of Proceeds

> Not Applicable

Item 3:  Defaults Upon Senior Securities

> Not Applicable

Item 4:  Submission of Matters to a Vote of Security Holders

> Not Applicable

Item 5:  Other Information

> Not Applicable

Item 6:  Exhibits and Reports on Form 8-K

**SIGNATURES**

**Part 1.  Financial Information**

**Item 1.   Consolidated Financial Statements**

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**ETEC SYSTEMS, INC.****Consolidated Balance Sheets
               (in thousands, except share and per share amounts)
                                  (Unaudited)**

`July 31,    October 31,
                                                         1999          1999
                                                     ------------  ------------
ASSETS
Current assets:
Cash and cash equivalents..........................      $44,849       $51,673
Marketable securities..............................       14,075        11,531
Accounts receivable, less allowance for
 doubtful accounts of $2,279 and $1,192............       70,077        68,814
Inventory..........................................       94,390        94,371
Deferred tax assets................................       17,644        17,644
Other current assets...............................        9,224        14,304
                                                     ------------  ------------
 Total current assets..............................      250,259       258,337
Property, plant and equipment, net.................       50,532        52,992
Other assets.......................................        7,215         6,460
                                                     ------------  ------------
                                                        $308,006      $317,789
                                                     ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................      $19,736       $27,075
Accrued and other liabilities......................       34,176        38,035
Taxes payable......................................        8,192         7,091
                                                     ------------  ------------
 Total current liabilities.........................       62,104        72,201
Deferred gain on sale of asset.....................        2,472         2,428
Other liabilities..................................        4,774         4,226
                                                     ------------  ------------
 Total liabilities.................................       69,350        78,855
                                                     ------------  ------------
Commitments and contingencies

Stockholders' equity:
Preferred Stock, par value $0.01 per share;
 10,000,000 shares authorized; none outstanding....         --            --
Common Stock, par value $0.01 per share;
 60,000,000 shares authorized; 21,488,267 and
 21,555,584 issued and outstanding.................          215           216
Warrants...........................................          600           600
Additional paid-in capital.........................      189,501       191,311
Cumulative translation adjustments.................        1,592           767
Retained earnings .................................       46,748        46,040
                                                     ------------  ------------
 Total stockholders' equity........................      238,656       238,934
                                                     ------------  ------------
                                                        $308,006      $317,789
                                                     ============  ============`

**See the accompanying notes to these
               consolidated financial statements.**

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**ETEC SYSTEMS, INC.****Consolidated Statements of Income
               (in thousands, except per share amounts)
                                  (Unaudited)**

> Three Months Ended
>                                             October 31,
>                                         -------------------
>                                             1998      1999
>                                         --------- ---------
> Revenue:
>   Products...........................    $68,829   $43,305
>   Services...........................     10,069    13,422
>                                         --------- ---------
>                                           78,898    56,727
>                                         --------- ---------
> Cost of revenue:
>   Products...........................     31,194    22,312
>   Services...........................      8,007    11,818
>                                         --------- ---------
>                                           39,201    34,130
>                                         --------- ---------
> Gross profit.........................     39,697    22,597
>                                         --------- ---------
> Operating expenses:
>   Research, development and
>    engineering.......................     17,132    15,096
>   Selling, general and
>    administrative....................      8,990     8,904
> 
>                                         --------- ---------
>                                           26,122    24,000
>                                         --------- ---------
> Income/(loss) from operations........     13,575    (1,403)
> Interest expense.....................       (153)      (80)
> Interest income and other, net.......        894       426
>                                         --------- ---------
> Income/(loss) before income tax
>    provision (benefit)...............     14,316    (1,057)
> Income tax provision/(benefit).......      4,867      (349)
>                                         --------- ---------
> Net income/(loss)....................     $9,449     $(708)
>                                         ========= =========
> 
> Net income/(loss) per share - basic..      $0.44    $(0.03)
>                                         ========= =========
> 
> Shares used in per-share
>   calculation - basic................     21,699    21,525
>                                         ========= =========
> 
> Net income/(loss)
>  per share - diluted.................      $0.43    $(0.03)
>                                         ========= =========
> 
> Shares used in per-share
>   calculation - diluted..............     22,174    21,525
>                                         ========= =========

