Good day everyone and welcome to the Veeco fourth quarter and year end 2009 earnings conference call. Today's call is being recorded. 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. Please go ahead.

Thank you operator and thank you all for joining today's call. Joining me today are our CEO, John Peeler, our CFO, Dave Glass, and our Corporate Controller John Kiernan. Today's earning's release was distributed at 4:00 pm this afternoon and is available on Veeco's website. Also posted on our site is a PowerPoint presentation of our fourth quarter financial results. 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 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's 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.

Thanks Deb, and thank you all for joining us today. I am pleased to report that Veeco's fourth quarter revenue was $146 million, a record level for our company, increasing 33% from the fourth quarter of 2008, and 48% sequentially, the strong revenue growth EBITDA of $25.1 million, GAAP EPS of $0.50 per share and non-GAAP EPS of $0.41 per share. Fourth quarter LED and solar revenues were a record $98 million with MOCVD revenues more than doubling sequentially. Revenues by segment were 67% LED and solar, 14% data storage and 19% metrology. All three of our businesses reported improved sequential gross margins with overall Veeco margins increasing to 45%. Veeco's fourth quarter 2009 bookings were $262 million surpassing our prior record of $226 million achieved in the third quarter by 16% and nearly 200% higher than the fourth quarter of 2008, bookings were strong in all Veeco segments. LED and solar orders were $177 million with 16 LED manufacturers placing orders for our MOCVD systems this quarter. We continue to see strong MOCVD demand as LED manufacturers ramp production for laptop and TV backlighting and for general illumination. Veeco received MOCVD orders from key customers in Europe, North America, China and Japan. We're capturing a significant share of the Korean market with Q4 orders from three top tier players and in Taiwan, we also received orders from several leading LED manufactures. MOCVD orders increased sequentially and represented the vast majority of our total $177 million in LED and solar orders. Data storage orders were $53 million, up 200% sequentially as our key hard drive customers invested in Veeco equipment after a year long capital freeze. Q4 was our best data storage order quarter since 2006. In metrology, we experienced a meaningful recovery in business conditions. We booked $32 million…

Thank you, John. I have to say it's a tremendous pleasure joining this team at such an exciting time in Veeco's history. I've been part of this team for just a few weeks now, but have been thoroughly impressed by the breadth of the technology and the solid role the company has established for itself as a leader in the industry. As John mentioned, our fourth quarter revenue was a record $146 million which is up 33% over last year, and 48% sequentially. The LED and solar process equipment segment led the way with growth of 161% year-over-year and 85% sequentially. Although data storage sales of $21 million were only about half the level of a year ago, that business saw very encouraging booking activity toward the end of the quarter. Metrology sales finished the quarter at $27 million about even with Q4, 2008 after showing good signs of recovery all year from the low point in the first quarter. Total bookings for the fourth quarter were $262 million, also a record for the company and led by the LED and solar process equipment segment. Our book-to-bill ratio was about 1.821 for the quarter. Gross profit was $66 million or 45% of sales for the quarter, up compared to 36% a year ago and 41% in the third quarter. This strong margin performance was driven by continued movement toward more outsourcing, higher utilization of fixed costs and lower unit overhead costs. Restructuring and cost savings programs from earlier in the year played an important role in helping to lower our costs. Q4 '09 selling, general and administrative expenses were $26 million or 18% of sales. This is up in dollar terms, but down as a percentage of sales compared to Q4 2008 and third quarter 2009. In Q4 the company…

Ladies and gentlemen the question-and-answer session will be conducted electronically. (Operator instructions). Your first question will come from Bill Ong with Merriman.

My question is on the data storage business, with $53 million in orders is it concentrated among one or two customers or is it more diversified and given that is that the general peak level you saw a few years ago, any color from your customers that you could see even high orders sometime in the near future?

