UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---

FORM 10-Q

---

[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2011

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 000-24838

MATTSON TECHNOLOGY, INC.(Exact name of Registrant as Specified in its Charter)



|Delaware                                                       | 77-0208119                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

47131 Bayside Parkway
Fremont, California      94538

(510) 657-5900

---

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES    x NO     ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
    YES

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer      ̈ | Accelerated filer    x | Non-accelerated filer     ̈ (Do not check if a smaller reporting company) | Smaller reporting company     ̈
|----------------------------- | ---------------------- | ------------------------------------------------------------------------ | ------------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES     ̈ NO    x Number of shares of common stock outstanding as of April 29, 2011: 50,309,590
Note:PDF provided as a courtesy
MATTSON TECHNOLOGY, INC.TABLE OF CONTENTS


PagePART I. FINANCIAL INFORMATIONItem 1.
Financial Statements (unaudited):Condensed Consolidated Statements of Operations
for the Three Months Ended April 3, 2011 and March 28, 2010
2Condensed Consolidated Balance Sheets as of April 3, 2011 and
December 31, 2010
3Condensed Consolidated Statements of Cash Flows for the
Three Months Ended April 3, 2011 and March 28, 2010
4Notes to Condensed Consolidated Financial Statements
5Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
17Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
23Item 4.
Controls and Procedures
24PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
25Item 1A.
Risk Factors
25Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
36Item 6.
Exhibits
37Signatures
381PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)


MATTSON TECHNOLOGY, INC.
                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (unaudited, in thousands, except per share amounts)


Three Months EndedApril 3,

March 28,2011

2010Net sales





$          47,049

$          25,195Cost of sales





33,105

17,433Gross margin





13,944

7,762Operating expenses:Research, development and engineering





6,515

6,406Selling, general and administrative





12,575

12,373Restructuring charges





(65)

16Total operating expenses





19,025

18,795Loss from operations





(5,081)

(11,033)Interest income





27

30Interest expense





(48)

(32)Other income (expense), net





(1,506)

458Loss before income taxes





(6,608)

(10,577)Provision for (benefit from) income taxes





(334)

179Net loss





$           (6,274)

$         (10,756)Net loss per share:Basic and diluted





$              (0.12)

$               (0.22)Shares used in computing net loss per share:Basic and diluted





50,287

49,984The accompanying notes are an integral part of these condensed consolidated financial statements.2MATTSON TECHNOLOGY, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      (unaudited, in thousands, except par value)

April 3,

December 31,2011

2010ASSETSCurrent assets:Cash and cash equivalents

$           20,405

$           16,863Short-term investments

-

2,151Restricted cash

4,028

4,026Accounts receivable, net of allowance for doubtful accountsof $865 as of April 3, 2011 and $681 as of December 31, 2010

18,039

24,127Advance billings

4,810

3,177Inventories

34,201

34,673Prepaid expenses and other current assets

4,701

5,770Total current assets

86,184

90,787Property and equipment, net

13,798

15,011Intangibles, net

938

1,000Other assets

4,762

4,826Total assets

$        105,682

$        111,624LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$           14,909

$           20,860Accrued liabilities

16,051

13,452Deferred revenue

6,746

5,349Total current liabilities

37,706

39,661Income taxes payable, non-current

4,028

4,287Other liabilities

4,987

5,021Total liabilities

46,721

48,969Commitments and contingencies (Note 6)Stockholders' equity:Preferred stock, 2,000 shares authorized; none issued and outstanding

-

-Common stock, par value $0.001, 120,000 shares authorized; 
                 54,485 shares issued and 50,304 shares outstanding as of April 3, 2011;54,440 shares issued and 50,259 shares outstanding as of December 31, 2010

54

54Additional paid-in capital

635,694

634,944Accumulated other comprehensive income

22,037

20,207Treasury stock, 4,181 shares as of April 3, 2011 and December 31, 2010

(37,986)

(37,986)Accumulated deficit

(560,838)

(554,564)Total stockholders' equity

58,961

62,655Total liabilities and stockholders' equity

$        105,682

$        111,624The accompanying notes are an integral part of these condensed consolidated financial statements.3MATTSON TECHNOLOGY, INC.
                     CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (unaudited, in thousands)


Three Months EndedApril 3,

March 28,2011

2010Cash flows from operating activities:Net loss

$        (6,274)

$      (10,756)Adjustments to reconcile net loss to net cashused in operating activities:Allowance for doubtful accounts

177

(481)Depreciation and amoritization

1,665

1,884Inventory valuation charges

1,176

475Stock-based compensation

728

642Deferred income taxes

-

(292)Other non-cash items

-

(39)Changes in assets and liabilities:Accounts receivable

5,914

(4,944)Advance billings

(1,636)

(3,304)Inventories

(24)

2,232Inventories - delivered systems

-

(1,688)Prepaid expenses and other current assets

1,198

20Other assets

101

743Accounts payable

(6,154)

4,182Accrued liabilities

2,343

647Deferred revenue

1,272

3,738Income taxes payable, non-current and other liabilities

(380)

(576)Net cash provided by (used in) operating activities

106

(7,517)Cash flows from investing activities:Purchases of available-for-sale investments

-

(5,097)Maturities of available-for-sale investments

2,151

6,125Increase in restricted cash

(2)

(5)Purchases of property and equipment

(158)

(99)Net cash from investing activities

1,991

924Cash flows from financing activities:Proceeds from stock plans, net

22

(1)Net cash from (used in) financing activities

22

(1)Effect of exchange rate changes on cash and cash equivalents

1,423

(913)Net increase (decrease) in cash and cash equivalents

3,542

(7,507)Cash and cash equivalents, beginning of period

16,863

45,346Cash and cash equivalents, end of period

$        20,405

$        37,839The accompanying notes are an integral part of these condensed consolidated financial statements.4MATTSON TECHNOLOGY, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	Basis of PresentationBasis of PresentationThe accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by such accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for
a fair statement of financial position and operations have been included. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements of
Mattson Technology, Inc. (the "Company" or "Mattson Technology") for the year ended
December 31, 2010, which are included in the Annual Report on Form 10-K filed by the Company with the Securities
and Exchange Commission on March 11, 2011. Certain prior year amounts have been reclassified to conform to the
current presentation.

The condensed consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The results of operations for the three months ended April 3, 2011 are not necessarily
indicative of results that may be expected for future quarters or for the entire year ending December 31, 2011.

