Good afternoon, ladies and gentlemen, and welcome to Advanced Energy’s First Quarter 2008 Conference Call. With us today are Dr. Hans Betz, President and CEO and Mr. Larry Firestone, Executive Vice President and CFO. (Operator Instructions). Now, I would like to introduce Ms. Annie Leschin of Advanced Energy Investor Relation. Ms. Leschin, you may begin.

Thank you, and good afternoon. Thank you for joining us this afternoon for our first quarter 2008 Earnings Call. With me on today’s call as the operator mentioned are Hans Betz, President and CEO, who is joining us from China today and Larry Firestone, EVP and CFO, both will be presenting prepared remarks today. By now, you should have received a copy of the press release that we issued approximately an hour ago. If you are in need of a copy, please visit our website at www.advanced-energy.com or feel free to contact us at 970-407-4670. Before we begin, I would like to let everybody know that Advanced Energy will be participating in JPMorgan’s Technology Conference on May 23rd in Boston. As additional events are scheduled this quarter, we will make additional announcements. I would like to remind everyone that except for historical financial information contained herein, the matters discussed in this conference call contain certain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the industries we serve, the timing of orders received from our customers, our ability to benefit from the cost -- continued cost improvement initiatives currently underway and unanticipated changes in our estimates, reserves or allowances. These and other risks are described in Form 10-K and 10-Q and other reports filed with the SEC. In addition, we assume no obligation to update the information that we provide you during this conference call, including the first -- excuse me, the second quarter guidance provided during this call and in our press release today. Guidance will not be updated after today’s call until our next scheduled quarterly financial release. I’d now like to turn the call over to Hans Betz.

Good afternoon, everyone, and thank you for joining us. Advanced Energy performed well this quarter. Our sales grew 6% substantially to 88.9 million exceeding our guidance as we successfully executed on our diversification strategy this quarter by growing revenue outside of semiconductor to 35% of our total business. Stronger non-semiconductor sales also drove a slightly higher gross margin of 40.3%, while our continued effective management of cost improved operating margin by more than 3.0 to 8.3%. This led to first quarter EPS of $0.13 above our guided range. Finally, we generated $29 million in cash before our stock repurchase to end the quarter with a 137 million in cash and marketable securities. Semiconductor sales in the first quarter was roughly flat with the last quarter, which is noteworthy as industry conditions deteriorated during the quarter due to continued ASP pressure and reduced demand. We did however ship a number of our semiconductor products to key OEMs for use on their evaluation tools which have shown encouraging preliminary results. The industry outlook continues to be uncertain as semiconductor companies try to deplete the impact of low memory prices and CapEx with a decidedly negative macroeconomic conditions. As a result, we anticipate our semiconductor revenue in the second quarter will be softer than the first quarter given the key OEM customers weakening outlooks. We remain encouraged by the penetration of some of our new products for next generation offerings and continue to work to gain market share and position ourselves to take advantage of the market recovery when it occurs. Sales to our non-semiconductor markets were the highlight of this quarter, increasing 18% sequentially, led by solar, flat panel display and architectural glass markets. Flat panel display was clearly the highlight of the quarter with sales up nearly 90% over the fourth…

Thank you, Hans, and good afternoon, everyone. I will review the results for the first quarter of 2008 and discuss our guidance for the second quarter. Strength in our non-semi markets drove the growth in our sales for the first quarter of 2008 to $88.9 million, which was above our guidance. This represented a sequential increase of 6% compared to the $83.8 million for the fourth quarter of 2007 and a decrease of 17.2% compared with the $107.3 million for the first quarter of 2007. Sales for the semiconductor capital equipment market were $57.7 million representing approximately 65% of total sales in the quarter. Sales for the non-semiconductor markets were $31.2 million or 35% of total sales compared to 32% in the fourth quarter 2007. Non-semiconductor markets include solar, both inverter and thin-film deposition tools, flat panel display, data storage, architectural glass and industrial coating. The much anticipated return of the capital investment drove the flat panel sales to reach 9% of total sales this quarter versus 5% in the fourth quarter as panel makers forged ahead with their expansion plans. Data storage fell slightly to 3% of total sales compared to 4% last quarter. The hard disk industry continues to make incremental investments at lower levels as the industry works to utilize the existing capacity that was installed over the last year and a half. We expect to see similar revenue levels next quarter. Sales to the architectural glass market represented 3% of total sales versus 1% in the fourth quarter. We’ve secured orders from China and continue to be encouraged by the activity in the glass market related to Low-E glass expansions and initial investments and maintenance-free glass as well as the solar market. Our industrial coating in emerging market sales represented approximately 11% of first quarter sales,…

(Operator Instructions). Your first question comes from Timothy Arcuri from Citi.

Hi, guys. This is actually Brian Lee calling in for Tim. I had a few quick things. First thing, is the 5.5 million in annual cost reductions is that all out of Q1 or is there, can we expect a residual impact coming in, in coming quarters?

Larry?

We took -- yeah, we took the 5.5 million as the annual rate of the cost reductions that we took. And as I mentioned, we are currently analyzing the business looking for further but those reductions have been taken, and you will see those laying in on a quarterly rate going forward.