With the $53 million in data storage, the data storage industry has consolidated to the point that they are really only 3 or 4 or 5 customers overall, a few large ones and I think we all know who they are. So the orders are really bunched from the largest players in the industry. I think that 53 included some pent-up demand if you remember in Q1 and Q2 last year, orders were very, very thin and yet major customers moved to pretty close to capacity manufacturing in Q4 and got to about all time records in numbers of disks produced. So I wouldn't be counting on that to repeat because I think it includes some pent-up demand and I can't really speak for the future. I think the good thing is we are very close to our customers. We've restructured the business with much more variable cost and we have continued to invest in R&D. So we were prepared to help our customers, both increase their capacity and improve their aerial density.

My final question is on the LED demand outlook which is clearly strong this year in years to come. But since LED manufacturing is a complex process, where do you believe is the weakest link in the entire LED supply chain that could prevent growth from strengthening even further?

I think, right now its capacity constrain on the MOCVD systems, I can't really speak to the backend processing systems but the MOCVD capacity constraint to the industry are really holding things up and that's been resulting in as you could see tremendous order rate for some time and we see that pattern continuing with a lot of interest in the new K465i, they are early customers of it, they have gotten great results and we are just really pleased with that.

And your next question will come from Chris Blansett with J.P. Morgan.

I have a question related to your situation to be in capacity constraint and then as you grow your shipment ability throughout the year, I assume your competitors will as well. Do you think there comes a point that your customers will have to deal with a wave of equipment that could then slow continued growth of sales as they absorb this equipment in the second half for the year?

Our shipments have been ramping up and we did about 22 in Q3 and 40 in Q4 and we are ramping our capacity to 45, 70 and ultimately a 120, based on what we know now, what we have also done during the year is increased our speed to install these systems and get them in and the customers are able to get them installed and get them operating pretty quickly, so I don't see any real bottlenecks here at this point, but it is a big ramp. So going from to 40 to 120 in a year's time is a lot of ramp up in shipments per quarter, but I don't see the bottleneck, I think we plan to execute and do our best to pull this off.

All right, and the second question I had is related to the diversity of customers you've had previously, and maybe what you have today if you can provide some color, if you see a change in the mix. It sounds like your customer base is broadening out, is that a good way to look at it?

It is broadening, and we came to this market with relatively low market share some number of years back, and believe that in aggregate we've gained significant market share. We think we're continuing to gain market share, so we're penetrating customers that we had not been in before. We're also seeing customers getting into points of real serious manufacturing, and they are looking for more automated solutions and solutions that work really well in a high volume environment. We think that's our tool and so rather than maybe in the past, just make the decisions on what they've used before. We think they are making the decisions to really maximize their volume going forward. As I mentioned in the earlier comments, we've really been winning deals on a global basis, and it really in all regions, we think we've done tremendously well in Korea and China and have been really gaining strength recently in Taiwan. So those are really important areas for us. So, we think we've got good geographical coverage and we are hitting leaders everywhere.

From Lazard Capital Markets we will hear from Daniel Amir.

With the outlook of 400 and 500 MOCVD tools for this year, what do you think needs to happen in order for us to get to the high end and what could happen on the negative side that we would be on the low end of that number for the industry.

I think the biggest growth driver right now is backlighting for TVs and laptops and what I have seen happening over the last six months or nine months and what we hear from our customers is that the adoption rate is really going faster for the adoption of the LEDs into LCD TVs, they are penetrating faster than I think people expected, the TV form factors are very attractive, people like the color and the contrast of the TVs and so what's happening is that the leading companies are pushing very quickly to get more of their models to be LED backlit and you will see a press announcement for instance of Samsung a month or so ago about they are going to get half of their TV models in 2010 to be LED backlit. We hear from some customers, they like to get half of their sales to be LED based, so I think what has to happen to drive these numbers is for this penetration into the TV market to continue and frankly I think it's going a lot faster than was predicted. So, we are on a path for rapid adoption there. We are also seeing more interest for lighting and we are hearing from customers that they are making LEDs for backlighting and lighting and when the backlighting starts to catch up, they cam move their LED production into general illumination market. So, I think there is a second wave coming and people are gearing up for that.