Fiscal YearThe Company's fiscal year ends on December 31. The Company closes its first fiscal
quarter on the Sunday closest to March 31.  The second and third fiscal quarters are each 13 weeks long and the fourth
quarter closes on December 31.Management Estimates

The preparation of the condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during
the reported periods. Actual results could differ from those estimates.

Liquidity and Management Plans


At April
3, 2011, the Company had an accumulated deficit of $560.8 million. The Company has incurred operating losses and
generated negative cash flows for each of the last three years. As of April 3, 2011, the Company had cash, cash
equivalents and restricted cash of $24.4 million and working capital of $48.5 million.
The Company believes that these balances will be sufficient to fund its working and other capital requirements
over the course of the next twelve months.
The Company's operations require careful management of its cash and working capital balances. The
Company's liquidity is affected by many factors including, among others, fluctuations in its revenue, gross profits and
operating expenses, as well as changes in its operating assets and liabilities. The cyclicality of the semiconductor
industry makes it difficult to predict the Company's future liquidity needs with certainty. Any upturn in the semiconductor
industry would result in short-term uses of cash to fund inventory purchases and accounts receivable. Alternatively, any
renewed softening in the demand for the Company's products or ineffectiveness of its cost reduction efforts may cause
the Company to incur additional losses in the future and lower its cash balances.

The Company
may need additional funds to support its working capital requirements, operating expenses or for other requirements.
Historically, the Company has relied on a combination of fundraising from the sale and issuance of equity securities and
cash generated from product, service and royalty revenues to provide funding for its operations. The Company intends
to continue to review its expected cash requirements, make commercially reasonable efforts to collect any aged
receivables, and take appropriate cost reduction measures to ensure that the Company has sufficient liquidity. The
Company periodically reviews its liquidity position and may decide to raise5additional funds, and may seek them from a
combination of sources including issuance of equity or debt securities through public or private financings. In the event
additional needs for cash arise, the Company may also seek to raise these funds externally through other means, such
as the sale of assets. The availability of additional financing will depend on a variety of factors, including among others,
market conditions, the general availability of credit to the financial services industry and the Company's credit ratings. As
a consequence, these financing options may not be available on a timely basis, or on terms acceptable to the Company,
and could be dilutive to our stockholders. The Company's current liquidity position may result in risks and uncertainties
affecting its operations and financial position, including the following: the Company may be required to reduce planned
expenditures or investments; the Company may be unable to compete in its newer or developing markets; the Company
may not be able to obtain and maintain normal terms with suppliers; suppliers may require standby letters of credit
before delivering goods and services, which will result in additional demands on the Company's cash; customers may
delay or discontinue entering into contracts with the Company; and the Company's ability to retain management and
other key individuals may be negatively affected. Failure to generate sufficient cash flows from operations, raise
additional capital or reduce spending could have a material adverse effect on the Company's ability to achieve its
intended long-term business objectives.

Revenue RecognitionThe Company derives revenues from these primary sources - equipment (tool)
sales, spare part sales and service and maintenance contracts.  In accordance with the authoritative guidance on
revenue recognition, the Company recognizes revenue on equipment sales as follows: 1) for equipment sales of existing
products with new specifications and for sales of new products, revenue is recognized upon customer acceptance; 2) for
equipment sales to existing customers who have purchased the same equipment with the same specifications and
previously demonstrated acceptance, or equipment sales to new customers purchasing existing products with
established reliability, the Company recognizes revenue on a multiple element approach in which revenue is recognized
upon the delivery of the separate elements to the customer and when the Company receives customer acceptance or is
otherwise released from its customer acceptance obligations.  For multiple element arrangements initiated at or prior to
December 31, 2010, the revenue relating to the undelivered elements is deferred at their estimated fair values until
delivery of the deferred elements; and for arrangements initiated or materially modified subsequent to December 31,
2010 containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling
price method, which allocates revenue to each element using the estimated selling prices for the deliverables when
vendor-specific objective evidence or third-party evidence is not available. The maximum revenue the Company
recognizes on a delivered element is limited to the amount that is not contingent upon the delivery of additional items
such as installation and customer acceptance. Under this approach, generally 90 percent of the total invoice amount is
recognized as revenue upon shipment and transfer of title; 100 percent of the associated tool costs is also recognized
upon shipment; and the remaining portion, generally 10 percent of the total invoice amount, is contingent upon customer
acceptance and is recognized once installation services are completed and final customer acceptance of the tool is
received. From time to time, the Company allows customers to evaluate systems, with the customer maintaining the
right to return the systems at its discretion with limited or no penalty. For this type of arrangement, the Company does
not recognize revenue on the evaluation systems until customer acceptance is received. For spare parts, the Company
recognizes revenue upon shipment. For service and maintenance contracts, the Company recognizes revenue on a
straight-line basis over the service period of the related contract. In all cases, revenue is only recognized when
persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability
is reasonably assured. Accounts receivable for which revenue has not been recognized are classified as advance
billings.

Recent Accounting PronouncementsIn October 2009, the Financial Accounting Standards Board issued an amendment
to its previously released guidance related to revenue recognition for sales arrangements with multiple deliverables.  The
amended guidance requires an entity at the inception of an arrangement to allocate the arrangement's consideration to
all of its deliverables using the relative selling price method, which allows for management's best estimate of a
deliverable's selling price when vendor-specific or other third-party evidence of fair value are not available.  The residual
method of allocating consideration, required under previous guidance, is no longer permitted.  Effective January 1, 2011,
the Company adopted this guidance for revenue arrangements entered into or materially modified on or
after that date.  The adoption of this guidance did not have a material impact on the Company's condensed consolidated
financial statements.

6This guidance did not change the units of accounting for our revenue transactions. We
typically recognize revenueon equipment
sales as follows: 1) for equipment sales of existing products with new specifications and for sales of new products,
revenue is recognized upon customer acceptance; 2) for equipment sales to existing customers who have purchased
the same equipment with the same specifications and previously demonstrated acceptance, or equipment sales to new
customers purchasing existing products with established reliability, we recognize revenue on a multiple element
approach in which we bifurcate such sale transactions into two separate elements.For multiple element arrangements initiated at or prior to December 31, 2010, the revenue relating to the
undelivered elements is deferred at their estimated fair values until delivery of the deferred elements; and for
arrangements initiated or materially modified subsequent to December 31, 2010 containing multiple elements, the
revenue relating to the undelivered elements is deferred using the relative selling price method, which allocates revenue
to each element using the estimated selling prices for the deliverables when vendor-specific objective evidence or third-
party evidence is not available.