**See the accompanying notes to these
               consolidated financial statements.**

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**ETEC SYSTEMS, INC.****Consolidated Statements of Cash Flows
                               (in thousands)
                                  (Unaudited)**

`Three Months Ended
                                                               October 31,
                                                          ---------------------
                                                              1998       1999
                                                          ---------- ----------
Cash flows from operating activities:
Net income/(loss)........................................    $9,449      $(708)
Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization..........................     3,771      3,387
  Changes in assets and liabilities:
  Accounts receivable....................................    11,253      1,263
  Inventory..............................................      (505)        19
  Other assets...........................................     2,634     (4,369)
  Accounts payable.......................................    (3,276)     7,339
  Accrued and other liabilities..........................    (1,367)     6,897
                                                          ---------- ----------
    Net cash provided by operating activities............    21,959     13,828
                                                          ---------- ----------
Cash flows from investing activities:
  (Purchases)/sales of marketable securities, net........      (521)     2,544
  Capital expenditures for property and equipment, net...    (4,360)    (5,847)
                                                          ---------- ----------
    Net cash used in investing activities................    (4,881)    (3,303)
                                                          ---------- ----------
Cash flows from financing activities:
  Repayment of debt and capital leases...................       (37)        --
  Repayment to intermediary..............................   (13,751)    (5,721)
  Repurchase of Common Stock ............................   (19,823)        --
  Proceeds from issuance of Common Stock.................       143      1,811
                                                          ---------- ----------
    Net cash used in  financing activities...............   (33,468)    (3,910)
                                                          ---------- ----------

Effect of exchange rate changes on cash..................      (148)       209
                                                          ---------- ----------
Net change in cash and cash equivalents..................   (16,538)     6,824
Cash and cash equivalents at the beginning
  of the period..........................................    63,600     44,849
                                                          ---------- ----------
Cash and cash equivalents at the end of the period.......   $47,062    $51,673
                                                          ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................      $191        $81
                                                          ========== ==========

Cash paid during the period for income taxes.............    $7,444       $654
                                                          ========== ==========`

**See the accompanying notes to these
               consolidated financial statements.**

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**NOTE 1 - BASIS OF PRESENTATION**

In the opinion of Etec's management, the accompanying unaudited balance
sheets and related interim statements of operations and cash flows
include all adjustments (consisting only of normal recurring items)
necessary for their fair presentation in conformity with generally
accepted accounting principles.  Preparing financial statements requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses.  Examples include
provisions for inventory and bad debts.  Actual results may differ from
these estimates.  Interim results are not necessarily indicative of
results for a full year.  The information included in this Form 10-Q
should be read in conjunction with Management's Discussion and Analysis
and financial statements and notes thereto included in the Etec Systems,
Inc. 1999 Form 10-K.

The Company operates on a 52-week calendar.  For  clarity fiscal periods
are reported on a calendar month end.

Net Income Per Share

Basic net income/(loss) per share is computed on the basis of the
weighted average number of common shares outstanding during the period.
Diluted net income/(loss) per share is computed on the basis of the
weighted average number of common shares and equivalents (representing
the dilutive effect of stock options) outstanding during the period.  Net
income/(loss) has not been adjusted for any period presented for purposes
of computing basic and diluted net income/(loss) per share.  Due to the
net loss for the three months ended October 31, 1999, common stock
equivalents outstanding of 641,029 are considered anti-dilutive and
excluded from the calculation of net loss per share-diluted.

For purposes of computing diluted net income/(loss) 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 1999 were 1,944,375 and 1,014,673 shares at an average exercise price
of $29.15 and $46.35, respectively.

Recent Accounting Pronouncements

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 a
new model for accounting for derivatives and hedging activities.  It
supersedes and amends a number of existing accounting standards.  SFAS
133 requires that all derivatives be recognized in the balance sheet at
their fair market value, and the corresponding gains or losses be either
reported in the statement of operations or as a deferred item depending
on the type of hedge relationship that exists with respect to such
derivative.  SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of Effective Date of FASB Statement No.
133," is effective for all fiscal quarters and years beginning June 15,
2000.  The Company has not yet determined the effect of adopting SFAS
133, which will be effective for the Company's fiscal year 2001.

