Please standby. Good day everyone, welcome to the Veeco first quarter 2009 earnings conference call. (Operator Instructions) For opening remarks and introductions, I would like to turn the conference over to the Senior Vice President of Corporate Communications & Investor Relations, Ms. Debra Wasser. Ms. Wasser, please go ahead.

Thank you operator and thank you all for joining today's call. I'm Debra Wasser, Veeco's Senior Vice President of Investor Relations. Joining me today are John Peeler, our Chief Executive Officer and Jack Ryan, our Chief Financial Officer. Today's earning's release was distributed at 4:00 pm this afternoon and is available on the Veeco website. Also posted on our site is a PowerPoint overview of our first quarter financial results. This call is being recorded by Veeco Instruments and is copyrighted material. It cannot be recorded or rebroadcast without Veeco's express permission. Your participation implies consent to our taping. To the extent that this call discusses expectations about market conditions, market acceptance and future sales of the company's products, future disclosures, future earnings expectations or otherwise makes statements about the future, such statements are forward looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors are discussed in the business description and management discussion and analysis sections of the company's report on form 10-K and annual report to shareholders and in our subsequent quarterly reports on form 10-Q, current reports on form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements including those made on this call to reflect future events or circumstances after the date of such statements. During this call, management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance is available on our website. I will now turn the call over to John for opening remarks.

As expected, the first quarter was extremely challenging for Veeco given the overall economic climate and limited capital spending across our end markets. Veeco's revenues were $63 million, down 39% from the first quarter of last year and non-GAAP loss per share was $0.22. These results were in line with our guidance. Veeco's balance sheet remained healthy, with our quarter end cash balance standing at $93 million after paying an earn out for our 2008 solar acquisition. We are executing on the cost reduction plan we outlined which has included increasing outsourcing, manufacturing site consolidations, operational changes focused on reducing our materials cost and work force reductions. Veeco headcount has decreased from 1,318 on September 30 to 1,091 at the end of March. Based upon our previously announced actions, we anticipate headcount to be at or below 1,000 by the end of the year. These significant cost reduction efforts have already yielded declines in manufacturing overhead, service and operating expenses of over 20% since the third quarter of 2008. We are on track to lower our EBITDA breakeven to below $80 million by the third quarter and maintain our goal to return to profitability by Q4. I'm proud of the progress that's already been made by the Veeco team and confident that we're on track to create a scalable operational model capable of delivering better than 15% EBITDA performance when the market recovers. Veeco's first quarter 2009 bookings were $53 million with weak business conditions in all segments. LED and solar orders were $28 million, down 26% from the first quarter of last year and 35% sequentially. One bright spot in Veeco's first quarter order rate is that even in this difficult time, we continue to build our solar business. We secured a new systems customer, [Diyang] Metals of Korea…

First quarter 2009 in sales were $62.8 million compared to $102.3 million for the first quarter of 2008. We experienced a $19.9 million or 47.3% decline in LED and solar process equipment sales, primarily due to the continuing economic downturn as well as the high brightness LED industry absorption of the significant number of MOCDD systems purchased during the last two years. Data storage product equipment experienced a $7.2 million or 29.8% decline in revenues, primarily attributable to customers freezing their capital equipment spending. In addition, metrology sales declined $12.4 million or 34.2% with weakness in all end markets. First quarter 2009 orders were at $53.1 million, down $56.2 million or 51.4% compared to $109.3 million for the first quarter of 2008 and down $35.4 million or 40% sequentially compared to the $88.5 million in orders for the fourth quarter of 2008. Veeco's book-to-bill ratio was 0.84 to 1 for the quarter. As John has indicated, really, the first quarter represents a bottom in our order level. Backlog at March 31, 2009 was approximately $135.3 million, down $11.9 million from the December 31, 2008 level. First quarter 2009 backlog adjustments totaled $2 million including $1.8 million of order cancellations and $200,000 from changes in foreign currency rates. Gross profit was $20.4 million or 32.4% of sales for the quarter, down compared to the 41.7% in the first quarter of 2008 and down sequentially from 36.4% in the fourth quarter of '08. Decrease in gross margin percentage principally resulted from the significant decrease in sales volume in a mix of lower average selling price tools in optical metrology. LED and solar process equipment gross margins were 29.2%, down compared to 41% in the first quarter of '08 and 35% in the fourth quarter of '08, mainly due to significant decrease in…