There were no other recent accounting pronouncements or changes in accounting
pronouncements during the three months ended April 3, 2011, as compared to the recent accounting pronouncements
described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, that
are of significance or potential significance to the Company.

2.	Balance Sheet Details

The Company's cash and cash equivalents, short-term investments and restricted cash as
of April 3, 2011 and December 31, 2010 are carried at fair market value, as shown below:

April 3,

December 31,2011

2010(thousands)Cash and cash equivalents:Cash in bank

$        14,354

$          13,978Money market funds

6,051

2,885$        20,405

$          16,863Short-term investments:United States agency securities

$                        -

$             2,151Restricted cash:Certificates of deposit

$           4,028

$             4,026As of both April 3, 2011 and December 31, 2010, the Company had restricted cash of $4.0
million, which is primarily secured standby letters of credit provided to certain landlords and vendors.  See Note 6.

The Company did not have any short-term investments as of April 3, 2011.  All short-term
investments as of December 31, 2010were considered available-for-sale and were
marked to market, with unrealized gains and losses recorded as a component of other comprehensive income.  As of
December 31, 2010, all short-term investments had contractual maturities due within one year.

Components of inventories as of April 3, 2011 and December 31, 2010 are shown below:

April 3,

December 31,2011

2010(thousands)Inventories, net:Purchased parts and raw materials

$        15,751

$          14,266Work-in-process

8,238

9,225Finished goods

10,212

11,182$        34,201

$          34,6737Components of property and equipment as of April 3, 2011 and December 31, 2010 are shown below:

April 3,

December 31,2011

2010(thousands)Property and equipment, net:Machinery and equipment

$        54,000

$          52,608Furniture and fixtures

11,151

10,741Leasehold improvements

18,561

17,81383,712

81,162Less: accumulated depreciation

(69,914)

(66,151)$        13,798

$          15,011Components of accrued liabilities as of April 3, 2011 and December 31, 2010 are shown below:

April 3,

December 31,2011

2010(thousands)Accrued liabilities:Compensation and benefits

$           6,083

$             5,941Warranty

2,954

2,539Value-added tax

1,099

748Restructuring

392

436Other

5,523

3,788$        16,051

$          13,452Components of other liabilities as of April 3, 2011 and December 31, 2010 are shown below:

April 3,

December 31,2011

2010(thousands)Other liabilities:Deferred revenue, non-current

$          2,750

$            2,875Other

2,237

2,146$          4,987

$            5,02183.	Fair Value

The Company's cash and cash equivalents, short-term investments and restricted cash
are carried at fair value, and its accounts receivable and accounts payable are valued at their carrying amounts which
approximate fair value due to their short-term nature. The Company had no debt outstanding as of April 3, 2011.
Assets and Liabilities Measured at Fair Value on a Recurring BasisAssets and liabilities measured at fair value on a recurring basis are shown in the
table below by their corresponding balance sheet caption and consisted of the following types of instruments as of April
3, 2011 and December 31, 2010:

April 3, 2011

December 31, 2010Fair Value Measurements at

Fair Value Measurements atReporting Date Using

Reporting Date Using(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

Total(thousands)

(thousands)Assets measured at fair value:Cash equivalents:Money market funds


$   6,051

$                 -

$   6,051

$   2,885

$                 -

$     2,885Short-term investments:United States agency securities


-

-

-

2,151

-

2,151Other assets:Equity instruments


125

-

125

164

-

164Total assets measured at fair value


$   6,176

$                 -

$   6,176

$   5,200

$                 -

$     5,200Liabilities measured at fair value:Other liabilities:Deferred compensation


$          125

$                 -

$          125

$          164

$                 -

$          164Equity instruments in the table above represent plan assets under the Company's Deferred
Compensation Plan, which effectively offset corresponding deferred compensation plan liabilities as of the dates
presented.

4.	Intangible Assets

The Company's identified intangible assets consisted of the following as of April 3, 2011 and December 31, 2010:

April 3,

December 31,2011

2010(thousands)Intangibles, net:Developed technology



$               1,250

$               1,250Accumulated amortization



(312)

(250)$                   938

$               1,000For both the three months ended April 3, 2011 and March 28, 2010, the Company recorded
amortization expenses of approximately $0.1 million.


95.	Restructuring Charges

In 2008 and 2009, the Company implemented several restructuring
programs, resulting in restructuring charges principally comprised of employee severance costs and lease contract
termination costs. The following table summarizes changes in the restructuring accrual for the three months ended April
3, 2011 and March 28, 2010:

Three Months Ended April 3, 2011

Three Months Ended March 28, 2010Employee

Contract



Employee

ContractSeverance

Termination



Severance

TerminationCosts

Costs

Total

Costs

Costs

Total(thousands)

(thousands)Beginning balance
$            94

$         342

$         436

$             89

$         520

$         609Payments
-

-

-

(13)

-

(13)Reserve adjustments
(94)

29

(65)

59

(43)

16Foreign currency changes
-

21

21

-

-

-Ending balance
$              -

$         392

$         392

$          135

$         477

$         612Remaining employee severance cost contingencies were resolved in the first quarter of
2011. The Company is currently engaged in an ongoing negotiation with a landlord with respect to a lease contract
termination, and the payment of the lease termination expense depends on the timing of a final agreement with the
landlord.

6. 	Commitments and Contingencies

Warranty

The following table summarizes changes in the product warranty accrual for the three
months ended April 3, 2011 and March 28, 2010:

Three Months EndedApril 3,

March 28,2011

2010(thousands)Beginning balance





$           2,539

$           1,310Warranties issued in the period





1,089

836Costs to service warranties





(993)

(294)Warranty accrual adjustments





319

(44)Ending balance





$           2,954

$           1,808GuaranteesIn the ordinary course of business, the Company's bank provides standby letters of credit or
other guarantee instruments on behalf of the Company to certain parties as required.  The standby letters of credit are
secured by certificates of deposit, which are classified as restricted cash in the accompanying condensed consolidated
balance sheets.  The Company has never recorded any liability in connection with these guarantee arrangements
beyond what is required to appropriately account for the underlying transaction being guaranteed. The Company does
not believe, based on historical experience and information currently available, that it is probable that any amounts will
be required to be paid under such guarantee arrangements. As of April 3, 2011, the maximum potential amount that the
Company could be required to pay was $3.8 million, the total amount of outstanding standby letters of credit, which were
secured by $4.0 million of certificates of deposit.