**NOTE 2 - CASH EQUIVALENTS AND MARKETABLE SECURITIES**

The Company considers all highly liquid debt instruments having a
maturity of three months or less 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, 1999, these available for sale securities totaling approximately
$20.1 million were included in cash and cash equivalents or marketable
securities.  The investment portfolio at October 31, 1999 is comprised of
money market funds, corporate debentures, and municipal obligations.
Temporary differences between cost and fair value at July 31, 1999 and
October 31, 1999 were not material.

**NOTE 3 - INVENTORY**

`July 31,     October 31,
                                                1999         1999
                                             -----------  -----------
                                                  (in thousands)

  Purchased parts....................           $21,208      $20,873
  Work-in-process....................            44,641       46,553
  Spares.............................            28,541       26,945
                                             -----------  -----------
                                                $94,390      $94,371
                                             ===========  ===========`

**NOTE 4 - INCOME TAXES**

The Company recorded a provision of $4.9 million and a benefit of $0.3
million for income taxes for the three months ended October 31, 1998 and
1999, respectively.  The Company's benefit for income taxes for the three
months ended October 31, 1999 reflects the tax benefit expected to be
realized during the year or recognized as a deferred tax asset at the end
of the year.  Management will continue to evaluate the recoverability of
the deferred tax assets in future periods.

**NOTE 5 - 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 are as follows (in thousands):

`Three Months Ended
                                       October 31,
                                ------------------------
                                   1998         1999
                                -----------  -----------

  Net income/(loss).........        $9,449        $(708)
  Change in cumulative
   translation adjustments..         1,217         (825)
                                -----------  -----------
  Total comprehensive
   income/(loss).............      $10,666      $(1,533)
                                ===========  ===========`

**NOTE 6 - CONTINGENT LIABILITIES**

Semiconductor-related industries have experienced substantial litigation
regarding patent and other intellectual property rights.  As is typical
in the industry, Etec has from time to time received, and may in the
future receive, communications from third parties alleging infringements
of patents and other intellectual property rights.  In the future,
protracted litigation may be necessary to defend us against alleged
infringement of others' rights.  Any such litigation, even if we are
ultimately successful in our defense, could result in substantial cost
and diversion of time and effort by management.  This in and of itself
could have a material adverse effect on our business, financial condition
and results of operations.  Further, adverse determinations in such
litigation could result in our loss of proprietary rights, subject Etec
to significant liabilities (including treble damages under certain
circumstances), require us to seek licenses from third parties, or
prevent us from manufacturing or selling our systems.

The Lemelson Foundation has filed a suit against numerous semiconductor
manufacturers, claiming patent infringement of a number of basic U.S.
patents granted to Jerome Lemelson over many years.  Some of these
semiconductor companies, and the attorneys for the Lemelson Foundation,
have also contacted semiconductor equipment companies and commercial
maskmaking companies, claiming potential liability for infringement of
these same patents.  We, in turn, have been contacted by two of our
customers, notifying us of the fact that they have received claims and
claiming that we may have responsibility for indemnifying them under the
terms of our sales contracts.  We have reached a settlement with one
customer, and we believe that we will be able to settle with the other
customer on reasonable terms, without any material adverse effect.
However, there is no assurance that we will be able to do so, and the
costs of a lengthy litigation, or a judgment in which we are found
liable, could have a material adverse effect. In addition, we may receive
similar claims for indemnity from other U.S. customers who are pursued by
the Lemelson Foundation.

**NOTE 7 - OPERATING SEGMENT**

Etec adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in fiscal year 1999.  SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products, geographic information and major customers.

Etec designs, develops, manufactures, and markets patterning solutions
that enable the production of semiconductor chips and printed circuit
boards worldwide.  Its products include electron- and laser-beam systems
that produce high-precision masks, which are used to print circuit
patterns onto semiconductor wafers, and laser direct imaging systems,
which directly image patterns on printed circuit boards.  Etec is
organized into three product line operating segments: the Semiconductor
Products Group ("SPG"), the Interconnect Products Group ("IPG"), and the
Display Products Group ("DPG").