Thanks, Jack. Despite the recent pause in customer spending, we continue to invest heavily in R&D in order to remain aligned with technology roadmaps across our three businesses. We anticipate strong multiyear LED industry growth tied to further adoption in applications such as TVs and laptops driving purchases of Veeco MOCVD tools. A recent Credit Suisse report forecasted that 9.3% of mobile PCs were backlit with LEDs in 2008, increasing to 39% this year and 68% in 2010. While there is still a price gap between LED backlights and compact fluorescent lightening, LED advantages such as lightweight, thin form factor, wide color gamut and low power consumption are effectively outweighing the price differential. While cost is still an issue in mainstream LCD TV adoption, this report forecasted that LEDs will achieve 15% penetration by 2011. LED street lighting and outdoor displays are also an emerging growth opportunity serving as growth drivers in the near term. In solar we're excited about customer interest in our CIGS thin film solar equipment product line. We expect Veeco to become a leading provider of equipment for this emerging thin film solar technology. The U.S. Department of Energy's National Renewable Energy Laboratory has claimed a new world record for CIGS thin film solar cell conversion efficiency at 19.9%. Production module efficiencies for CIGS are increasing, many with the aid of Veeco technology. We believe that CIGS will continue to show significant advantages in efficiency and cost per watt of energy produced when compared with amorphous silicon. We also anticipate that CIGS will compete on parity with CdTe without the negative large content of cadmium. In data storage we remain focused on providing customers with solutions that increase aerial density while maximizing their equipment return on capital. For example, we launched a new NEXUS chemical vapor…

(Operator Instructions). Our first question comes from Tim Arcuri – Citi. Timothy Arcuri – Citi: A couple of things, can you give us the backlog number?

Yes. We did give it to you but we'll give it to you again. It was $135.3 million. Timothy Arcuri – Citi: And then also, Jack, can you give us – I know you gave us some of the margin numbers by product line but they don't necessarily add up to what the overall average was, so could you give us those numbers excluding any charges or excluding any one-timers?

Yes. Let's see, excluding one-time charges our data storage gross margin was 36.4%, LED and solar was 29.2% and metrology was 39.1%; overall 34.9%. Timothy Arcuri – Citi: Great. And as you look into June and as you look to a better bookings quarter where do you think that's going to come from? What particular product line?

So we see quite a bit of additional or new activity in the LED space. We have seen an increase in quoting activity in metrology based on our two new products there. Those would be a couple of the examples. There's certainly activity in the data storage area, but we wouldn't be counting on an uptick here. And of course we continue with a lot of activity and quoting in our solar business. Timothy Arcuri – Citi: And then the last thing for me, John, as you get back to – let's just kind of play this out where the revenue goes back to the kind of $100 million per quarter level? You were in the kind of high single digit operating margin range during this past cycle at that level, you know, mid to say high single digits. Are these cost cuts sustainable so you'd be a couple hundred basis points higher than that as the revenue would kind of get back to that level?

There's a chart in our, actually chart 11 in our presentation, and what you'll see there is that at the $110 million we can probably get to 15% EBITDA and at 90 to 100, 6%, 7% or more. The reductions we've done we believe are sustainable because if you remember from the last call we kind of started by redesigning the company at the top level. We reduced the number of business units. We took out layers. We targeted going from six manufacturing sites and process equipment to two, increased our outsourcing so we'd have a higher percentage variable cost, and really a lot of activities as well as taking out a significant number of employees. I think Jack said it adds up to about 24% as it's done. So we do think they're sustainable. Now we have announced that with this earnings announcement some additional reductions that we would call temporary in nature which are some salary reductions and reductions in the 2009 bonus and profit sharing. Those we'll bring back, but our model allows for that and we'd like to bring those temporary ones back as soon as possible. So this has been a real redesign of the company and when we get back to a more normal revenue level we'll be a lot more profitable.

