UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

x Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2010

OR

¨ Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the transition period from            to

Commission file number 000-17157

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

NOVELLUS SYSTEMS, INC. RETIREMENT PLAN

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

NOVELLUS SYSTEMS, INC.

4000 North First Street

San Jose, CA 95134

(408) 943-9700

NOVELLUS SYSTEMS, INC.

RETIREMENT PLAN

Financial Statements and Supplemental Schedule

December 31, 2010 and 2009

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm		1
Financial Statements:
Statements of Net Assets Available for Benefits		2
Statements of Changes in Net Assets Available for Benefits		3
Notes to Financial Statements		4
Supplemental Schedule as of and for the year ended December 31, 2010:
Schedule H, Line 4i — Schedule of Assets (Held at End of Year)		11
Signature		12
Consent of Independent Registered Public Accounting Firm (Exhibit 23.1)		14

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Participants and

Plan Administrator of the

Novellus Systems, Inc.

Retirement Plan

We have audited the financial statements of the Novellus Systems, Inc. Retirement Plan (the Plan) as of December 31, 2010 and 2009, and for the years then ended, as listed in the accompanying table of contents. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Plan’s management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2010 and 2009, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule, as listed in the accompanying table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ MOHLER, NIXON & WILLIAMS

Accountancy Corporation

Campbell, California

June 23, 2011

1

NOVELLUS SYSTEMS, INC.

RETIREMENT PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

	December 31,
	2010			2009
	(In thousands)
Assets:
Investments at fair value	$	198,381		$	170,122
Contribution receivable from employer		2,834			2,769
Notes receivable from participants		2,593			2,216
Net assets available for benefits at fair value		203,808			175,107
Adjustment from fair value to contract value for fully benefit-responsive common/collective trust		(909	)		(495	)
Net assets available for benefits	$	202,899		$	174,612

See Notes to Financial Statements.

2

NOVELLUS SYSTEMS, INC.

RETIREMENT PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

	For the years ended December 31,
	2010		2009
	(In thousands)
Additions to net assets attributed to:
Investment and other income:
Dividends and interest	$	3,858	$	3,471
Net realized and unrealized appreciation in fair value of investments		22,579		33,926
Total investment and other income		26,437		37,397
Contributions:
Participant		10,308		10,667
Employer		2,834		2,767
Total contributions		13,142		13,434
Total additions		39,579		50,831
Deductions from net assets attributed to withdrawals and distributions		11,292		16,656
Net increase in net assets available for benefits		28,287		34,175
Net assets available for benefits:
Beginning of year		174,612		140,437
End of year	$	202,899	$	174,612

See Notes to Financial Statements.

3

NOVELLUS SYSTEMS, INC.

RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009

NOTE 1 — THE PLAN AND ITS SIGNIFICANT ACCOUNTING POLICIES

General — The following description of the Novellus Systems, Inc. Retirement Plan (the Plan) provides only general information. In 2005, the Plan was amended and restated using a prototype plan document supplied by the Vanguard Group, a third-party administrator. Participants should refer to the prototype plan document and Summary Plan Document for further description of the Plan’s provisions.

The Plan is a defined contribution plan that was established in 1988 by Novellus Systems, Inc. (the Company) to provide benefits to eligible employees, as defined in the Plan document. The Plan is designed to conform to provisions of the Internal Revenue Code, as amended (the Code) and the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Administration — The Board of Directors of the Company has appointed an Administrative Committee (the Committee) to manage the operation and administration of the Plan. The Vanguard Fiduciary Trust Company serves as the Plan’s trustee. The Vanguard Group processes and maintains the records of participant data and serves as the Plan’s custodian. Administrative expenses were insignificant to the financial statements in 2010 and 2009 and have therefore been reported as withdrawals.

Basis of accounting — The financial statements of the Plan are prepared on the accrual method of accounting in accordance with U.S. generally accepted accounting principles (U.S. GAAP).

Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Forfeited accounts — Forfeited non-vested accounts are used to either pay the Plan’s administrative expenses or are applied against matching contributions made by the Company. As of December 31, 2010 and 2009, unutilized forfeitures were insignificant.

Notes receivable from participants — Notes receivables from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are deemed distributions based upon the terms of the Plan document.

Investment valuation and income recognition — Investments of the Plan are held by the trustee and are invested based upon instructions received from participants. The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 3 for discussion of fair value measurements. Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Net appreciation includes the Plan’s gains and losses on investments bought or sold as well as held during the year.

The Plan has a fully-benefit responsive common/collective trust as an investment. This type of investment contract is required to be reported at fair value. However, contract value is the relevant measurement for fully-benefit responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Statements of Net Assets Available for Benefits present the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The statements of changes in net assets available for benefits are prepared on a contract value basis.