In connection with the Company's acquisition of Vortek
Industries, Ltd (Vortek) in 2004, the Company became party to an agreement between Vortek and the Canadian Minister
of Industry (the Ministry) relating to an investment in Vortek by Technology Partnerships Canada. Under the agreement,
as amended, the Company or Vortek (renamed Mattson Technology, Canada, Inc. or "MTC") agreed to various
covenants, including (i) payment by the Company of a royalty to the Ministry of 1.4 percent of revenues from Flash RTP
products, up to a total of CAD 14.3 million (approximately $14.8 million based on the applicable exchange rate as of April 3, 2011), (ii) MTC maintaining a10specified average workforce of employees in Canada through October 27, 2009,
(iii) investment of a certain amount by October 27, 2009 and certain other covenants concerning protection of intellectual
property rights and manufacturing obligations. Under the provisions of this agreement, if the Company, or MTC, did not
materially satisfy its obligations pursuant to the covenants, the Ministry could have demanded payment of liquidated
damages in the amount of CAD 14.3 million less any royalties paid by MTC or the Company to the Ministry. As of
December 31, 2010, the Company is no longer subject to covenants (ii) and (iii), as discussed above; but is still subject
to covenant (i), relating to the payment of royalty on revenues from the Flash RTP product until 2020. However, if MTC
is dissolved, files for bankruptcy or does not materially comply with certain terms and conditions of the contract prior to
its expiration on December 31, 2020, the Company would be subject to liquidated damages in the amount of CAD 14.3
million less any royalties paid by MTC or the Company to the Ministry.

The Company is a party to various agreements, pursuant to which it may be obligated to
indemnify other parties with respect to certain matters. Typically, these obligations arise in the context of contracts under
which the Company may agree to hold other parties harmless against losses arising from a breach of representations or
with respect to certain intellectual property, operations or tax-related matters. The Company's obligations under these
agreements may be limited in terms of time and/or amount, and in some instances, the Company may have defenses to
asserted claims and/or recourse against third parties for payments made by the Company. It is not possible to predict
the maximum potential amount of future payments under these or similar agreements due to the conditional nature of
the Company's obligations and the unique facts and circumstances involved in each particular agreement. Historically,
payments made by the Company under these agreements have not had a material effect on the Company's financial
position, results of operations or cash flows. The Company believes if it were to incur a loss in any of these matters,
such loss would not have a material effect on its financial position, results of operations or cash flows.

LitigationIn the ordinary course of business, the Company is subject to claims and litigation, including
claims that it infringes third party patents, trademarks and other intellectual property rights. Although the Company
believes that it is unlikely that any current claims or actions will have a material adverse impact on its operating results or
its financial position, given the uncertainty of litigation, the Company cannot be certain of this. The defense of claims or
actions against the Company, even if not meritorious, could result in the expenditure of significant financial and
managerial resources.

7.  Stockholders' EquityCommon Stock Repurchase ProgramIn March 2007, the Company's Board of Directors approved a common stock
repurchase plan ("Repurchase Plan") that authorized the repurchase of up to $20.0 million of outstanding
shares of the Company's common stock through open-market purchases or private transactions. In October 2007, the
Company's Board of Directors expanded the Repurchase Plan, authorizing the repurchase of up to an additional $30
million of shares of the Company's common stock through open-market purchases or private transactions. By December
31, 2008, a total of 3.8 million shares had been repurchased against the original and expanded Repurchase Plan, at a
weighted-average purchase price of $9.20 for a total purchase price of approximately $35 million. The Company's last
repurchase of common stock under this plan was in the first quarter of 2008.  In May 2011, the Company terminated the
Repurchase Plan.

Accumulated Other Comprehensive IncomeAccumulated other comprehensive income as of
April 3, 2011 and December 31, 2010 was $22.0 million and $20.2 million, respectively, comprised primarily of
cumulative translation gains.


118.  Employee Stock Plans

As of April 3, 2011, the Company had 1.5 million shares available for future grants
under the 2005 Equity Incentive Plan (the "2005 Plan"). The following table summarizes the combined
activity under all of the Company's equity incentive plans for the three months ended April 3, 2011:

Weighted-

Restricted

Weighted-Awards

Stock

Average

Stock

AverageAvailable

Options

Exercise

Units

Grant DateFor Grant

Outstanding

Price

Outstanding

Fair Value(thousands)

(thousands)



(thousands)Balances at December 31, 2010

2,263

6,278

$          5.51

343

$          3.67Stock options:Granted


(1,193)

1,193

$          2.40

-

-Exercised


-

(35)

$          1.08

-

-Cancelled or forfeited


461

(461)

$          9.31

-

-Restricted stock units:Granted


-

-

-

-

-Released


12

-

-

(17)

$          6.24Cancelled or forfeited


1

-

-

(1)

$          5.86Balances at April 3, 2011

1,544

6,975

$          4.75

325

$          3.53Stock Options


Stock options granted under the 2005 Plan are for periods not to exceed seven years.
Generally, options to purchase stock under the 2005 Plan are granted at exercise prices that are at least 100 percent of
the fair market value of the Company's common stock on the date of grant. Generally, 25 percent of the options vest on
the first anniversary of the vesting commencement date, and the remaining options vest 1/36 per month for the next 36
months thereafter.

During the three months ended April 3, 2011 and March 28, 2010, the Company granted
options to purchase 1.2 million and 1.2 million shares of common stock, respectively, with an estimated total grant-date
fair value of $1.8 million and $2.3 million, respectively.


Supplemental disclosure information about the Company's stock options outstanding as of April 3, 2011:

Weighted-Weighted-

AverageAverage

Remaining

AggregateExercise

Contractual

IntrinsicShares

Price

Life

Value(thousands)



(in years)

(thousands)Stock options:Outstanding options

6,975

$           4.75

4.6

$       1,738Vested and exercisable options

3,765

$           6.38

3.3

$       1,235The aggregate intrinsic value shown in the table above represents the total pretax intrinsic
value, based on the Company's closing stock price of $2.44 as of April 1, 2011, which would have been received by the
option holders had all option holders exercised their options at that date. The Company settles employee exercises of
options with newly issued common shares.

Restricted Stock Units ("RSUs")The Company's 2005 Plan provides for grants of time-based and performance-based RSUs.

