Good day everyone and welcome to Veeco Instruments Fourth Quarter 2007 Results Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Senior Vice President of Corporate Communications and Investor Relations Ms. Debra Wasser. Ms. Wasser, please go ahead.

Thank you everyone for joining today at Fourth Quarter 2007 Results Conference Call. Joining me for today’s call are John Peeler, our Chief Executive Officer and Jack Ryan, our Chief Financial Officer. Today’s earnings release was distributed at four p.m. this afternoon. If you have not yet seen the press release, please visit the veeco.com website or call 516-677-0200, extension 1305 to get a copy. We have also prepared an overview of our financial results and segment breakdowns which can be found on the website as well. This call is being recorded by Veeco Instruments and is copyrighted material. It cannot be recorded or rebroadcast without Veeco’s expressed permission. Your participation implies consent to our taping. To the extent of this call discusses expectation about market condition, market acceptance, and future sales of the company’s products, future disclosures, future earnings expectations, or otherwise make statements about the future. Such statements are forward-looking and our subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. This factors are discussed in the business description and management discussion in the analysis section of the company’s report on Form 10-K and annual report to shareholders in our subsequent for quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligations to update any forward-looking statements including those made on these call to reflect future events or circumstances after the date of such statements. During these calls, the management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliations to GAAP measures of performance is available on our website. I would now like to turn the call over to John for opening remarks.

Our agenda for this call is to review the fourth quarter and full year 2007 results, provide outlook and guidance for the first quarter and review activities that have been completed to improve Veeco’s performance. I will also cover market trends and strategies for our business, and provide guidance for 2008. As we stated in our press release, Veeco reported fourth quarter revenue of $107 million, which is in line with our guidance of $1,422,012.00 million, revenues were down 13% form the fourth quarter of 2006, but up 9% on a sequential basis driven by increases in sales to all in-market except semiconductor. Fourth quarters bookings of $115 million were at the high end of guidance, down slightly on a sequential basis after our strong third quarter level and up 5% compared with the fourth quarter of 2006. We have experience continued strength than LED wireless orders, which were again over $40 million including multi-unit orders and orders from several new customers in Asia. Included in the strong LED wireless figure was $5 million in orders for solar applications. Data storage orders of approximately $36 million were flat versus the third quarter and up from the prior year trough of $21 million. Scientific research orders were down slightly versus the prior quarter. The only market which showed a significant bookings downturn was semiconductor which was down 12% sequentially. Veeco’s earnings per share, excluding amortization and restructuring charges was $0.07 per share. This was ahead of our guidance range due to lower than expected operating spending levels and this has been a significant focus for us. Veeco’s full year of 2007 performance was clearly a disappointment with revenues of $403 million, down 9% versus 2006, while we had strong 2007 revenue growth in LED wireless which was up 25%, and Scientific…

For the three months end of December 31, 2007 sales were $106.8 million up sequentially 9.3% but down to 13.2% versus the fourth quarter of 2006. The decrease versus 2006 was due to $10.3 million or 22.4% decrease in metrology sales, principally due to lower sales of automated AFM products to the semiconductor market. Process equipment sales was $71 million, a decrease of $5.9 million, it was 7.7% versus the fourth quarter of 2006 due to the lower sale of the ion beam products and the data storage market. Fourth quarter 2007 orders improved to $114.9 million which is at the high end of our guidance, up 5.3% on the fourth quarter of 2006 but down 2.9% sequentially. Price equipment represented 68% of orders at $78.3 million and metrology represented 32% of orders at $36.6 million. Compared to fourth quarter of 2006, we experienced a 70% increase in data storage orders and a 35% increase in high brightness LED wireless orders, Veeco’s book to bill ratios was 1.08 to 1 for the quarter. Backlog at December 31, 2007 was approximately $107.5 million. Fourth quarter 2007 backlog adjustment totaled $16.2 million primarily consisting of customer orders for the ALD and PVD multi target data storage product lines which were discontinued as part of the company’s previously announced restructuring plan. The associated restructuring charge of $10.6 million in the fourth quarter of 2007 consisted of $7.7 million of inventory and related accruals and fixed assets associated with these data storage product lines, as well as $2.9 million in personnel severance cost resulting from the company’s 7.5% reduction in employment. Gross margin on a non-GAAP basis excluding the $4.8 million inventory charge for the noted discontinued products was $40.5 million or 37.9% of sales for the quarter up sequentially from 36.7% in the…

