Good afternoon. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Advanced Energy conference call. All lines are placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. (Operator instructions) Thank you. At this time, I would like to turn the call over to your Chairperson, Ms. Anne Leschin. Ma’am, you may begin the call.

Thank you, and good afternoon. Thank you for joining us this afternoon for our third quarter 2008 earnings conference call. With me on today’s call are Hans Betz, President and Chief Executive Officer, and Larry Firestone, Executive Vice President and CFO, who will both present prepared remarks. By now, you should have received your copy of the press release that we issued approximately an hour ago. If you would like a copy, please visit our website at www.advanced-energy.com or contact us at 970-407-4670. Before we begin, I would like to let everyone know that Advanced Energy will be participating in CS First Boston’s Technology Conference in early December in Scottsdale, Arizona and Barclay’s Capital Global Technology on December 10 in San Francisco. As additional events are scheduled in the 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 continued cost improvement initiatives 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 fourth quarter guidance provided during the call and in our press release dated today. Guidance will not be updated after today’s call until our next scheduled quarterly financial release. I will now turn the call over to Hans Betz.

Good afternoon, everyone and thank you for joining us. The third quarter marked the continuous successful execution of our overall vision to concentrate on the product strategy to diversify our overall business and to expand our non-semiconductor sales. Given the ongoing challenges presented by the conditions of the semiconductor market coupled with the looming global economic crisis, we are proud to have achieved our financial targets, with sales of $84.5 million and a GAAP EPS of $0.13. As a percentage of the total sales, non-semiconductor revenue represented 48%, semiconductor revenue represented 34% and services represented 18%. Total gross margins were 41.7%. Our cash position remained strong, ending the quarter at $168 million in cash, marketable securities, and long term investments. Weakness in the semiconductor market continued with SAP consolidations and project push-outs leading a decline in capital spending by our customers. So, our sales to the semiconductor OEMs declined 20% sequentially. We believe our share gains and strong performance at Korean OEMs have minimized Advanced Energy’s quarterly decrease in semiconductors versus the more dramatic decline throughout the industry. The outlook for the semiconductor market remains ten years, as conditions have been exacerbated by the recent credit crisis, which is causing semiconductor manufacturers to re-evaluate the equipment-purchasing strategies and they accept investments decisions in a network to conserve cash, which is in turn lowering 2009 capital spending projections. We believe this may lead to a slower recovery in semiconductors then anticipated. However, we are focused on securing next generation’s wins during this downturn. Non-semiconductor revenues had another strong showing this quarter, contributing 48 of total sales, with particular strength in solar and across many of our emerging markets. We continue to build and improve our portfolio’s products as we work to expand Advanced Energy’s presence in the non-semi markets. Solar sales…

Thank you, Hans, and good afternoon, everyone. I will review the results for the third quarter of 2008 and discuss our guidance for the fourth quarter. Despite the softening economic environment and the continued weakness in the semiconductor climate, strength in our non-semi markets drove our sales to $84.5 million. With solid 11% growth in non-semi revenue, we achieved a healthy balance between our semi and non-semi business. Year-over-year, revenues declined 7% from the $90.5 million in the third quarter of 2007. This quarter, we have separated our service business from the components of semi and non-semi revenues, as this will provide additional clarity around product revenues versus recurring revenues derived from the service business. Sales to the semiconductor capital equipment market represented 34% of total sales in the quarter at $28.2 million. The industry continued to weaken, driving sales down compared to last quarter’s 40% of sales or $35.3 million. Sales to the non-semiconductor markets were very strong at $40.7 million or 48% of total sales, compared to $36.6 million or 42% of sales in the second quarter of 2008. Sales to the solar market this quarter, which were comprised mostly of sales to our OEM customers that manufacture thin-film deposition tools, represented a record 23% or $19.3 million of total sales versus 14% in the second quarter. Architectural glass sales fell to 3% of total sales versus 4% in the second quarter. Clean technology, which comprises both solar and architectural glass, was 26% of overall sales. Sales to the flat panel display market performed well at 11% of total sales in the third quarter versus 7% in the second quarter. This quarter represented what we believe to be the peak of the first wave of this investment cycle with Gen-8 and Gen-8.5 investment and the result, we expect…

(Operator instructions) The first question is from Brett Hodess. Your line is open. Paul Simons – Merrill Lynch: This is Paul Simons for Brett. Just a question on solar; so the jump you had this quarter obviously was from PV deposition and you have got the new products coming out. What is the mix of solar going to look like by the end of next year? Is it still going to be mostly PV?