12Time-Based Restricted Stock UnitsTime-based RSUs generally vest 25 percent of the units granted on each anniversary of the
vesting commencement date or date of grant. On occasion, the Company grants time-based RSUs for varying purposes
with different vesting schedules. Time-based RSUs granted under the 2005 Plan are counted against the total number of
shares of common stock available for grant under the plan at 1.75 shares for every one share subject thereto.

During the three months ended April 3, 2011 and March 28, 2010, the Company did not
grant any time-based RSUs.   The associated stock-based compensation expense on time-based RSUs is determined
based on the fair value of the Company's common stock on the date of grant of the RSU and recognized over the
vesting period.
Performance-Based Restricted Stock UnitsThe vesting of performance-based RSUs is contingent on the Company's achievement
of certain predetermined financial goals and in some cases, the achievement of certain market performance. The
amount of stock-based compensation expense recognized in any one period can vary based on the achievement or
anticipated achievement of specific performance goals. If a performance goal is not met or is not expected to be met, no
compensation cost would be recognized on the underlying RSUs, and any previously recognized compensation expense
on those RSUs would be reversed.

During the first quarter of 2008, the Company's Board of Directors approved the grant of 0.7
million performance-based RSUs to certain of its senior-level management, with vesting in four equal tranches upon the
achievement of four sequentially increasing revenue performance targets and contingent on the achievement of certain
operating profit margin and stock price thresholds. By December 31, 2008, the Company determined that due to the
deteriorating market conditions during the fourth quarter of 2008, it was not probable that any of the four revenue targets
and the operating profit targets would be met by the specified dates. As a result, the stock-based compensation related
to these RSUs was deemed unrecognizable. Since the fourth quarter of 2008, the Company has cancelled a total of 0.4
million of these performance-based RSUs based on employee terminations, leaving 0.3 million units outstanding as of
April 3, 2011. If and when the Company determines that the related targets are probable of being achieved, the
Company will begin recognizing expenses in the period that such determination is made. The Company did not record
any compensation expense related to these RSUs during the three months ended April 3, 2011 and March 28,
2010.

Supplemental disclosure information about the Company's stock options and RSUs with time-based vesting is as follows:

Three Months EndedApril 3,   2011

March 28,2010(thousands, except weighted-averagefair values)Stock options:Weighted-average fair value of options granted





$               1.51

$               1.89Intrinsic value of options exercised (1)





$                    54

$                114Cash received from options exercised





$                    38

$                    37Restricted stock units with time-based vesting:Weighted-average fair value oftime-based RSUs granted





$                       -

$                       -________________(1)Amount represents the difference between the exercise price of the
option and the Company's closing stock price on the date of exercise.9.	Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the applicable
authoritative guidance, which requires the measurement of stock-based compensation on the date of grant based on the
fair value of the award, and the recognition of the expense over the requisite service period for the employee.

13Valuation AssumptionsThe Company uses the Black-Scholes valuation model to determine the fair value of stock
options. The Black-Scholes model requires the input of subjective assumptions, which are summarized in the table
below for the three months ended April 3, 2011 and March 28, 2010:

Three Months EndedApril 3,   2011

March 28,2010Expected dividend yield





-

-Expected stock price volatility





77%

74%Risk-free interest rate





2.1%

2.4%Expected life of options in years





5

5The Company estimates the expected life of options based on an analysis of its historical
experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of
the option; expected volatility is based on the historical volatility of the Company's common stock; and the risk-free
interest rate is equal to the U.S. Treasury rates, with maturity approximating the expected life of the option. The
Company does not currently pay cash dividends on its common stock and does not anticipate doing so in the
foreseeable future; accordingly, the expected dividend yield is 0 (zero) percent.

The Company's stock-based compensation expense for the three months ended April 3, 2011
and March 28, 2010 was as follows:

Three Months EndedApril 3,   2011

March 28,2010(thousands)Stock-based compensation by type of award:Stock options






$                680

$                537Restricted stock units






38

95Employee stock purchase plan






10

10$                728

$                642Stock-based compensation by category of expense:Cost of sales






$                   34

$                   18Research, development and engineering






126

103Selling, general and administrative






568

521$                728

$                642The Company did not capitalize any stock-based compensation as inventory for the three
months ended April 3, 2011 and March 28, 2010 as such amounts were inconsequential.

As of April 3, 2011, the Company had $3.6 million in unrecognized stock-based
compensation expense related to stock options, net of estimated forfeitures, which will be recognized over a weighted-
average period of 2.6 years.  As of April 3, 2011, the Company had $0.1 million in unrecognized stock-based
compensation expense related to unvested time-based RSUs outstanding, net of estimated forfeitures, which will be
recognized over a weighted-average period of 0.8 years.

10.	Reportable Segments

The Company has one reportable segment - designing, manufacturing and marketing of
advanced fabrication equipment to the semiconductor manufacturing industry.  All Company revenues and profits are
generated from the sales of systems and services in this business segment, whose chief operating decision maker is the
Company's Chief Executive Officer.

14The following shows net sales by geographic areas based on the installation locations of
systems sold and the locations of services rendered:

Three Months EndedApril 3, 2011

March 28, 2010(thousands)

%

(thousands)

%Net sales:United States








$       1,083

2

$           959

4Korea








22,133

47

15,993

63Taiwan








8,954

19

672

3China








6,575

14

1,180

5Japan








2,779

6

1,258

5Other Asia








1,426

3

3,795

15Europe and others








4,099

9

1,338

5$    47,049

100

$    25,195

100In the three months ended April 3, 2011, three customers accounted for 42 percent, 14
percent and 10 percent of net sales, respectively. In the three months ended March 28, 2010, three customers
accounted for 56 percent, 14 percent and 11 percent of net sales, respectively.

As of April 3, 2011, three customers accounted for 37 percent, 12 percent and 11 percent of
the Company's accounts receivable balance, respectively. As of December 31, 2010, four customers accounted for 19
percent, 13 percent, 11 percent and 11 percent of the Company's accounts receivable balance, respectively.

Geographical information relating to the Company's property and equipment, net, as of April
3, 2011 and December 31, 2010 is as follows:

April 3,     2011

December 31,2010(thousands)Property and equipment, net:United States

$               8,748

$              9,880Germany

2,064

2,236Canada

2,633

2,507Others

353

388$            13,798

$           15,01111.	Income Taxes

The provision for (benefit from) income taxes for the three months ended April 3,
2011 and March 28, 2010 was a $0.3 million benefit and a $0.2 million provision, respectively, primarily consisting of
provisions for foreign taxes.  The $0.3 million tax benefit for the three months ended April 3, 2011 includes a $0.4 million
tax benefit related to the release of uncertain tax benefits due to a lapse of the statute of limitations. On a quarterly
basis, the Company evaluates its expected income tax expense or benefit based on its year-to-date operations, and
records an adjustment in the current quarter.  The net tax provision (benefit) is the result of the mix of profits
earned by the Company and its subsidiaries in tax jurisdictions with a broad range of income tax rates.