Our next question comes from Joanne Feeney – FTN Equity Capital. Joanne Feeney – FTN Equity Capital Markets: Thank you. Yes, I was wondering if perhaps you could give us some more description of the backlog, $135 million is sort of a nice comfort level given what you're planning to do over the next couple of quarters. Can you tell us what the composition of the backlog looks like in terms of both timing, when those things are likely to ship as a percentage, say, over the next couple of quarters, and then composition in terms of the segments that your backlog is strongest in?

Well, we can tell you that the backlog is predominantly in process equipment. Our metrology business is mostly a turns business, so turns about 50% of it turns within the quarter so the predominant, you know, we've got data storage of about $31 million of backlog and our LED and solar is about $90 million of backlog and it essentially goes out in Q2, Q3 in data storage and through Q4 in LED and solar. Joanne Feeney – FTN Equity Capital Markets: And so the push outs, Jack, that you guys talked about last time in data storage, you see some of that starting to shift this quarter you think?

Well, we said the second half and we're kind of standing by that. Joanne Feeney – FTN Equity Capital Markets: Okay, I'm sorry, you had just mentioned 2Q and 3Q for data storage and so –

I'm sorry. Well, three, yes, 2Q yes. We do have – those were not the push outs. The third quarter were the push outs, so – Joanne Feeney – FTN Equity Capital Markets: And then if I could, I'm curious about where in the segments, metrology, LED solar and data storage you might have most operating leverage or are they roughly the same? As revenues start to come back where might we see operating profit rise more quickly in those three segments?

Well, certainly in general process equipment has a higher material content. I think that's true in capital equipment in general than in metrology and so you do get higher leverage and yes, we've had historically higher gross margins in metrology. But I think that conversely operating spending is – since it is such a wide distribution channel in metrology the cost of distribution and selling is higher there. So it's kind of a mixed bag, frankly, but I would say that we're confident that we can get to – we've developed the model that we have and as John pointed out earlier, where we kind of talk about gross margin improving to the mid-40s. So I think with volume we can get back to that kind of level on a gross margin basis. Joanne Feeney – FTN Equity Capital Markets: And so given the decline to next quarter in gross margin – I think you had 33% to 35% and we're currently at 35% so is there a mix shift or is it volume? What's – actually you should be upon volume this quarter, so why are you expecting a decline in gross margin this quarter?

We actually had some favorable mix in this particular quarter in some of our equipment business in terms of bifurcations and some components business that we're not anticipating as continuing.

Our next question comes from Matt Petkun – D.A. Davidson & Company. Matt Petkun – D.A. Davidson & Company: John, I was wondering if you could give us an update on the competitive landscape in the LED market?

Well there's predominantly two players shipping products, Extron and us, and it's certainly a very competitive marketplace. We – orders started to dry up in kind of late summer before the economic meltdown hit the world and we went through a pretty dry spot in terms of orders. I think we're seeing a lot of activity and we've heard of a lot higher utilization rates in our customers and I saw the first Samsung LED TV announcement over the weekend, so they're actively marketing the TVs based on LED technology and I think that's creating some real competitive pressures to drive purchase of our type of tools. Matt Petkun – D.A. Davidson & Company: And then one other question, just on this new announcement you guys made today for the ability to do CIGS deposition on glass, do you see near-term order activity coming out of that and can you talk about the types of customers who may be selecting those tools?

Well we have been quoting the product for some time. I think if you look at the CIGS market now, probably about 2/3 of it is on glass and maybe 1/3 of it on Web. We think there may be an increased shift to Web coating over the longer term because there's some pretty good economics of the Web coating versus the glass type of system. But there are quite a few companies out there up and running with CIGS on glass. And we see a number of opportunities. We see current customers that have built their own equipment historically that are interested in looking at alternatives to homemade equipment. And we see new companies trying to get into the market and selecting glass. Right now the highest efficiency CIGS are being made on glass. And we also see companies that are in other thin film technologies wanting to move into CIGS and looking for a way to do that quickly. So there's a lot of interest and a lot of activity in the market. Matt Petkun – D.A. Davidson & Company: And then just one final question, a place that's seen a lot of interest and activity, but I'm not sure any real dollars yet. Just wondering if you guys have any opportunities maybe from an internal R&D funding perspective or even from the market opportunity, given new stimulus dollars flowing into all sorts of end markets, most notably for you guys maybe the energy market, but also maybe in some of your metrology segments?