I would like to take a few moments to describe our strategic initiatives and the market trends impacting our outlook for 2008. Historically, we have presented the company as two product segments, process equipment in Metrology, and four TM markets. This combination ends up being a complex and matrix way of looking at Veeco. In my mind Veeco has three market focused businesses. First, our LED and solar process equipment business comprised of MOCBD and MBE technologies. Second, our data storage process equipment business comprised of our ion beam and slider technologies. And third, our Metrology business. Going forward, we will report our process equipment business in two segments, LED and solar process equipment, and data storage process equipment. And we will report revenue bookings, and profitability information for each. We will of course continue to report results for our metrology business. We have posted some historical data on these three businesses on the website and you will see that the numbers are not that different from the end-market breakdowns used in the past. We believe that this is a much simpler way to look at Veeco with our core technologies aligned with their primary end-markets. We also see these three businesses as having different strategies for growth and profit improvement and believe that this segmentation will make it simpler for you to model the company and track our progress and execution. Veeco’s Senior Management is focused on allocating our resources to best drive growth in financial performance such as where to invest more and where to cut back, and it is taking actions to build and improve each of these three businesses. I will now take a few minutes to outline our focus areas and our market outlook for each business. In LED and solar process equipment, we believe…

(Operator instructions) We will take our first question from Bill Ong with American Technology Research. Bill Ong – American Technology Research: In the MOCVD bookings that you saw, is it mostly by the demand of the Red Orange LED application or more towards the blue green gallium nitrite applications, and how do you see others will play out? Are you expecting these strong bookings deposit and so you accelerate your run off into 2009?

First of all the strength is really across both types of LED’s. We have not seen anything to indicate a pause at this time, but it has happened before in the market and it certainly could happen again. We do enter the year with strong backlog, so we believe we can deliver good results even if there is pause but we have not seen that. Bill Ong – American Technology Research: Do you have a sense of the market share for 2007 right now?

We have tracked the bookings wins and losses versus our competition as we have gone through 2007 and we think on a bookings basis that we have come from about 20% to about 35%. Revenue has clearly lagged the bookings, but we think booking is a good leading indicator for the future. Bill Ong – American Technology Research: Okay and then my last question is on your 2008 revenue guidance, you are expecting data storage be flat of 5% given the Capex for Seagate and Western Digital is kind of flattish in the backend of your load, if that is that, even the flat of 5% is too optimistic maybe some comfort on why you think you may do a little bit better this year?

Comfort really comes from the fact that we entered the year with a strong backlog and we have multiple customers going to eight-inch wafer size and we have both backlog as well as anticipated additional orders for this new technology; so even in a fairly tough capex environment, we think we can deliver at least the bottom of that range and perhaps better.

Our next question comes from Joanne Feeney with FTN Midwest. Joanne Feeney – FTN Midwest Securities Corp: A couple of questions on the HP-LED world, could you give us an update on your gross margin over there. You were making some steady improvements, has that been continuing?

Yes we have made improvements and I think I indicated that in my comment that we had gone from I think with a 30% gross margin to almost 39% gross margin during the course of 2007, and as John and I both indicated, we have expectations that our gross margin will continue improve in the coming 2008 year. Joanne Feeney – FTN Midwest Securities Corp: And so if I understand, the outlook for the process equipment in HP-LED, you were remarking I think John that you saw an external source of about an 8% on an annual growth rate forecasted for the next few years, you are forecasting growth in that segment of 20% or better for 2008, is that because either you expect to take share or you just see this year as a particular year, which capacities constrained in that market?

First of all Joanne, I meant 18% as the kind of overall LED market growth, on the other hand a lot of the segments are growing at 40 or more percent growth, so our growth is based on a couple of things, being able to address the higher growth segments as well as really entering the year with a very strong backlog and a 37% bookings growth last year really positions us for a very good revenue growth this year, so we are confident we are going to keep growing above 20% in this market. Joanne Feeney – FTN Midwest Securities Corp: Do you have any sense of the state of capacity utilization in this segment?