Then in terms of your bookings in the LED side, how should we be looking at trends going forward here, it seems like you have obviously posted very strong bookings in the past couple of quarters, but kind of at the same levels I guess. Is it really related to the capacity that you are ramping or is it customers are going to take a pause at some point this year, how should we look at that?

So, first of all we don't give bookings guidance but what I can tell you, if you look at Q3, they were just tremendous orders there, we followed that up in Q4 and the activity of quoting and penetrating new customers and acceptance and excitement about the new product goes on. So, we see a really good business environment that will likely drive strong orders going forward and we came into the year with a very solid backlog, much more than half of that backlog will shift in the first half of the year, and we think that there is room for more orders to fill our slots in the second half of the year, and we see customers wanting to get those slots.

From Bank of America/Merrill Lynch, we will hear from Krish Sankar. Krish Sankar - Bank of America/Merrill Lynch: John, you said that you went from about eight customers in Q3 to about 16 MOCVD customers in Q4, can you tell a little bit on the color of the customers, were there any repeat or follow-on orders, and also where you're able to get any new customers in Japan?

So, there are some repeat orders in there, and there are some new orders. There were five orders that are very significant and over $10 million. Out of that business, we did win some business in Japan. We're not a big player in Japan though, so we're still relatively small there. I'd say that's the one region where we have the least market share. It definitely is the region where we have the least market share, but good distribution, both across region several major semiconductor companies purchasing for volume production or just getting started, so a really healthy distribution of different types of customers. Krish Sankar - Bank of America/Merrill Lynch: Got it, and can you tell me what in your view where is MOCVD market share exiting 2009?

I think if you look at it on a revenue basis and you just take the publicly reported numbers for Veeco and Axtron and you lay those out and make some assumption for Nippon Sanso, a couple of interesting trends. One is we believe we've been gaining revenue share for each of the quarters in the year and then secondly, we exited the year probably around 33% with a decent estimate for revenue market share, but maybe more interesting is looking at the bookings because the bookings are basically a good bit ahead of the revenue trend and our share is significantly higher there. So we think that's 40 plus percent in recent quarters and I can't speak to Q4 because other companies haven't released their numbers, but Q3 you can do the math yourself on that and figure that out. So we think we are gaining share on both bookings and revenue and have a very attractive ramp here on both sides penetrating new customers where we weren't in before and getting great feedback on the new product. Krish Sankar - Bank of America/Merrill Lynch: ,:

Well, so in the data storage market what's happened is the customers consolidated in 2007, significantly 2007 maybe some in 2006 and as they merge together, there was generally some excess capital in one company or the other and those merged entities used the equipment they had from either company to deliver results and that caused some slowdowns in 2007, it came back up in 2008 as that capacity was digested. It's basically the industry has a smaller number of players now, a much smaller number of players with the top three being Seagate, Western Digital and Hitachi and there are some other guys, but those three make up the bulk of the market. The good thing is, there is now a lot of other people to consolidate, so we are down to a relatively small number of customers, there is a push to improve aerial density and reduce the cost of these disk drives and so there is good growth, Trend Focus says it's kind of 12% unit growth going forward on average multi-years and at the same time, each unit is going to have more storage in it as there is more video storage and more data storage in these devices. So, I think it's a healthy situation at this point and there certainly was a pause following the global economic crisis but that's over, the growth is there and we are the world leader in products to make thin film magnetic heads. So we are seeing both, capacity buys and as well as new technology buys and that's back to where things should be.

From Canaccord Adams, we'll hear from John Dorsheimer.

On the booking side for the MOCVD bookings, do you have firm delivery and deposits on what you reported in terms of bookings? I just want to make sure there hasn't been any change in recognition of what's booked?

No. there has been no change in the policy. Our policy is firm-purchased order and appropriate deposit depending on the customer in the region and then a confirmed delivery date within 12 months, and that's the same policy we've been following.