SPG's products include MEBES electron beam systems, and ALTA and CORE
laser beam systems.  Sales of SPG products represented a majority of
Etec's revenue and gross margin.  IPG makes and sells DigiRiteTM 2000
laser direct imaging systems.  DPG is a development stage business and
there can be no assurance that the Company will be able to introduce its
products successfully into the market.

Segment operating expenses and assets include those items that can be
specifically identified with or reasonably allocated to a particular
segment.  Operating segments do not sell products to each other, and
accordingly, there are no intersegment revenues to be reported.

Information on reportable segments for the three months ended October 31,
1998 and 1999 are as follows (in thousands):

`SPG          IPG          DPG         Total
                                -----------  -----------  -----------  -----------

Three months ended October 31,
  1998:
Revenue....................        $78,898          --           --       $78,898
Operating income/(loss)....        $17,311      $(2,955)       $(781)     $13,575
Assets.....................       $318,853       $8,772       $3,515     $331,140

Three months ended October 31,
  1999:
Revenue....................        $56,089         $638          --       $56,727
Operating income/(loss)....         $2,691      $(3,289)       $(805)     $(1,403)
Assets.....................       $304,113      $11,552       $2,124     $317,789`

**NOTE 8 - RESTRUCTURING**

The Company recorded restructuring charges totaling $2.5 million in the
quarter ended April 30, 1999.  The restructuring charges comprise mainly
severance costs related to the involuntary termination of 91 employees,
of which 73 were based in Hayward, 12 in Oregon and 6 in France.  These
charges also include facility costs arising from the consolidation of the
Company's European and Oregon operations.

The following table shows the components of the restructuring charge
recorded in the fiscal year ended July 31, 1999 and the three months
ended October 31, 1999 (in thousands):

`Provision    Incurred                  Incurred
                                Fiscal Year  Fiscal Year     Balance   Three Months   Balance
                                   Ended        Ended          at         Ended         at
                                 July 31,     July 31,     July 31,    October 31,  October 31,
                                   1999         1999         1999         1999         1999
                                -----------  -----------  -----------  -----------  ----------

  Severance and benefits....        $1,593       $1,189         $404         $226        $178
  Facilities closure costs
   and other................           922          460          462          235         227
                                -----------  -----------  -----------  -----------  ----------
  Total.....................        $2,515       $1,649         $866         $461        $405
                                ===========  ===========  ===========  ===========  ==========`

Cash outlays were primarily made for severance and benefit costs.  The
balance due for severance and benefits at October 31, 1999 primarily
relates to amounts due to French employees.

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**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, 1999**

Revenue. Revenues comprise primarily sales of the Company's MEBES, CORE,
and ALTA mask pattern generation systems, accessories and upgrades, and
the provision of technical support, maintenance and other services on
such products.  Product revenue, as a percentage of total revenue,
decreased from 87% in the quarter ended October 31, 1998 to 76% in the
quarter ended October 31, 1999, while service revenues increased from 13%
to 24% of total revenue over the same period.  Product sales volume
decreases have been the principal factor in Etec's revenue reduction.
The Company recognized revenue on four SPG systems and one IPG system in
the quarter ended October 31, 1999 compared to seven SPG systems in the
quarter ended October 31, 1998. 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 decreased 37% to $43.3 million from $68.8 million for the
quarters ended October 31, 1999 and 1998, respectively.  This decrease
primarily reflects a lower demand for mask pattern generation systems  as
many of the Company's customers have continued to rely on older
generation technology, and delayed purchases of new equipment.  This
decrease in SPG shipments was partially mitigated by higher average sales
prices.

Service revenue increased 33% to $13.4 million from $10.1 million for the
quarters ended October 31, 1999 and 1998, respectively, due primarily to
an increase in the number of systems under service contracts, increases
in average service contract prices and incremental billable services
associated with relocating certain customers systems.