Yes, we do see opportunities. I mentioned the metrology side, there's a NIST in a number of different government agencies. It looks like there's going to be some stimulus funding coming through them. So we see that in a lot of laboratory and university type of applications. And then on the other side, on the energy side, we see potential opportunities in both LED and solar. There's a lot of interest in that. And we've been actively engaged with a number of different states and hope to secure some funding. So that's pretty exciting. We have not baked anything into our plans and so it will be upside for us if we do.

(Operator Instructions) Our next question comes from Brett Hodess – BAS-ML. Brett Hodess – BAS-ML: I was first wondering when you look at the temporary cost cuts going into place today, what revenue level would you get back to before you would start to put some of those costs back in?

We've basically said that we hope to restore some of these things pretty quickly and so we're hopeful that this isn't a year-long thing or anything like that. We're really looking to get the company to EBITDA breakeven though. So if we think we can get to EBITDA breakeven then that would be a good guiding point that we might be able to turn these things back on to a more normal situation. Brett Hodess – BAS-ML: And then you were commenting on the fact that the bigger part of the market in CIGS right now is on glass. Efficiency's higher there; a lot of your customers or a lot of folks are interested in the new FastLine I guess as a result of that on the glass side. How long do you think it takes somebody to evaluate the FastLine for that and make a decision on purchasing?

Good question. It probably takes three months or more, and so I'm going to guess at three to six months. I think it depends a lot on the speed of the company because we see some companies with very fast decision making and others that are slower. And of course part of that depends also on funding, whether they have the funding and the confidence from their board to do it. But I would say we've been talking to customers for quite awhile here so we've had a lot of customer activity. The press release that we put out today is not going to be a big surprise to people that are in interested in this. So we have started on that already. Brett Hodess – BAS-ML: Meaning orders potentially sooner than three to six months because you've already been out there talking to them before this?

Yes, I would hope so. I would hope so and I said that a lot of the customers are on glass. The glass market overall developed earlier, but the glass market has an advantage currently of efficiency because people have gotten the highest efficiencies on glass due to the sodium in the glass having some impact. But the Web coating has some real economic advantages in terms of the capital cost is lower to build a given size factory. It's significantly lower. So I think we're going to see growth in both sides of this, and we had the technology to do both sides, so we've been working on both. We just happened to get to the Web faster due to our acquisition. Brett Hodess – BAS-ML: And then the final question, we were taking a look at the data storage side which is pretty much bouncing along the bottom here and noticed that the correlation on your sales in the data storage market are extremely correlated to the Seagate capital spending every quarter which is no big surprise since they're a top customer. And if you look at Seagate's CapEx and based on their commentary, it does appear that this might have been their bottom quarter on CapEx as well. Would you expect off the bottom there might be a lag between you and their cap spending or do you think you'd stay pretty much in line with it?

That's kind of a guess really because we don't know exactly where their internal discussions are. I will say in the data storage market overall we saw some significant downward trend in non-systems products, or consumables over the last quarter, and went down pretty fast. I don't think that's sustainable to run at those levels. So I think we're expecting that those over time whether it's two quarters out or now or this quarter that both the non-systems will start to move back up as well as systems. And we do have quite a bit of discussions going on related to some key technology products that are already proven that we're hoping to sell to a number of new customers. And with Seagate I would keep in mind that this quarter is the last quarter of their fiscal year, so that may keep some pressure up. But we'll see.

(Operator Instructions) Our next question comes from Andrew Abrams – Avian Securities. Andrew Abrams – Avian Securities: John, I was wondering if you could kind of give a little more detail in the LED side, maybe if you could break down where you thought the interest was? I realize that there is still a lot of capacity out there, but maybe if you could look at it from the merchant side or the captive side. I know there's been activity on the captive side a little more recently. Is there a way you can see into that and give us a little guidance there?

Well I could give you a few hints. One of the new drivers is the TVs and the big TV manufacturers are in Korea that are announcing LED backlit, LCD TV. So clearly a lot of interest there, but that market is not all captive. They're people that are vertically integrating and they're simultaneously buying from other people. So that's one application, but we've seen interest, pretty widespread interest across Asia so far and some in other places too. Andrews Abrams – Avian Securities: In the solar space what kind of expense run rate do you think you're going to be running for the next 6 or 12 months there?