As of December 31, 2010, the Company had $27.1 million of unrecognized tax benefits
exclusive of interest and penalties described below.  Included in the $27.1 million are approximately $3.0 million
of unrecognized tax benefits (net of federal benefit) that, if recognized, would favorably affect the effective tax rate in a
future period, before consideration of changes in the valuation allowance.  The Company does not anticipate
there will be a significant change in its unrecognized tax benefits within the next twelve months.

The Company's practice is to recognize interest and/or penalties related to unrecognized tax
benefits in income tax expense. As of December 31, 2010, the Company had $1.2 million accrued for estimated interest and $0.115million accrued for estimated penalties. For the three months ended April 3, 2011, the recorded income tax
benefit included estimated interest of $0.1 million.

The Company and its subsidiaries are subject to United States federal income tax as well as
to income taxes in various foreign and state jurisdictions. The Company's federal and state income tax returns are
generally not subject to examination by tax authorities for years before 2007 and 2006, respectively.  The
Company had no tax audits in progress as of April 3, 2011.

12.	Net Loss Per Share

The Company presents both basic and diluted earnings per share on the face of its
condensed consolidated statements of operations.  Basic earnings per share are computed by dividing net income by
the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share are
computed using the weighted-average number of shares of common stock outstanding plus the effect of all dilutive
securities representing potential shares of common stock outstanding during the period. For the purposes of computing
diluted earnings per share, weighted average common stock equivalents do not include stock options with an exercise
price that exceeded the average market price of the Company's common stock for the period.

The following table summarizes the incremental shares of common stock from these
potentially dilutive securities, calculated using the treasury stock method:

Three Months EndedApril 3,

March 28,2011

2010(thousands)Weighted-average shares outstanding - Basic





50,287

49,984Diluted potential common shares from stockoptions and restricted stock units





-

-Weighted-average shares outstanding - Diluted





50,287

49,984All outstanding stock options and restricted stock units are potentially dilutive securities, and as
of April 3, 2011 and March 28, 2010, the combined total of stock options and RSUs outstanding were 7.3 million and 6.4
million, respectively.  However, since the Company had net losses for the three months ended April 3, 2011 and March
28, 2010, no potentially dilutive securities were included in the computation of diluted shares for those years as inclusion
of such shares would have been anti-dilutive.  Accordingly, basic and diluted net loss per share were the same in each
period reported.

13.	Comprehensive Loss

The components of comprehensive loss are:

Three Months EndedApril 3,

March 28,2011

2010(thousands)Net loss





$            (6,274)

$          (10,756)Cumulative translation adjustments





1,828

(1,325)Unrealized investment gain (loss)





2

(9)Comprehensive loss





$            (4,444)

$          (12,090)16Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements, which are subject
to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on management's current expectations and beliefs, including estimates and projections about our
industry. Our forward-looking statements may include statements that relate to our future revenue, gross margin,
earnings, cash flow and cash position; growth of the industry and the size of our served available market; the timing of
significant customer orders for our products; customer acceptance of delivered products and our ability to collect
amounts due upon shipment and upon acceptance; end-user demand for semiconductors, including the growing mobility
electronics industry; customer demand for semiconductor manufacturing equipment, including as a result of greenfield
fab plans; our ability to timely manufacture, deliver and support ordered products; our ability to bring new products to
market, to gain market share with such products and the overall mix of our products; customer rate of adoption of new
technologies; risks inherent in the development of complex technology; the timing and competitiveness of new product
releases by our competitors; margins; product development plans and levels of research, development and engineering
activity; our ability to align our cost structure with market conditions, including outsourcing plans, operating expenses,
and the expected effects, cost and timing of restructurings; tax expenses; excess inventory reserves, including the level
of our vendor commitments as compared to our requirements; economic conditions in general and in our industry; the
impact of any litigation or investigation on our operating results or financial position; any offering and sale of securities
pursuant to our shelf registration statement or otherwise; and the sufficiency of our financial resources to support future
operations and capital expenditures. Forward-looking statements typically are identified by use of terms such as
"anticipates," "expects," "intends," "plans," "seeks,"
"estimates," "believes" and similar expressions, although some forward-looking statements are
expressed differently. These statements are not guarantees of future performance and are subject to numerous risks,
uncertainties and assumptions that are difficult to predict. Such risks and uncertainties include those set forth in Part II,
Item 1A under "Risk Factors" and this Part I, Item 2 under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."  Our actual results could differ materially from those anticipated by
these forward-looking statements. The forward-looking statements in this report speak only as of the time they are made
and do not necessarily reflect our outlook at any other point in time. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future event, or for any other reason.


This discussion should be read in conjunction with the
condensed consolidated financial statements and notes presented in this Quarterly Report on Form 10-Q and the
consolidated financial statements and notes in our last filed Annual Report on Form 10-K for the year ended December
31, 2010 (the "2010 Form 10-K").

We are a supplier of semiconductor wafer processing equipment used in the fabrication
of integrated circuits (ICs). Our manufacturing equipment is used for semiconductor manufacturing and back-end
packaging. Our manufacturing equipment utilizes innovative technology to deliver advanced processing capabilities and
high productivity for the fabrication of current and next-generation ICs. We were incorporated in California in 1988 and
reincorporated in Delaware in 1997.

Our business depends upon capital expenditures by
manufacturers of semiconductor devices. The level of capital expenditures by these manufacturers depends upon the
current and anticipated market demand for such devices. Because the demand for semiconductor devices is highly
cyclical, the demand for wafer processing equipment is also highly cyclical. The semiconductor equipment industry is
typically characterized by wide swings in operating results as the industry moves through its cycle.  In 2010, our
customers responded to an increasing demand for advanced products, expanding production by shrinking the chip size
thus increasing the number of chips that could be produced on the wafer.  This technology-driven phase of the cycle
lasted roughly through the first half of 2010.  As demand for chips continued through 2010, the technology phase of the
expansion was replaced by a capacity-driven phase, in which our customers added to the number of wafers being
produced in their existing factories.  The second half of 2010 was generally characterized by this capacity expansion
phase as customers purchased equipment and in some cases filled their existing facilities to capacity.  This was
especially the case in the foundry and DRAM memory sectors of chip making.  As these facilities were nearing
completion, many of our larger customers started building new facilities or "greenfield" sites in preparation for
their expected next round of expansion.  We anticipate that this greenfield expansion will occur in the 2011-2012
timeframe, and be characterized by continued foundry purchases and a new round of memory expansion primarily
driven by NAND flash technology in support of the new tablet products, smartphones and the solid state drives for computing.