Gross Profit. The Company's gross profit on product revenue decreased 44%
to $21.0 million from $37.6 million for the quarters ended October 31,
1999 and 1998, respectively.  The decrease is due primarily to lower
revenues and increased fixed costs associated with the Company's two new
manufacturing facilities.  As a result product gross margins decreased to
49% from 55% for the three months ended October 31, 1999 and 1998,
respectively.  Going forward, margins could be adversely affected by
lower than expected SPG product sales, product mix skewing toward older
less expensive mask pattern generation equipment, or lower than
anticipated margins in the laser direct imaging business (the Company's
Interconnect Products Group) where the Company does not have significant
prior experience or sales volumes.  A substantial portion of the
Company's international sales are denominated in U.S. dollars.  As a
result, changes in the values of foreign currencies relative to the value
of the U.S. dollar can render our products comparatively more expensive.
Although the Company has not been negatively impacted in the past by
foreign currency fluctuations, such conditions could affect our
international sales in future periods.  A combination of some or all of
these factors may have a material adverse effect on margins in the
remainder of fiscal 2000.

The Company's gross profit on service revenue declined 22% to $1.6
million from $2.1 million for the quarters ended October 31, 1999 and
1998, respectively.  Gross margin percentage on service revenue was 12%
and 20% for the quarters ended October 31, 1999 and 1998, respectively.
The decline in gross profit reflects higher costs due to a moderate
increase in service personnel coupled with  fewer systems under either
installation or warranty.  Service costs related to installation and
warranty are charged to product costs.  As the number of systems under
installation and warranty decreases, service costs are proportionately
higher.

Research, Development and Engineering. The Company's research,
development and engineering expenses, net of third-party funding under
cooperative development agreements, while down in dollars, increased as a
percentage of revenue, from 22% in the quarter ended October 31, 1998 to
27% in the quarter ended October 31, 1999.  This percentage increase
reflects the Company's commitment to key development programs in a period
of reduced unit demand.  Funding received under cooperative development
contracts was $1.4 million and $2.1 million for the quarters ended
October 31, 1999 and 1998, respectively.  Research and development
expense in the remainder of fiscal 2000 could be higher than expected if
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 remained constant at $9.0 million, representing 16% and 11% of
revenue, for the quarters ended October 31, 1999 and 1998, respectively.
During the quarter ended October 31, 1999, the Company benefited from a
reduction in its bad debt reserves as a significant past due receivable
was collected immediately following the end of the quarter.  This
reduction was offset by increased overhead associated with the two new
manufacturing facilities and costs associated with renegotiating bank
credit lines.

Interest Expense. Interest expense for the quarters ended October 31,
1999 and 1998 was $0.1 million and $0.2 million, respectively.

Interest Income and Other, net. Interest and other income was $0.4
million and $0.9 million for the quarters ended October 31, 1999 and
1998, respectively.  The decrease is mainly due to lower average cash
balances available for investment and lower average interest rates earned
on these balances.

Income Tax Provision. The Company recorded an income tax benefit of $0.3
million for the quarter ended October 31, 1999 and a provision for income
taxes of $4.9 million for the quarter ended October 31, 1998.  The
Company's effective tax rate decreased from 34% in the quarter ended
October 31, 1998 to 33% in the quarter ended October 31, 1999, primarily
due to tax credits.

**B. Liquidity and Capital Resources**

In addition to its cash flows from operations the Company has entered
into significant facility leases.  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 approximately $110.0 million of the $121.0 million through
October 31, 1999.

As of October 31, 1999, the Company had cash, cash equivalents, and
marketable securities of $63.2 million, as compared to $58.9 million at
July 31, 1999.  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,
1999), will provide adequate cash to fund its operations for at least the
next twelve months.  To the extent that such cash resources are
insufficient to fund our activities, the Company would need to raise
additional funds.  There can be no assurance that the Company could
obtain additional financing on reasonable terms or at all.  If additional
capital is raised through the sale of equity or debt securities, dilution
of earnings per share could occur.

The major source of cash during the three months ended October 31, 1999
was $13.8 million provided by operating activities.  The largest
component was a $7.3 million increase in accounts payable caused by a
delay in negotiating final payments to the Company's contractors for both
the Hillsboro and Hayward construction projects.  Fluctuations in
accounts receivable, inventory and current liabilities for the three
months ended October 31, 1999 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 Company also sold
marketable securities of $2.5 million during the period.

Major uses of cash during the period was $5.8 million of net capital
expenditures for leasehold improvements, testing and process equipment
and net repayments of $5.7 million to a third-party financing
intermediary.