I don't think we kind of provide expense run rate down to that level, but we've got three types of solar technologies. We've got our thermal sources out of our MVE business. That business has done quite well. And we've got our Veeco solar business making the Web coaters, FastFlex and new glass-based systems. We've been investing since we bought the company a year ago. We've transformed it and come out with the CIGS product lines; before that it was just Moly and TCO. So we'll continue to spend. I think we were excited that this quarter we got another systems customer as well as did well on the sources side. Systems revenue for [News Type Systems] will be delayed because it'll take a while to fabricate the units, ship them and get revenue acceptance, and if it's a type of system that we haven't shipped before that revenue will be stretched out a little bit, probably into 2010.

Our next question comes from Patrick Ho – Stifel Nicolaus. Patrick Ho – Stifel Nicolaus: Thanks for taking my questions. First, in terms of your cost cuts and your shifts to outsourcing, can you just give a little color in terms of what type of leverage you're getting from outsourcing? Is it between the different businesses? And secondly, if business does pick up quicker than you anticipate how quickly can you get these, I guess, outsourcing – or how quickly can you get the outsourcing up versus what you've been doing internally, particularly since I believe you've consolidated several of your manufacturing facilities? Again, so if business picks up what will you be able to do? How can you act quickly to a changing environment?

So on the first part on the leverage, what we've been trying to do is simplify the company so we don't have so many sites where we do manufacturing and associated with that it gives you with the number of sites you get a really heavier internal cost structure than if you had all the internal manufacturing in one place. So we're looking to simplify the company. That gives us some cost improvement but another real key element to the outsourcing is just making the costs variable. And we're looking by the end of this year to get to more than 80% variable cost structure on the process equipment side. And that will basically give us a significantly lower breakeven so when the industry cycles in the future we don't feel as much impact on the bottom line. As far as speed of turn up, we think the outsourcing's going to give us really good ability to turn up and to actually be able to turn up faster. So we're not worried about that and we think we can move fast to meet whatever ramps. We don't envision any capacity limitation problems here with – based on the partners we've picked and the arrangements that we have we don't see a capacity limiting problem. Frankly, that wouldn't be the worst problem to have because it would mean a lot of other good things were happening. Patrick Ho – Stifel Nicolaus: That's true. In terms of your EBITDA breakeven of $80 million, can you just clarify what your operating breakeven is and on that operating breakeven what would your gross margin assumption be?

When you say operating breakeven are you talking about GAAP earnings or – I'm not sure what you're referring to there. Patrick Ho – Stifel Nicolaus: Just GAAP, you know, just like the pro forma on an operating basis, what would your revenue levels be because it's – obviously there's got to be some difference between, I guess, EBITDA versus your standard operating number. And then what would the gross margin assumption be on that?

I would say that you'd probably be at a low 40 kind of 40s percentage on a gross margin level and you'd probably be $84 million in revenues.

Our next question comes from [David Duley] – Steelhead Securities. [David Duley] – Steelhead Securities : Most of my questions have been asked, but one clarification is how many shut down days do you plan in this current quarter and how many did you have in the quarter that just ended?

I don't believe we had any in Q1 and I don't believe we have any in Q2. We have – okay. I'm not sure of that, but on a company-wide basis we have one shutdown around the Fourth of July week and we have one around Thanksgiving and we have some vacation policy changes that will push people to take at least three weeks of vacation in the second half of the year and maybe even a little more. So it's not – I wouldn't consider these large shutdowns based on kind of what we're seeing from some other companies in the capital equipment business. They're pretty modest. [David Duley] – Steelhead Securities : Okay, and final clarification for myself when you get to your breakeven levels of revenue and you get to this 40% gross margin range on incremental revenue above this $80 million, what do you think the drop rate is? I'm just trying to compare this to the drop rate that you had in the last upturn.

Yes, you know depending on the mix obviously we get a higher flow through from metrology than we do from equipment, but it's – the equipment you probably get 50% flow through so that the operating, and then you probably have a 35% at the EBITDA line, something like that. And for metrology it would be slightly higher.

And we have no further questions in the queue at this time.

Okay. Well, thank you all for joining us today.

That does conclude today's conference. We appreciate your participation.