Yes, I think as we continue to gain traction in the inverter business, that is still going to be a longer trajectory rollout, so I think it is pretty safe to say that given the activity that has gone on in the deposition tool market that PV will slope down the landscape, but we haven’t given any color as to what percentages those are. Paul Simons – Merrill Lynch: And then you mentioned the credit situation. Do you have any thoughts on what portion of your addressable market do you think is still in financing?

In the solar business? Paul Simons – Merrill Lynch: Yes, in the solar business.

Well, I don’t think that one is in our purview, given the fact that our channel to the market is principally through OEMs. Paul Simons – Merrill Lynch: Okay.

Next question is from Joe Feng. Your line is open, sir. Joe Feng – JP Morgan: Hi, good afternoon. Can you give us some more details on what you are seeing in the fourth quarter, since you are guiding roughly down with 15% to 22%, but solar is going to up, so the fact suggests that semi is going to be down or even worse than that?

I don’t think we gave the direction on really any other market. Semi is the biggest contributor of the downward shift in revenue in the markets though. Joe Feng – JP Morgan: So, in the past, you mentioned that solar will double in 2008 and do you think you are still on track for that guidance?

Yes, we are. Joe Feng – JP Morgan: And then, any thoughts for 2009?

We are really not a point where we are giving an outlook to 2009 solar revenues. Joe Feng – JP Morgan: Okay, and then perhaps. If you can give us your thoughts, do you think there is such a thing as a minimum maintenance for the semiconductor orders that would be sustainable pretty much no matter what goes on out there? And where do you think you are at?

Yes, I understand that question and it is a little bit of a tough question to answer because we have got – you know, every year we live, we have more products to come out of warranty which go into the available market for our service business. So, I think we continue and have continued to see over the last several years’ growth in our service business. It is a nice performing part of our portfolio of businesses, but I don’t know that there is a minimum level of service regarding semi. Certainly, the focus on utilization of fabs and kind of mining productivity out of existing capital structures is favorable to that business today. Joe Feng – JP Morgan: Okay. And perhaps I could follow up with the 200 millimeter memory fabs going out for retiring and it seems accelerating. How is that going to affect your service business moving forward?

If it fully retires, it does not affect, if they would like to use the equipment for other kind of products, they probably need some upgrades and this would be positive for our service business. Joe Feng – JP Morgan: Okay. All right, thank you.

Next question is from Timothy Arcuri. Your line is open, sir. Brian Lee – Citigroup: Hi, guys. This is actually Brian Lee calling in for Tim. I had a couple of quick things. I guess a follow up to the last question. If I look at the last time the semi business got this bad, it was kind of in the 2000, 2001 cycle, and at that point, you guys weren’t breaking out service, and so you were running that kind of sub-$20 million per quarter in the semi business. Is there any sense you can give me as to how much of that was service backing that job?

They were events way before my time, so –

Mine too, by the way.

I don’t think we have got those numbers at our hands. Brian Lee – Citigroup: Well, maybe to ask it a different way, is there anything fundamentally different mix wise or customer exposure wise that would give you confidence that things won’t bottom at similar levels to what you saw in 2000 and 2001?

Because 2001 was 7 years and in the meantime the installed base has grown substantially. So from that point, we would assume that the service business has grown accordingly. And on the other side in the meantime, I think we are working heavily on having more products in the service side, aside from the break in fixed business. So we would assume that there is a substantial difference between 2001 and today. Brian Lee – Citigroup: Okay.

And on the semi new products side as well, I think the influences in the market are a little bit different than they were back in 2001, 2002. So, it is hard really for us to say. Brian Lee – Citigroup: Okay, fair enough. Maybe switching gears here a little bit. Larry, what was breakeven this quarter and what do you expect it to be at the end of Q4?

Breakeven is running a little north of $70 million and we expect it to be in the $70-ish million range by the end of Q4. Brian Lee – Citigroup: Okay, okay. And then, I guess last question from me. How much of the service business is related to the semi side and how much is related to the non-semi side?