When we look at the bookings this quarter, on MOCVD again percentage that are K465i tools, is it a vast majority that you're booking right now for the [i tool]?

It's a mix, but a lot of it is K465 with agreement. We can ship K465s, K465is and we can upgrade K465s, to K465is and that's actually a advantage of our modular architecture within the product, so ultimately they will shift to K465is, but it will take some time for that because customers may have one unit qualified and they are likely to re-qualify the new product before they buy more. Although I think some of the customers are hearing about great results from the i and would like to get more of those faster. So it's a mix I can't give you an exact breakdown but it's a mix at this point and ultimately eventually I think a lot of people will come back and ask us to do the upgrade if they didn't get [is] at the beginning.

Last quarter we saw a decent number of i Beta tools that were out there, how many of the beta is converted into multi-system purchases and then as we look forward how many beta tools do you have in large sort of 10 plus type of system customers that have not converted.

Well, first of all we didn't have a whole lot of beta tools. So everyone of them went to a real critical customer in the region of Asia somewhere and everybody that has received those tools has had great comments on them and we've had two major acceptances of those and I expect those customers either have or they will order quantities. We haven't put any out there and had anybody do evaluation and accept it, but not order that's just not something that I think is going to happen.

Less than 5 and what's out there, but we are now getting request for people to basically buy systems to take and evaluate. I wouldn't call them Betas anymore, the products have been accepted by top companies in the world and they are just extremely solid products that came up very quickly and the improvements they gave the customers in yield and productivity were really significant. So, people try them and like them and it's not Beta anymore, we have got a small, very small single digit number of units out there that kind of haven't finished the process and the only reason they haven't finished is they got there later because we put out two at the beginning and then some more after that.

On the solar, I think you had two web coders that were out there in terms of getting some order. Have those been booked in terms of those orders on the solar side?

Yes, we came into the year with two groups, kind of sets of tools on order for China and Korea. Each one was for four tools and that was about $30 million or so of backlog that we came into the year with. Those tools are being fabricated, expect to ship them to the customers in the first half, and get revenue probably in the second half. I mean some of it could come in the first half, but I would say ship in first half revenue in the second half, we continue to see great interest in these tools and think there is good pipeline of potential orders behind us.

If I look at the breakout in terms of the EBIT per segment, it's obvious that MOCVD is really boosting things while, data storage and metrology are carrying relatively low EBITs margin. If we look at the pickup in the data storage bookings, let me ask what lead times are because just by doing the math it would suggest that you should see a pretty drastic pickup in EBIT for the data storage as you start recognizing those revenues or am I missing how something flows through the model?

Data storage, lead times tend to be four, five, six months and the revenue trend recently of data storage is very, very depressed. And the good thing is that those depressed levels, we were profitable at $20 million type of revenue level, and as you can see we just booked $50 million, so you know the revenue is going to come up, and that business should be a very profitable and healthy business and Dave can give you some specifics in the second. On the metrology side, we booked I think it was $32 million. It was the best bookings quarter in six quarters, really driven by new products and again they were profitable here the last two quarters also. So I think that business as we get the revenue up, we did a lot of work on our cost structure last year and in the midst of the great depression that business was hit pretty hard from a lot of angles as the revenue comes up, it's going to achieve very healthy profit levels.

Yes, John let me add just one more, bit of information on timing which might help shed a little bit of light. In data storage just because of the timing of how bookings come in we had a big flush of, but things really freed up toward the end of the fourth quarter. So that might be causing a little bit of the anomaly we see with the big bookings in the fourth quarter.

From UBS we will hear from Ahmar Zaman.

Just real quickly to begin with, you have given us gross margins by segment in the past, will you be willing to share those now?

I don't believe we have provided gross margins by segment in the past.

Just trying to get an idea of the sustainability of bookings going forward. So, you clearly had an amazing booking quarter. I know you don't give booking guidance specifically, but looking at a backlog, can we assume backlog would be up directionally in the first half of 2010?