Okay. What percent would you say was actually picking out of Q1 of that 5.5?

Oh. We took the -- I see what you are saying, I am sorry. We took the cost reduction action in March. So it was a pretty -- I mean, it was a certainly a one-third action against that, but then you also have the restructuring charge.

Okay, okay. That’s helpful. I guess shifting gears here a little bit. On the margin side, though it sounds like the non-semi business actually is helping on the margin front. Can you give us a sense for what the sort of margin delta is between your blended margins on the non-semi side versus the semi side?

Yeah we don’t really break that out. What we have said is that the semi margins, are a little lower than the corporate average, and the non-semi are a little higher.

Okay. So I mean, is it fair to assume several 100 basis points or is it somewhere in or could it be as high as 500?

Gosh, we really haven’t guided that. It’s probably in the -- yeah, I would say, because there is so many different markets, I would have to -- then all of a sudden we are talking about mix. So I would just answer it the same way we have, which is the non-semi run a little ahead of the corporate average and the semi runs a little bit south. On the other side, we get OpEx leverage on the semi business because we get a lot less sales energy that has to go through to sell the semi business, maybe energy is the wrong term, but certainly less bodies focused on that part of the market.

Okay, okay. Fair enough. On the FPD business, how sustainable do you guys see business there because it sounds like some of your OEM customers have actually been talking about a pretty big first-half loaded order pattern there, followed by a fairly sharp decline in the back half. So is that sort of the trajectory that you guys would be expecting as well?

I think what we see is what our customers guide. And I think they have a bit of a better visibility than we have. It’s hard to get a -- let’s say, more crisp outlook from our side than our customers do.

Okay. Last thing, last quick thing from me and then I will go away. On the solar side of the business there is obviously a large pipeline of thin film projects here, most of that in contract status. Have you guys booked any revenues on any of these projects outside of what you would consider pilot phases? Is there anything in production, which you’ve actually seen hit the P&L?

I think...

Go ahead, Hans.

What we see is, we are serving practically all the major customers on the solar side, because we have a suite of products which is slow, DC and RF. And we are in some way involved in any of those order.

I guess, what I am asking is it are you guys seeing mostly just pilot projects right now that are impacting the P&L? Or is there actually production phase projects which you are booking revenues on?

I think it’s mainly on the pilot side. I would say the production things or what you are seeing building up in the backlog of a contract volumes that are sitting behind, at least on the thin film side, I think that’s where your question was oriented.

Sure. What sort of timing would you expect, would you expect any of that production stuff to fall into ‘08?

That’s a tough one. I mean, that’s going to end up being one of our customers answers. That’s going to depend on how they -- what they get through on the pilot side and how fast they move to production.

And the thing at this point in time, it’s hard to discern between production and pilot lines.

But I guess maybe I’m misunderstanding, but at the point that some of your OEM customers are actually installed, is that the point at which your revenue recognition trigger hits or...?

No, when they take possession of our product is when our revenue hits.

Okay.

So as they are moving product off of their lines -- and Hans is right; it’s very difficult to tell which ones are pilot and which ones are production, unless they’re really small versus really large supplies. But -

Right.

But it’s really difficult to tell what’s what as it moves off of our floor, and also when the timing of our customer’s revenue is going to be.

Okay. Thanks, guys.

Sure.

Your next question comes from Joe Feng from JPMorgan.

Hi. This is Joe for Jay Deahna. Thanks a lot for taking my call. Congrats on the quarter.

Thanks.

Quick question on the semiconductor outlook for second quarter. You mentioned it’s a little bit softer. And the OEMs have guided a pretty big range from like minus-5 to minus-25 on shipments. Can you give us a little bit more color on what you’re seeing?

I think what we see from our line of sight to our customers, I think what they announced publicly in terms of weakening their business, of course, it does reflect in our business as well.

So would you say it’s closer to the minus-5 side or the minus-25?

No, it’s closer to the minus-15 side.

Okay. That’s helpful. And then shifting gears on this, if flat panel is going to be flat, semi is going to be down, then that suggests that solar should be up. Is that how I should look at it?

That’s true.

Then from the ‘07 your revenues I believe is about 26 million for solar. And if ‘08 is going to be doubled, then that’ll be about 52 million. In Q1, you got 8 million in for solar. So that leaves about 44 million left for the next three quarters. Is there a linear trajectory upward, or is it going to be hockey stick effect?

No, we haven’t really guided that, but I would say it’s safe to say that solar just continues to build quarter-over-quarter.

And I think there is no formula, which neither is hockey stick or a linear. It’s quite sometimes lumpy and the orders are pretty big sometimes. Therefore it’s hard, but we don’t see any downfall from our doubling revenue in ‘08. But it doesn’t necessarily mean that we are accurate on 1 million or 2 million, but just roughly double.

Sure, so roughly double. So then that means that you feel fairly secure that these thin film lines are going to happen for the OEMs to take the components from you.

Yes, I mean, there is not only these thin film lines, which have made a lot of noise publicly, but there are a lot of panel manufacturers. And this is much wider than just these very big orders announced by AMED and Erlycom.