Income taxes — The Plan obtained its latest determination letter on December 12, 2002, in which the Internal Revenue Service (IRS) stated that the Plan, as then designed, was in compliance with the applicable requirements of the Code. The Plan has been amended since receiving the determination letter. The form of the Plan document upon which the Plan is currently based has received a favorable opinion letter from the IRS, and, pursuant to IRS Revenue Procedure 2005-16 (2005-10 I.R.B. 674), the Company is entitled to rely upon this letter to establish that the terms of the Plan are in continuing compliance with the applicable requirements of the Code. The Company believes that the Plan is currently designed and is being operated in compliance with the applicable requirements of the Code and related state statutes, and that the trust, which forms a part of the Plan, is exempt from federal income and state franchise taxes.

4

U.S. GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the plan, and has concluded that as of December 31, 2010, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2007.

Risks and uncertainties — The Plan provides for various investment options in any combination of investment securities offered by the Plan, including the Company’s common stock. Investment securities are exposed to various risks, such as interest rate, market fluctuations and credit risks. Due to the risks associated with certain investment securities, it is at least reasonably possible that changes in market values, interest rates or other factors in the near term, could materially affect participants’ account balances and the amounts reported in the financial statements.

Recently issued accounting pronouncements — In September 2010, the Financial Accounting Standards Board issued new authoritative guidance addressing reporting for participant loans by defined contribution pension plans. This authoritative guidance requires that participant loans be classified as notes receivable from participants segregated from plan investments, and measured at their unpaid principal balance plus accrued unpaid interest. Participant loans were previously classified as investments. This guidance is effective retrospectively for fiscal years ending after December 15, 2010. The Plan adopted this guidance for the year ended December 31, 2010 and has restated the financial statements for 2009 to reflect the retrospective application. There was no impact to the net assets as of December 31, 2010 and 2009 as a result of the adoption.

NOTE 2 — PARTICIPATION AND BENEFITS

Participant contributions — Participants may elect to have the Company contribute up to 100% of their eligible pre-tax compensation into a traditional 401(k) account or after-tax compensation into a Roth 401(k) account, not to exceed the amount allowable under current income tax regulations. Participants who elect to have the Company contribute a portion of their compensation to the Plan agree to accept an equivalent reduction in compensation. Contributions withheld are invested in accordance with the participant’s direction.

Participants are also allowed to make rollover contributions of amounts received from other tax-qualified employer-sponsored retirement plans. Such contributions are allocated to investments in accordance with the participant’s direction and the Plan’s provisions.

Employer contributions – Participants in the Plan become eligible to receive matching contributions immediately upon enrolling in the Plan and electing to make salary deferral contributions to the Plan. Generally, a participant will share in the matching contribution only if the participant is employed on the last day of the Plan year and has completed one year of credited service. All matching contributions are placed into the participant’s traditional 401(k) account.

For the years ended December 31, 2010 and 2009, the Company matched 50% of eligible participant contributions under the Plan. The maximum eligible participant contribution for matching purposes is the greater of $4,000 or 6% of eligible compensation. The Company may change the matching contribution rate at any time, subject to the limits of the Plan and the Code. Employer contributions were $2.8 million for each of the years ended December 31, 2010 and 2009 and were made in shares of the Company’s common stock in the amount of 73,017 and 124,231 shares, respectively. These contributions were transferred into the Plan subsequent to each year-end.

The Company is also allowed to make discretionary contributions as defined in the Plan and as approved by the Board of Directors. No discretionary contributions were made for the years ended December 31, 2010 and 2009.

Vesting — Participants are immediately vested in their contributions. Participants are fully vested in the employer’s matching and discretionary contributions allocated to each participant’s account after three years of credited service.

5

Participant accounts — Each participant’s account is credited with the participant’s contributions, earnings or losses on the participant’s investments and an allocation of the employer contributions, if any. Participants may allocate a maximum of 25% of their contributions to the Company Stock Fund, which is a fund invested primarily in shares of the Company’s common stock.

Payment of benefits — Upon termination, the participants or beneficiaries may elect to leave their account balance in the Plan or receive their total benefits in a lump sum amount equal to the value of the participant’s vested interest in their account. Distributions are paid in cash, except for distributions from the Company Stock Fund, which may be paid in cash or shares of stock at the election of the participant. The Plan allows for the automatic lump sum distribution of participant vested account balances that do not exceed $5,000. As of December 31, 2010, the amount of withdrawals elected by participants that were disbursed subsequent to year-end was insignificant.

Notes receivable from participants — The Plan allows participants to borrow not less than $1,000 and up to the lesser of $50,000 or 50% of their vested account balance. Such loans bear interest at the available market financing rates and must be repaid to the Plan within a five-year period, unless the loan is used for the purchase of a principal residence in which case the maximum repayment period may be extended. Outstanding loans at December 31, 2010 carry interest rates ranging from 4.25% to 9.25%.