17For 2011, our new positions in etch and RTP, added to our broad strip base, expand our
available market, especially in the new greenfield fabs, and transition us from productivity-driven markets into more
technology-driven markets.  Our etch products, the paradigmE and Alpine, are targeted to meet the stringent
requirements of advanced dielectric etch as well as packaging applications. In the first quarter of 2011, we benefited
from our strategic investment in our etch product line by recording and shipping the largest paradigmE etch order in our
history to a leading semiconductor manufacturer for volume manufacturing of advanced etch applications. We have
grown the etch business to over one-third of our total system revenue for the quarter. The etch market represents a new
market for us, and we believe it is significantly larger than our other market sectors. In addition, we believe our etch
product line will allow us to take better advantage of future cycle ramps for technology-driven purchases in the
semiconductor industry.  During the quarter, we continued to ship our next generation RTP system, the Helios XP, to
several leading semiconductor manufacturers.  We also continued to maintain a strong position in our strip business,
shipping our strip tools to three of the top four foundries, and leveraging the success of our Suprema tool by introducing
the SUPREMA XP5, a more efficient, higher throughput system. We continue to target leading customers with strong
balance sheets and the requisite resources in order to fully leverage our positions for improvements in our results with
the continued strengthening of the global economy.  We are unable to predict the impact, if any, the recent earthquake
and tsunami in Japan will have on our business.  Our customers and suppliers in Japan and elsewhere may be
adversely affected by the consequences of the natural disaster.  As a result, our customers may defer, delay, cancel or
otherwise not place orders with us and our suppliers may defer, delay, cancel or otherwise not deliver components or
subassemblies to us, each of which would cause our revenues to temporarily decline in the second and third quarters of
2011 and negatively impact our results of operations.

As of April 3, 2011, we had an accumulated deficit of $560.8 million. We have incurred
operating losses and generated negative cash flows for each of the last three years.  As of April 3, 2011, we had cash,
cash equivalents and restricted cash of $24.4 million and working capital of $48.5 million.  We believe that these
balances will be sufficient to fund our working and other capital requirements over the course of the next twelve months.
Our operations require careful management of our cash and working capital balances. Our liquidity is affected by many
factors including, among others, fluctuations in our revenue, gross profits and operating expenses, as well as changes in
our operating assets and liabilities. The cyclicality of the semiconductor industry makes it difficult for us to predict our
future liquidity needs with certainty.  We intend to continue to review our expected cash requirements, make
commercially reasonable efforts to collect any aged receivables, and take appropriate cost reduction measures to
ensure that we have sufficient liquidity. We may need additional funds to support our working capital requirements,
operating expenses or for other requirements.  We periodically review our liquidity position to raise additional funds
from a combination of sources including issuance of equity or debt securities through public or private financings. In the
event additional needs for cash arise, we may also seek to raise these funds externally through other means, such as
the sale of assets.  The availability of additional financing will depend on a variety of factors, including among others,
market conditions, the general availability of credit to the financial services industry and our credit ratings.  As a
consequence, these financing options may not be available on a timely basis, or on terms acceptable to us, and could
be dilutive to our stockholders.  If adequate funds are not available or are not available on acceptable terms, our ability
to take advantage of unanticipated opportunities or respond to competitive pressures could be limited. Failure to
generate sufficient cash flows from operations, raise additional capital or reduce spending could have a material adverse
effect on our ability to achieve our intended long-term business objectives.

The success of our business will be dependent on numerous factors, including, but not
limited to, the market demand for semiconductors and semiconductor wafer processing equipment. Such factors will also
include our ability to (a) significantly grow the Company, either organically or through acquisitions, in order to enhance
our competitiveness and profitability; (b) develop and bring to market new products that address our customers' needs;
(c) grow customer loyalty through collaboration with and support of our customers; (d) maintain a cost structure that will
enable us to operate effectively and profitably throughout changing industry cycles and (e) generate the gross profits
necessary to enable us to make the necessary investments in our business.

18Results of Operations

The following table sets forth our condensed consolidated results
of operations for the periods indicated, along with comparative information regarding the absolute and percentage
changes in these amounts:

Three Months EndedApril 3, 2011


March 28, 2010


Change(thousands)

%


(thousands)

%


(thousands)

%Net sales

$   47,049

100.0


$  25,195

100.0


$    21,854

86.7Cost of sales

33,105

70.4


17,433

69.2


15,672

89.9Gross profit

13,944

29.6


7,762

30.8


6,182

79.6Operating expenses:Research, development and engineering

6,515

13.8


6,406

25.4


109

1.7Selling, general and administrative

12,575

26.7


12,373

49.1


202

1.6Restructuring charges

(65)

(0.1)


16

0.1


(81)

n/m
(1)Total operating expenses

19,025

40.4


18,795

74.6


230

1.2Loss from operations

(5,081)

(10.8)


(11,033)

(43.8)


5,952

(53.9)Interest income

27

0.1


30

0.1


(3)

(10.0)Interest expense

(48)

(0.1)


(32)

(0.1)


(16)

50.0Other income (expense), net

(1,506)

(3.2)


458

1.8


(1,964)

n/m
(1)Loss before income taxes

(6,608)

(14.0)


(10,577)

(42.0)


3,969

(37.5)Provision for income taxes

(334)

(0.7)


179

0.7


(513)

n/m
(1)Net loss

$   (6,274)

(13.3)


$ (10,756)

(42.7)


$    4,482

(41.7)___________(1)Not meaningful.Net SalesNet sales were $47.0 million for the three months ended April 3, 2011, an increase of
approximately $21.9 million compared to $25.2 million for the three months ended March 28, 2010.  The increase
reflects the improvement in the global economy and the semiconductor equipment sector, with our customers continuing
to fund productivity- and technology-driven equipment purchases.  The increase in net sales for the first quarter of 2011
was primarily due to significant sales of our etch products, coupled with increases in sales of substantially all of our other
products.  In the first quarter of 2011, we booked and shipped the largest etch order in our history, contributing over one-
third of our quarter's total system revenue.