All we know is what our customers tell us by buying additional units and we have seen a good ramp on bookings, we do not know a whole lot more than that. Joanne Feeney – FTN Midwest Securities Corp: Okay and then on the Metrology side do you see, I mean that is obviously traditionally been an area where gross margin is much higher and with auto AFM kind of waiting to see a ramp with the recovery of semiconductors; is there anything else that might go on within that segment that could bring up gross margins or are there other new products that you see bringing up gross margins through this year?

There are, first of all in the instrument side we are anticipating a growth year. Our new and other product line has a better gross margin than prior products so the new products we expect to pull up the gross margin and we are also working on our operational effectiveness. We have added Mark Munch who we are very glad is with us, and we believe that the combination of products put some growth and some improvement in our operations will drive the gross margins on the instrument side and of course on the auto AFM side, we had a real tough revenue year last year. We believe the new insight product will help to produce a better growth year this year and that will produce better gross margins. Joanne Feeney – FTN Midwest Securities Corp: And so in the past Metrology has been just so much better in terms of growth margins and process equipment, today they are almost even; so is it the case that the potential in those two segments is more balanced now than traditionally and with the only exception perhaps being the auto AFM product?

First of all, on the Metrology side, the instruments continue to be much higher gross margin than the process equipment, so we expect that to continue as well as to get improved gross margins in the instrument side. The auto side has pulled everything down this last year, so I expect Metrology over the average to operate at significantly better gross margins than process equipments maybe 8 to 10 points better. Joanne Feeney – FTN Midwest Securities Corp: Okay and then finally, any signs from your customers of an economic downturn? Are you seeing anything concrete that would suggest a slow down across the board here?

We are not; I think the data storage market news is pretty much out there with good announcements, solid end market announcements from Seagate and WD, and we are not seeing any other signs other than continued very tough semiconductor market.

Our next question is from Timothy Arcuri with Citigroup. Timothy Arcuri – Citigroup: Couple of things, first of all John can you give us some update with respect to the potentially pending competition in the MOCVD space; there is a big process tool vendor that has talked about getting into that space, do you see any new entrance in that space?

Well, I think we have long said that this was an attractive market and we would not be surprised if anyone else entered this market and that certainly maybe the case. We do believe there are some significant barriers to entry based on the complexities of the technology and the installed base of Veeco and Asteron, so I do not have any new news, but we will continue to stay on our toes, build our products to be better and work on next generation products. Timothy Arcuri – Citigroup: John on that point, if you look at the valuation of your primary peer in that space, it would imply that you are getting one buy-in Veeco will be getting the entire rest of the business basically for free if you kind of comp up to what they are giving value just on the MOCVD business; as you kind of look at the valuation that the market is paying for the LED space, what sort of strategical turnout, over the long term do you think exist for the other businesses because right now the market does not seem to be giving you any credit whatsoever for anything beyond just your LED market.

We are thinking of a couple of things that we are working on, first of all we just announced that a more clear way to present the company which is actually the way we manage it, which we think will improve visibility in each of the businesses and hopefully that will result in getting a realistic value for the businesses going forward. Secondly, we announced the new approach to providing the segmentation of each because each of these businesses has good opportunities and good potential in its own right, but they each need different things to maximize their value going forward. In high brightness LED and solar, it is continued investment really coming out with the next generation products, building the revenue, gaining share and growing. And in Metrology, as I outlined it is different and in data storage is different, yes, so we are working to get the full value and development of each of these businesses and if the market has not seen that yet, it probably will in a while. Timothy Arcuri – Citigroup: Okay I guess last thing for me, it looks like if you are look at your data storage guidance it looks like basically you are kind of flat lining revenue in the kind of mid-30 range, off of your Q4 booking numbers or are you just kind of assuming that revenue flat lines basically at were the bookings were in Q4, so that kind of being the case; A, do you think that the seasonality in storage is gone and B, we are kind of bouncing along a perpetual bottom here, is there any strategic alternative for that business so that if you even wanted to get rid of it, would it be a product sale or are those products too intertwined with what you do in other parts of the business that you could not outright sell that business?