Yes, I don't how to answer that, but I have given you guidance to tell you the truth. But look it's a great market out there and things look very good to us and the product is getting great reviews and the markets growing and we are gaining share as more things get signed off then we have been gaining share and orders look good to us, so, that's probably the best I can do.

Okay. Can you comment on book to bill in the first quarter?

Not really. We didn't provide that as guidance, I think we gave you a revenue number and we told you that the market environment was good and so we just had a record quarter in bookings, had two record quarters in a row actually. So, have been figured out.

Yes, so far we spent like three times the book of the business feels really good this quarter and similar trends as its been in the last six months so I don't know how more clearly we can state that.

I think operator time for one more if there is one?

And your final question will come from Jesse Pichel with Piper Jaffray.

Congratulations for firing it all cylinders and now with the drive business coming back, I won't ask you about the bookings but let me do ask, is there any risk to the backlog there if the customers wait for the 465i, and can you tell us how is the margin profile directionally of the 65 versus the 65i, because we noticed that your gross margin guidance is down a little bit next quarter which maybe impacting the stock here because I thought it would have been up, so is it because of the i transition, and if not do you any initiatives there to improve it, and then I have a follow-up?

Let me take the first part of this question, and Dave can talk a little more specifically about the gross margins. We've been getting positive pricing on the 465i, and it's a tool with tremendous benefits that with a little higher price, so I think that's been very positive and I think I'll let Dave explain why the margin may be temporarily depressed due to ramping of our manufacturing capacity.

You see in our guidance, you see the margin dipping a little bit in the first quarter, that's because we expect as we ramp up capacity, we're going to incur a number of expenses that would get charged to cost to sales that are period expenses in order to support that ramp, things like training up installation, field support and such, those cost will be incurred in the first quarter, but they are going to be out there in the field and working to bringing the new capacity in Q2 plus.

So you think that Q1 is kind of the margin trough there on that product?

That comment wasn't product specific. That was in general as we support the overall MOCVD ramp we are incurring period costs that will get charged off in Q1 for things like field support and training.

And then we go to the ramp up 70 tools by Q2, yeah.

And then 120 by Q3, or is that by Q4.

End of the year.

End of the year, great. And of the 16 in the quarter the customers can you tell us are those mostly single sourced, I am trying to ascertain if the strength we are seeing is all market related or perhaps there is some share gains as well which you alluded to John.

Most of them are not single sourced I mean there are a few companies in the industry that are single sourced but there are many that are that split the business between a couple of suppliers and that have had may be a few, we have customers that have mostly Veeco tools and a few Axtron tools and we have the opposite but most customers are building an aggressive manufacturing capability are going to buy some of both companies I think that's a pretty normal practice in this type of industry.

Has the i won you a new shared customer?

I believe it has yes you know the eye gets great reception and from there have been some companies that in the past did not buy much from us and some of those companies really like the 465i a whole lot.

Right and finally although you probably won't comment on your positioning relative to a potential applied materials launch should we assume then your guidance assumes a launch and that you have a pretty good read of their beta customers either in Japan or Korea?

Our guidance, we put out guidance, we are pretty confident in our guidance. We hit our guidance every quarter since I have been here in two and a half years. So, we think we have a pretty good read in from the places where we are selling things and the guidance that we give for Q1, those systems were booked long ago, they are being billed, they have deposits there is really, I don't see any impact of applied on any kind of near term business there for us.

Let me take a shot at one more. I understood if you have no comment but Xiamen Sanan publicly announced that it would buy 200 more MOCVD tools and I believe they said that your customer publically. How likely do you think it is that this returning to a near term, new order for you or is that in your bookings guidance now?

I can't really comment on individual customer orders other than we have had past press releases with Xiamen and they are an important customer of ours. Thanks. Okay, thank you for joining us. Operator we are going to rap this up and we'll talk to you again soon.

Ladies and gentlemen that does conclude today's presentation, we do thank everyone for your participation.