Okay. Do you give out breakout on the exposure to the equipment suppliers versus the solar fabs?

No, we don’t. We don’t.

Okay. All right, thank you.

Your next question comes from Alexander Paris from Barrington Research.

Could you tell me the dollar amount in the first quarter in the flat panel business?

Oh, let me just look here. Flat panel would be in the 5.7 million range.

And that was up from how much a year ago?

Oh, I’m sorry; wait a second. Flat panel is in -- I had the wrong line. Flat panel is in the $7.5 million range, and that’s up from about 4 million a year ago.

And you said that’s going to be relatively flat in the second quarter sequentially? And I think you just mentioned that solar was 8 million or 8.1 million?

Yes, it was in that range.

Right. Okay, and the tax rate, it sounds like you’re using 28% for the year.

Yes.

And just one other thing, I think you discussed it. The 5.5 million cost savings, I guess, you implied that’s going to be spread fairly evenly over the rest of the year.

Mm-hmm.

And then are there more restructuring charges beyond the first quarter?

There will be as we analyze and follow further cost reductions. But we haven’t really defined that yet. Then that would take shape very similar to what happened in the first quarter.

But if you had more restructuring charges though, then you would expect more cost savings.

Further cost reductions, yes.

Right. Okay, thanks a lot.

Your next question comes from CJ Muse from Lehman Brothers.

Hi, Olga calling in for CJ. Just had a couple of questions. On the semi side, you had pretty much flattish revenues in March, whereas most of your customers guided to sequential declines and expect similar in June. Is that in anyway indication of incremental market share gains? How should we think about that and how your semi revenues for ‘08 should fare relative to overall wafer fab equipment?

I think as we mentioned in our script, it’s not an actual market share gain, but it may turn out in the market share gain going forward because some of those additional revenue came from evaluation tool, which are normally used in order to qualify for the next generation. So this is part of it.

Okay, so just overall for right now just to assume that you would generally trend with the market, and not to factor in any incremental upside for that?

No.

That’s a safe assumption, yes.

Okay. And then I guess outside of the SG&A cut that you instituted in March -- and it sounds like you would basically be exiting the year at around this range. How should we think about ‘09? Would you start to ramp that as your underlying businesses grow or would you try to keep it at this level?

No, I think we’d try and keep it at those levels as best we can.

Okay. And then I guess given the new products that you are introducing on the inverter side or the Solaron, are you factoring in for the potential for exceeding your initial guidance for solar revenues to be up over more than double? Or are you just sticking that to be more conservative, or I guess any changes in your outlook overall?

Yes, for 2008, yes, I think the market situation that we’re in is one where we’re securing new customers, and we’re installing for the first time in that customer base and really building our credibility. So I think even as we introduce new products later this year, it’s again on a customer and market acceptance kind of trajectory. So I would say that we would stick with the guidance outline that we gave.

Okay.

Yes, I think in order to confirm that, I mean, there is an inherent timeline. If you have a product which isn’t superior, you need a time of evaluation on the customer side, and this time cannot be shortened or cut. Therefore in ‘08, it won’t change dramatically.

Okay. And then I guess one final question from me. In your prepared remarks, you talked about increasing competition at the OEMs for Gen 8 and Gen 10 display tools. How does that impact to you? Is that more of a ASP pressure for you guys, or more of who you have exposure to versus other equipment providers? How should we read that real competition and how it translates to your top line?

Yes, it’s not necessary an ASP pressure, even though ASP pressure is permanent there. But there is the possibility that part of this business may be lost to competition.

Oh, okay. So you’re talking about competition for you rather than competition for your customers?

Yes, from the component suppliers.

Got you. Okay, that’s it. Thank you very much.

(Operator Instructions). Your next question comes from Tom Diffely from Merrill Lynch.

Yeah, good afternoon. I was hoping to get a little bit more on the auction rate securities. What were the exposures of those instruments?

You mean the underlying exposure?

Yes student loans or real estate or -

Yes, we had student loans and some municipals. Everything is of really high credit caliber, but again the trading in that whole market has closed up, as you know.

Okay, and you mentioned you took some kind of a charge. Could you explain that again?

Yes, we took an impairment charge. As our money managers have looked at it and they started to grade their whole portfolios, they’ve come out with an impairment methodology that we looked at. Now AE is not in a position where it needs to liquidate those. We could hold those bonds to maturity. So that’s where it sits in a temporary impairment situation. But where we are in the world of cash management and FASB accounting is the market value of those securities really needs to be what resides on our balance sheet. So even though we’re in a position where we can wait it out and hold the maturity or hold the refinancing, whatever is going to happen, we need to follow the current accounting guidance on that.

Okay. And what was the actual impairment charge taken?

I think it was 1.8 million.

1.8, okay. And then at some point if that -- if you do need to liquidate for some reason, then that will hit the income statement?

Yeah. That would hit the P&L in liquidation.

Okay, all right. Thank you.

Sure.

At this time, there are no further questions.

Okay, great. Well, thank you all for joining this call and hopefully we will see you at the JPMorgan Conference in May.

Thank you.

Bye-bye.

That concludes today’s teleconference. You may now disconnect.