So first of all on the data storage market, the fourth quarter orders where significantly up from the fourth quarter of last year, so if you look at the order trend, the order trend is improving, the revenue trend does lag the order trend, so based on that it gives us a tough revenue trend in data storage for the first half of 2008, but based on the orders that we have been getting and the backlog that we have, we do believe there is a good recovery in the second half. I would like to think the cyclicality of data storage went away, but there is a long history here that would probably prevent me from drawing that conclusion. So the business, the bookings provide some good insight that we do have a good future here. We have taken a lot of cost out of the business, we have simplified it, we have made it easier to run with less sites; so we do think it is a good business. There is some synergy across our businesses and to data storage, we sell Metrology, and we sell MB products and some cross selling to data storage into other markets. So we do think there are synergies between the business, we are working to get more leverage in our supply chain in some of the areas to get more out of that, and as far as strategic alternative, we are focused on building the business and getting it back to profitability making a healthy business.

Next we will go to Mark Miskelly with JP Morgan

A few question, first of all, I appreciate the newly introduced format for reporting going forward, in tem of judging how you form to your mile posting with respect of segments and taking that one step further as far as data storage, can you maybe just help us understand how your customers are reacting; obviously, you have already talked about the cancellations in term of what you have done with the PVD and LED, but can you talk about their response in terms of, do you see the response in terms of realizing how really focused you guys are in terms of improving the profitability of your data storage business; are they going to work with you more as partners rather than try to beat you over the head on your existing business for continual price declines?

You know Mark the reaction of our customers has actually been quite good; and first of all we did not surprise any of them, we have been working with our customers since early in the fall, as well as up through the last week to talk to our top customers understand best where they really valued us and versus where we were selling them products that were kind of ‘me too’ products and maybe where we had entered the market late or did not have compelling technology or just did no align with what they really saw as their high-value products. So we have a good understanding of where they needed us and wanted us to be. We went through a process of where we were potentially going to exit product lines of working with our customers carefully to do that and I think that is very important. I have seen companies cut product lines and surprise customers and do tremendous damage. In the past, we were very careful not to do that and not to leave our customers high and dry. So this was a carefully worked plan over the prior months to get to a situation that worked for our customers and worked for us. As I have talked to them and our other senior management have talked to the customers, it has been well received, they are looking for us to improve our efficiencies to use more Asian sourcing, to be a more efficient company, so they have been very positive about the changes we are making and feel that it actually aligns with their very competitive environments. The $16 million of backlog reduction was really worked carefully. This was not the we sent them a letter and they responded and cut orders, this was a jointly worked plan with our customers and I think we will work more closely together going forward, so I think we feel good about what we did here and it was hard to do, but I think it was the right thing for the company and will be better for us and our customers in the future.

Okay I appreciate that and then, I may have missed it, but Jack or John did you see what the quantifiable reduction in that business will mean in terms of as we look forward to 2008 in terms of comparison how much of the LED and PVD divestiture hold out revenue on a quarterly basis for 2007?

You know on the revenue side our 0% to 5% growth assume those product lines are going; so the numbers we have issued as far as going forward growth include the impact of this cancelled product lines.

You are not going to give us what it was on a quarterly basis for the four quarters of 2007 those respective product lines being cancelled?

We do not have that on our fingertips frankly; it was not a terribly meaningful number.

If we could shift gears to HP-LED, I just want to get a sense in terms of the visibility around the 20% to 25% revenue growth for this year and getting back to the earlier question, is it more fun to inverse it back and load in them, and the reason I ask that is just because of the Olympics, how much of the Olympics is having an impact here?

First of all, we had a very solid bookings year in 2007. We are beginning to ship the new systems, we have gotten acceptance of our first 465; so the revenue is not back and loaded, it is a loaded throughout the year in a fairly uniform way, and actually as we talked about it, there was kind of a first half trough in data storage, the high brightness LED business is making up for that in a pretty big way to get us where we have ended up to. It is not back and loaded, but there is a lot of backlog to ship so we are comfortable in our numbers.