**C. 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: risks associated with the timely development and market
acceptance of new products in an environment of rapid technological
change, reduced or postponed orders as a result of changes in customers'
planned capital spending, timely availablity of key components, delays in
factory testing and acceptance, increased costs and manufacturing
capacity associated with the addition of new facilities, ability of
certain customers to finance new system purchases, the possibility of new
products or technologies introduced by competitors, and material
variations in financial results due to a delay in delivery of even one
system. (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, 1999, which
data is incorporated herein by reference.)

Year 2000 Readiness Disclosure

Computer programs and systems which 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 which 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; 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. Etec's  web site (www.etec.com) provides a
comprehensive Y2K report on its efforts, the status of product testing
and validation, and field implementation.  As defined by Etec's Y2K
Project, the Awareness and Assessment phases, representing 40% of the
project effort, have been completed and the Renovation phase,
representing 10% of the project effort is now  complete.  The
Testing/Validation and Implementation phases have been completed.

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 has performed
its testing in accordance with SEMATECH Year 2000 Test Scenarios
guidelines.  All of the Company's products have completed the renovation
and validation phases.  Field upgrades have been released, and the
Company is installing these upgrades in its customers' systems through
its standard Service Update Plan Process.  The upgrade schedule is
determined by customer requirements.  The Company has upgraded, validated
and tested approximately 99% of the systems requiring an upgrade.

Supplier Readiness: This aspect of the Y2K readiness program is focused
on minimizing risk associated with the Company's suppliers by requesting
satisfactory answers to two key questions: Are the supplier's products
Y2K compliant; and, will the supplier continue production unaffected by
Y2K problems?  All of the Company's major suppliers were contacted using
the SEMATECH Year 2000 Supplier Readiness Questionnaire.  The Company has
received responses from all of those contacted.  The Company also
identified suppliers critical to its ability to sustain product
manufacturing over a short period of time.  A critical supplier list was
developed and the Company worked directly with those suppliers to
determine their Y2K capability.  The Company has developed contingency
plans based upon this assessment.

Internal Infrastructure Readiness: The Company has completed an
assessment of its IT and non-IT applications and its business processes.
Suppliers of IT and non-IT applications or processes critical to
sustaining the short run operating capability of the enterprise have been
contacted to determine their capability to provide Y2K capable equipment,
services and supplies.  Additionally, contingency plans have been
developed for these applications and processes.

The Company estimates that the total Y2K project costs will range from $5
to $8 million.  Over 90% of these costs have been incurred with the
remainder expected to be spent over the next two fiscal quarters.  The
Company is continuing its assessment and developing alternatives which
will result in a further refinement of this estimate over time.  There
can be no assurance that this estimate will be sufficient or that actual
costs will not differ materially from the current estimate.

Etec believes that its most reasonably likely worst case scenario would
be the failure of services, supplies or products provided by third
parties.  As the Company has little or no control over remediating the
Y2K problems of third parties such as utilities, telecommunication
providers, computer system and software suppliers, the risks are
relatively more difficult to assess than with the Company's internal
systems or its products.  Third party failures would disrupt the
Company's operations and could have a material adverse effect on its
financial condition.  Etec is not in a position to identify all possible
scenarios nor can it estimate the impact of such disruptions.

Various disclosures and announcements of the Company concerning its
products and Y2K Readiness Program are intended to constitute "Year 2000
Readiness Disclosures" as defined in the Year 2000 Information and
Readiness Disclosure Act.

**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, 1999 have not changed
significantly.

**Part II - Other Information**

**Item 1.  Legal Proceedings**

The Company is not currently involved in any material legal proceedings.

**Item 6.  Exhibits and Reports on Form 8-K**

(a)     The following exhibits are filed herewith:



|**Exhibit Number** | **Description**        
|------------------ | -----------------------
|27                 | Financial Data Schedule

(b)     Reports on Form 8-K:    None.

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**ETEC SYSTEMS, INC.

                                   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, on December 6, 1999.



| |                   
| | ------------------
| | 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)

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**ETEC SYSTEMS, INC.

                               INDEX OF EXHIBITS**



|**Exhibit Number** | **Description**        
|------------------ | -----------------------
|27                 | Financial Data Schedule

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