NOTE 3 — FAIR VALUE MEASUREMENTS

Fair Value Hierarchy

The Plan defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Plan considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The Plan’s financial instruments consist primarily of mutual funds, a common/collective trust, the Company Stock Fund and common stock. Three levels of inputs are used to measure the fair value of our investments:

Level 1 -	Quoted prices in active markets for identical assets or liabilities.
	Mutual funds – These investments are public investment vehicles valued using the net asset value. It is not probable that the mutual funds will be sold at amounts that differ materially from the net asset value of shares held.
	Common stock – These investments are valued at the closing price reported on the active market on which the individual securities are traded.
Level 2 -	Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.
	Common/collective trust – The fair value of this investment is based on the underlying investments. The underlying investments consist of a portfolio of investment contracts that are issued by insurance companies and commercial banks and in contract that are backed by bond trusts, valued using the net asset value. The net asset value is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of units outstanding. It is not probable that the common/collective trust will be sold at amounts that differ materially from the net asset value of units held. The trustee has the right to hold investments in the fund for up to 12 months from the date of a redemption request.
	Company Stock Fund – The fair value of this fund is based on the underlying investments. The underlying investments consist primarily of common stock of the Company with the remainder held in money market funds to help simplify and accelerate participants’ daily transactions. The common stock portion of this investment is valued at the closing price reported on the active market on which the individual securities are traded. The money market funds are public investment vehicles valued using the net asset value.
Level 3 -	Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. As of December 31, 2010 and 2009, we did not hold any level 3 investments.

6

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

During the years ended December 31, 2010 and 2009, there were no transfers of financial instruments between Level 1 and Level 2 or transfers in or out of Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Investments measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2010:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
Assets
Mutual funds
Growth funds	$	42,849	$	—	$	—	$	42,849
Blend funds		47,752		—		—		47,752
Bond funds		19,458		—		—		19,458
Target retirement date funds		19,131		—		—		19,131
Value funds		14,608		—		—		14,608
Balanced funds		12,467		—		—		12,467
Money market funds		84		—		—		84
Common/collective trust
Pooled stable value fund		—		23,080		—		23,080
Common stock
Company Stock Fund		—		18,886		—		18,886
Other common stock		66		—		—		66
Total assets	$	156,415	$	41,966	$	—	$	198,381

Investments measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2009:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In thousands)
Assets
Mutual funds
Growth funds	$	39,992	$	—	$	—	$	39,992
Blend funds		36,494		—		—		36,494
Bond funds		17,132		—		—		17,132
Target retirement date funds		14,091		—		—		14,091
Value funds		12,952		—		—		12,952
Balanced funds		11,242		—		—		11,242
Common/collective trust
Pooled stable value fund		—		22,893		—		22,893
Common stock
Company Stock Fund		—		15,326		—		15,326
Total assets	$	131,903	$	38,219	$		$	170,122

7

NOTE 4 — INVESTMENTS

The following table presents the fair values of investments and investment funds that include 5% or more of the Plan’s net assets available for benefits at December 31:

	2010
	(In thousands)
Vanguard Retirement Savings Trust	$	23,080
American Funds: The Growth Fund of America		22,662
Novellus Company Stock Fund		18,886
Vanguard 500 Index Fund Investor Shares		16,396
Vanguard Wellington Fund Investor Shares		12,467
Vanguard Total Bond Market Index Fund Investor Shares		12,258
Vanguard Global Equity Fund		12,215
Columbia Acorn Fund; Class Z		11,047
Other funds individually less than 5% of net assets		69,370
Assets held for investment purposes	$	198,381

	2009
	(In thousands)
Vanguard Retirement Savings Trust	$	22,893
American Funds: The Growth Fund of America		22,705
Novellus Company Stock Fund		15,326
Vanguard 500 Index Fund Investor Shares		12,788
Vanguard Wellington Fund Investor Shares		11,242
Vanguard Global Equity Fund		11,230
Vanguard Total Bond Market Index Fund Investor Shares		11,026
Other funds individually less than 5% of net assets		62,912
Assets held for investment purposes	$	170,122

The Plan’s investments including gains and losses on investments bought, sold and held during the year appreciated in value as follows for the years ended December 31:

	2010		2009
	(In thousands)
Common stock	$	6,050	$	8,103
Mutual funds		16,529		25,823
	$	22,579	$	33,926

8

NOTE 5 — PARTY-IN-INTEREST TRANSACTIONS

The Plan invests in shares of mutual funds managed by an affiliate of the Vanguard Fiduciary Trust Company. Any purchases and sales of these funds are open market transactions at fair market value. Such transactions, while considered party-in-interest transactions under ERISA regulations, are permitted under the provisions of the Plan and are specifically exempt from the prohibition of party-in-interest transactions under ERISA.