Okay and did you comment as far as the 20% to 25% gross target, how much of that is based on the contribution from the new products in solar or soon to be announced new products in solar or does it even include?

It is really a combination of our high brightness LED and solar products with a little bit to wireless out of those businesses. It is mainly high brightness LED and solar, we have booked about 20 million of solar in 2007, probably shipped about 10 million of revenue of that, so the solar growth is probably nominally about equivalent in a percentage point to the LED growth; so it is both of those markets are exciting markets and growing together.

Okay just lastly, I know it is kind of a loaded question but Dr. Munch has only been there for a few week, but John when you worked with Dr. Munch, have you kind of recognized Metrology as having the same type of opportunity as maybe data storage where there can be some realignment or refocus in efforts that you could implement over the next 6 to 12 months?

Well first of all Dr. Munch has been here only four days maybe five days including today, him and I spent a lot of time together before he joined the company to make sure this was going to work for both sides; but I think he has seen the opportunity in the business and her has seen that we can make this business operate better and improve the growth and the effectiveness and I am sure he will be working on that in the coming months. I have spent a good bit of time over the last couple of months working with that business myself and we do believe there are opportunities to improve our growth rate as well as to improve our gross margin and our predictability so we can get a good business and we can do good things with it and I think Dr. Munch is exactly the right guy to lead that to the next level.

The next question will come from Matt Petkun with D.A Davidson & Co. Matthew Petkun – D.A Davidson & Co.: Couple of questions for me, first John what do you see in terms of wafer-size transitions in the data storage market and when you look at the implied economics of a shift in the wafer-size, how does that color your view of a market that you think will grow at only 6% gigahertz, industry resources suggest will grow at only 6% gigahertz in and on of itself.

For the wafer-sized changes, we have major multiple customers planning to go larger wafer sizes, generally they will not throw out their existing equipment but they will add 8-inch equipment going forward as they need new capacity and so that presents a significant capital opportunity over a few years. The end market of 6% does not naturally, exactly tie to the capital equipment growth market because there are increased efficiencies in the use of capital, the move to film to sliders, getting more heads on a wafer all make for a more efficient operations, so over the long run we would expect capital to grow at a slightly less rate than the end market rate but we think there is a big opportunity. We do see our customers being very careful with their capital spending and very efficiency oriented, so what we have tried to do with our product lines here is really focus on the ones that align with the technology change or the economic change for our customers so we do think there is a good opportunity here but it is not going to come as a giant wave of dollars, it is going to come as customers start with 8-inch, get their pilot lines up and running, and then the capacity. So we think it givers some good growth going forward and we see that really starting a second half for 2008 there is always some potential, they will pull some of that forward. Matthew Petkun – D.A Davidson & Co.: Okay and then Jack you mentioned opex for Q1 of $39 million roughly; was that including your amortization of intangibles?

No, it is exclusive of that. Matthew Petkun – D.A Davidson & Co.: So you guys should be running at a higher rate than you have for the last couple of quarters and you mentioned some of the increases there but will come back to the level that we saw in Q4 or?

We do have some variable compensation that we did not have in 2007 when there was very little in way of the intensive bonus for management that will be impacting 2008.

Our next question comes from Mark Miller with Brean Murray. Mark Miller – Brean Murray, Carret & Co.: I was wondering if you could break out just for the high brightness LED orders this quarter and last quarter and say you were going with no solar included?

No I think we are not prepared to provide anymore granularity on that area. Mark Miller – Brean Murray, Carret & Co.: Would it be accurate to say your orders declined sequentially just based on high brightness orders from the Third Quarter?

No. I would say that the third quarter or fourth quarter are probably similar in terms of solar orders I do not think that is a corrective function. Mark Miller – Brean Murray, Carret & Co.: Okay finally your competitors working in with universal display on the development or equipment for OLB, do you have anything in align for that there has been some fairly, I know several years away but so many numbers of people are jumping into this market and they feel like to be eventually a replacement for some of the LED applications.

No we are at least in our MOCVD business we are not working on Led’s where we have seen some Metrology sales in some other price sales but not MOCBD. Well I want to thank you for joining us today, so operator that concludes the call.

Thank you. That does conclude this presentation, we appreciate everybody’s participation, have a good day.