Well, I think it is really dictated by our installed base over the years in the concentration of revenues that you guys have seen or that we have seen in the semi market. So, it is predominantly out of the semi side, but we get service revenues from really all parts of our business, so –

It should be more than 80%.

Yes. Brian Lee – Citigroup: 80%/20% would be reasonable. Okay, thanks guys.

Next question is from Jim Covello. Your line is open. Mark Delaney – Goldman Sachs: Hi, guys. This is Mark Delaney calling in for Jim. Thanks for taking my question. First I was hoping maybe you could comment a little bit on the inventory situation, maybe what you are seeing at your customers and then also on where you see it going for your own business and I know you had commented a little bit in the prepared remarks, but some more color on that?

Sure. Inventory with the OEM structure in semi, I assume you are really focusing on the semi side. Inventory with our customers is selling most of that that we do with our large OEMs is just in time, so I think the inventory structure is still running pretty lean. We do have – you know, inside AE, we have some inventory buildup going on as we transition manufacturing from Fort Collins to China and as we transition from say an older product to a newer generation product as well. So some of that is, or I would say most of that what you see in an increase in inventory is probably less market-specific and more AE-specific in moving pieces from either one technology to another or one manufacturing site to another. Mark Delaney – Goldman Sachs: Okay, that is helpful, thanks. And maybe getting back a little bit to the solar business for you guys, can you talk a little bit about the financing that you guys have, it maybe great if you answer that, but wondering do you have any sense of how much of the orders that you guys are getting is related to new capacity and what that might be if there was kind of just the same players as opposed to new players getting into the business?

Well, everything that we are getting as far as new orders is related to new capacity. So it is all CapEx build with either new solar lines going in on the thin-film deposition side, be it whatever technology is being used in the end panel manufacturer’s plans. And also new capacity on the inverter side as well. Mark Delaney – Goldman Sachs: I mean what kind of timeframe would you guys be looking at before you might expect repeat orders in the absence of capacity expansion?

yes, that is going to depend on – you know, we get repeat orders now from the OEM customers, but repeat orders from the same customer through the OEM channel is really a question that we would have to ask one level up in the chain. So, if you take our OEM customers, their level of getting repeat orders is going to dictate our level of repeat orders on the thin-film equipment side. On the inverter side, we have already seen repeat orders from a couple of customers. Mark Delaney – Goldman Sachs: Okay, great. Thank you.

Next question is from Olga Levinson. Your line is open. Olga Levinson – Lehman Brothers: Hi, thanks for taking my question. Larry, you commented on breakeven at the end of December. Can you, given us the various initiatives that you outlined about giving quick numbers, where do you expect breakeven to be, I guess, by mid and by the end of 2009?

Yes, Olga, I don’t have a number for you by mid and the end of 2009. What I can say is the short term cost reduction initiatives that we have put in place to bring us to the $70-ish million at the end of Q4 as we sat down as a management team; some of those are not repeatable or not long term running in nature. So, we will be using Q4 and the time between now and the end of the year to organize the more permanent cost structure initiatives and I think what we will plan on doing is drive in the breakeven point down to the point where we are successful in the market and we still run a healthy business. So I think it is safe to say there is some – and as you all know, as we look at things like headcount, there would be restructuring costs in the near term quarter with a long term permanent benefit from that. So, you know, where we would end up in the middle of the year is going to depend on the time that we take and really what we can push out of the business and the decisions we make between now and the end of the year. Olga Levinson – Lehman Brothers: Okay, and then now that you are breaking out the service portion I guess, can you tell us what it was in the first two quarters of the year and how you expect it to trend in 4Q?

I don’t think, well wait a second, maybe I do have that. Q1 was 17% revenues at $15.2 million; Q2 was 18% of revenues at $16.1 million; and we don’t give specific parts of the business guidance with respect to that. Olga Levinson – Lehman Brothers: Do you expect it to be down, flattish, any direction I guess?

Again, I haven’t given any visibility there. Olga Levinson – Lehman Brothers: Okay, and then, how should we think of the tax rate in 2009?

Tax rate in 2009, I would put it very similar to the Q4 tax rate in the 22%-ish range. Olga Levinson – Lehman Brothers: Okay, great. Thanks so much.

All right.

There are no further questions in the queue.

Okay, thank you everybody for joining our call and we will see you at the upcoming conferences.

This concludes today’s conference call. You may now disconnect.