Participants may elect to invest a portion of their accounts in the Company Stock Fund and employer contributions are initially made directly into the Company Stock Fund. The aggregate investment in the Company’s common stock held in the Company Stock Fund as of December 31, 2010 and 2009 was $18.8 million and $15.3 million, respectively.

NOTE 6 — RECONCILIATION TO FORM 5500

The following table reconciles the financial statements to the Form 5500 for the Plan years ended December 31:

	2010								2009
	Net assets available for benefits			Investment and other income		Deductions from net assets			Net assets available for benefits			Investment and other income		Deductions from net assets
	(In thousands)
Balance per the financial statements	$	202,899		$	26,437	$	11,292		$	174,612		$	37,397	$	16,656
Adjustment from contract value to fair value for fully benefit-responsive common/collective trust		909			414		—			495			802		—
Benefit claims payable		(27	)		—		(232	)		(259	)		—		(49	)
Balance per the Form 5500	$	203,781		$	26,851	$	11,060		$	174,848		$	38,199	$	16,607

NOTE 7 — PLAN TERMINATION OR MODIFICATION

The Company intends to continue the Plan indefinitely for the benefit of its participants; however, it reserves the right to terminate or modify the Plan at any time by resolution of its Board of Directors and subject to the provisions of ERISA. In the event the Plan is terminated in the future, participants would become fully vested in their accounts.

9

SUPPLEMENTAL SCHEDULE

10

NOVELLUS SYSTEMS, INC.	EIN: 77-0024666
RETIREMENT PLAN		PLAN #001

SCHEDULE H, LINE 4i – SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2010

(a)	(b)	(c)	(e)
	Identity of issue, borrower, lessor or similar party	Description of investment including maturity date, rate of interest, collateral, par or maturity value	Current value
	American Funds: The Growth Fund of America	Mutual fund	$	22,661,792
	Columbia Acorn Fund; Class Z	Mutual fund		11,047,225
	Hartford Small Company Fund; Class Y	Mutual fund		83,177
	Heartland Value Plus Fund	Mutual fund		3,253,123
	JP Morgan Mid-Cap Value Fund; Select Shares	Mutual fund		3,208,634
	Mainstay High Yield Corporate Bond Fund; Class I	Mutual fund		2,589,007
	PIMCO Total Return Fund; Institutional Class	Mutual fund		825,832
*	Vanguard 500 Index Fund Investor Shares	Mutual fund		16,396,247
*	Vanguard FTSE Social Index Fund Investor Shares	Mutual fund		363,373
*	Vanguard Global Equity Fund	Mutual fund		12,214,690
*	Vanguard Inflation-Protected Securities Fund	Mutual fund		3,785,808
*	Vanguard International Explorer Fund	Mutual fund		8,693,083
*	Vanguard Mid-Cap Index Fund	Mutual fund		5,561,165
*	Vanguard Prime Money Market Fund	Mutual fund		84,469
*	Vanguard Small-Cap Index Fund Investor Shares	Mutual fund		3,729,765
*	Vanguard Target Retirement 2005 Fund	Mutual fund		285,717
*	Vanguard Target Retirement 2010 Fund	Mutual fund		118,019
*	Vanguard Target Retirement 2015 Fund	Mutual fund		2,117,248
*	Vanguard Target Retirement 2020 Fund	Mutual fund		1,661,178
*	Vanguard Target Retirement 2025 Fund	Mutual fund		5,438,339
*	Vanguard Target Retirement 2030 Fund	Mutual fund		844,331
*	Vanguard Target Retirement 2035 Fund	Mutual fund		4,361,342
*	Vanguard Target Retirement 2040 Fund	Mutual fund		258,996
*	Vanguard Target Retirement 2045 Fund	Mutual fund		3,130,163
*	Vanguard Target Retirement 2050 Fund	Mutual fund		475,556
*	Vanguard Target Retirement Income	Mutual fund		440,583
*	Vanguard Total Bond Market Index Fund Investor Shares	Mutual fund		12,257,533
*	Vanguard Total International Stock Index Fund	Mutual fund		9,850,459
*	Vanguard Wellington Fund Investor Shares	Mutual fund		12,466,547
*	Vanguard Windsor II Fund Investor Shares	Mutual fund		8,145,920
*	Vanguard Retirement Savings Trust	Common/collective trust		23,080,334
*	Novellus Company Stock Fund	Common stock		18,885,558
*	Self-directed brokerage account	Common stock		78,801
*	Participant loans	Interest rate range of 4.25% to 9.25%		2,593,218
			$	200,987,232

* Parties in interest

Column (d), cost, has been omitted, as all investments are participant directed.

11

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	NOVELLUS SYSTEMS, INC. RETIREMENT PLAN
Date: June 24, 2011	By:	/s/ John D. Hertz
		John D. Hertz
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

12

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
23.1	Consent of Independent Registered Public Accounting Firm

13