Highlights for the fourth quarter include:

Cash increased by $2.2 million (10%) in the quarter, ending the year with $24.0 million;

Revenue of $20.5 million, down 12% compared to the third quarter of 2008;

Operating expenses of $12.1 million declined 15% sequentially; cash operating expenses of $10.1 million;

Gross margin of 42% comprised of 40% product gross margin and 46% service gross margin.

“In a difficult market environment, our fourth quarter results are indicative of the progress we have made to streamline our cost structure, cut expenses and improve our balance sheet management, while continuing to develop and introduce new products,” commented Timothy J. Stultz, president and chief executive officer. “With a backdrop of a 12% decline in revenues from the previous quarter, we increased cash by 10%, cut ongoing operating expenses by 15% and maintained gross margins above 40%. Today, our new products continue to gain traction, and over half of our revenues are derived from sources outside of traditional semiconductor capacity expansion activity.”

“Over the last several quarters we have made significant progress to reduce our cash breakeven level, and in fact we generated cash from operations in the fourth quarter,” added Stultz. “We will continue to seek opportunities to size our spending to the current business environment while maintaining our focus on balance sheet management and competitive products. With the near-term outlook for semiconductor capital spending continuing to weaken, our management efforts are directed at maintaining a sound financial and liquidity position while not compromising our ability to respond to a future recovery in semiconductor capital spending.”

Fourth Quarter 2008 Summary:

Revenues were $20.5 million, down 12% from $23.1 million in the third quarter of 2008 and down 38% from $33.2 million in the fourth quarter of 2007. Included in total sales were a record $7.6 million in service revenues, which benefited by strong upgrade sales in the quarter. Gross margin was 42.1%, down from 44.1% for the prior quarter and 44.1% in the year-ago period. Operating expenses were $12.1 million, a 15% decrease from the prior quarter (exclusive of the restructuring and impairment charges taken in the third quarter of 2008) and down 24% from the year-ago period.

The net loss was $2.6 million, or $0.14 per share. This compares to a net loss of $60.4 million, or $3.25 per share, in the third quarter of 2008 (which included $56.0 million in asset impairment and restructuring charges, equivalent to $3.01 per share) and a net loss of $1.3 million, or $0.07 per share, in the fourth quarter of 2007. The net loss for the fourth quarter of 2008 included $0.7 million for stock-based compensation expense, compared to $1.1 million in the prior quarter and $1.0 million in the year-ago period.

Earnings (loss) before interest, income taxes, depreciation and amortization excluding certain items such as asset impairment, restructuring and acquisition-related charges (EBITDA) for the fourth quarter was $2 million, compared to $2.2 million for the third quarter of 2008 and $1.2 million for the fourth quarter of 2007.

Selected Revenue Segment Information for the Fourth Quarter of 2008:

Revenues by Product:

Automated Metrology: 42%;

Integrated Metrology: 5%;

Materials Characterization: 16%;

Service: 37%.

Revenues by Region:

US: 40%;

Japan: 16%;

South Korea: 33%;

ROW: 11%.

Full Year 2008 Summary:

Gross margin was 43.8%, an increase compared to 42.1% in the prior year. Total research and development, selling, general and administrative expenses were $54.6 million, down 9% from $59.8 million for 2007. Total operating expenses, which include amortization of intangible assets, impairment and restructuring charges, were $128.2 million, compared to $65.7 million in the prior year. The net loss for 2008 included $68.5 million in asset impairment charges, $1.5 million in restructuring charges and $3.9 million in stock-based compensation expense. Earnings (loss) before interest, income taxes, depreciation and amortization excluding certain items such as asset impairment, restructuring and acquisition-related charges (EBITDA) was $5 million for 2008, compared to $6.9 million for 2007.