Cost of SalesCost of sales was $33.1 million for the three months ended April 3, 2011, an
increase of $15.7 million compared to $17.4 million for the three months ended March 28, 2010.  The increase was
primarily due to costs associated with increased product sales resulting from improved market conditions.  Partially
offsetting the year-over-year increase in product costs, cost of sales for the three months ended March 28, 2010
included a $0.9 million charge for under-absorbed overhead, which due to higher manufacturing volumes was not
required in the current quarter.

Gross ProfitGross profit for the three months ended April 3, 2011 was $13.9 million, an increase of $6.1
million compared to $7.8 million for the three months ended March 28, 2010.  The increase was primarily due to the
increase in sales and the reduction in under-absorbed overhead costs.

For the three months ended April 3, 2011 and March 28, 2010, we sold $1.8 million and
$1.1 million of inventories, respectively, that were previously written-off as part of excess and obsolete inventory.  The
benefit derived from the sale of this inventory was partially offset by inventory valuation charges of $1.2 million and $0.5
million for the three months ended April 3, 2011 and March 28, 2010, respectively, for other inventory deemed to be
excess and obsolete.

19Gross margin rate for the three months ended April 3, 2011 was approximately 30 percent,
a slight decrease from the 31 percent rate for the three months ended March 28, 2010.  The decrease was primarily due
to the mix of product shipments in the first quarter of 2011, which included a large shipment of our lower margin Aspen 3
tools.  The gross margin rate was also impacted unfavorably in the current quarter by warranty cost overruns in servicing
our new products.

Research, Development and EngineeringResearch, development and engineering expenses were
$6.5 million for the three months ended April 3, 2011, an increase of $0.1 million or 2 percent, compared to $6.4 million
for the three months ended March 28, 2010.  Spending levels were generally flat year over year across all expense
categories.

Selling, General and Administrative

Selling, general and administrative expenses were $12.6 million for the three months ended
April 3, 2011, an increase of $0.2 million or 2 percent, compared to $12.4 million for the three months ended March 28,
2010.   The increase was primarily due to a $0.7 million change in the provision to the allowance for doubtful accounts,
caused by a $0.5 million adjustment to lower the allowance in the first quarter of 2010 and a $0.2 million charge to
increase the allowance in the current quarter.  This increase was partially offset by a decrease in travel costs of $0.1
million and a decrease of tariffs and duties of $0.5 million.

Restructuring Charges

Amounts charged to restructuring reserves for both the three months ended April 3,
2011 and March 28, 2010 were only nominal adjustments related to the restructuring programs we implemented in 2008
and 2009.

Remaining employee severance cost contingencies were resolved in the first quarter of
2011. We are currently engaged in an ongoing negotiation with a landlord with respect to the lease termination, and the
payment of the lease termination expense will depend on the timing of a final agreement with the landlord.

Interest and Other Income (Expense), Net

Interest income for both the three months ended April 3, 2011 and March 28, 2010 were
nominal, reflecting low levels of investments and the continuation of low interest rates.

Other income (expense), net was $1.5 million expense for the three months ended April 3,
2011, which included $1.1 million of foreign exchange losses primarily related to liabilities denominated in Euros at our
U.S. operations during the period when the U.S. dollar weakened 8 percent against the Euro.  Other income (expense),
net was $0.5 million income for the three months ended March 28, 2010, which included $0.3 million of foreign exchange
gains.

Provision for Income Taxes

The provision for (benefit from) income taxes was a $0.3 million benefit and a $0.2 million
provision for the three months ended April 3, 2011 and March 28, 2010, respectively, primarily related to foreign taxes.
The $0.3 million tax benefit for the three months ended April 3, 2011 includes a $0.4 million tax benefit related to the
release of uncertain tax benefits due to a lapse of the statute of limitations. On a quarterly basis, we evaluate our
expected income tax expense or benefit based on our year-to-date operations, and we record an adjustment in the
current quarter.  The net tax provision (benefit) is the result of the mix of profits earned by us and our
subsidiaries in tax jurisdictions with a broad range of income tax rates.

20

---



Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss our condensed consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments, including those
related to reserves for excess and obsolete inventory, warranty obligations, bad debts, intangible assets, income taxes,
restructuring costs, contingencies and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under the circumstances. These form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.

Consistent with our 2010 Form 10-K, we consider certain accounting policies for the
following areas as critical to our business operations and an understanding of our results of operations:

- Revenue Recognition
- Allowance for Doubtful Accounts
- Warranty
- Inventories and Inventory Valuation
- Fair Value Measurement of Assets and Liabilities
- Impairment of Long-Lived Assets
- Restructuring
- Income Taxes
- Stock-based Compensation

In the first quarter of 2011, we adopted guidance related to revenue recognition
for sales arrangements with multiple deliverables.  The impact of this adoption on our revenue recognition policy is
described in further detail in our Recent Accounting Pronouncements and Accounting Changes
section. There have been no other material changes from the methodology applied by management for critical
accounting estimates previously disclosed in our 2010 Form 10-K.

Liquidity and Capital Resources

Our cash, cash equivalents, short-term investments and restricted cash were $24.4 million
as of April 3, 2011, an increase of $1.4 million from $23.0 million as of December 31, 2010. We had restricted
cash of $4.0 million as of April 3, 2011, which primarily secures letters of credit provided to certain landlords and
vendors.  Stockholders' equity as of April 3, 2011 was $59.0 million compared to $62.7 million as of December 31, 2010.
Working capital as of April 3, 2011 was $48.5 million compared to $51.1 million as of December 31, 2010.

Liquidity and Capital Resources Outlook

At April 3, 2011, we had an accumulated deficit of $560.8 million. We have incurred
operating losses and generated negative cash flows for each of the last three years.Our operations require
careful management of our cash and working capital balances. Our liquidity is affected by many factors including, among
others, fluctuations in our revenue, gross profits and operating expenses, as well as changes in our operating assets
and liabilities. The cyclicality of the semiconductor industry makes it difficult for us to predict our future liquidity needs
with certainty. Any upturn in the semiconductor industry would result in short-term uses of our cash to fund inventory
purchases and accounts receivable. Alternatively, any renewed softening in the demand for our products or
ineffectiveness of our cost reduction efforts may cause us to incur additional losses in the future and lower our cash balances.

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We may need additional funds to support our working capital requirements, operating expenses
or for other requirements. Historically, we have relied on a combination of fundraising from the sale and issuance of
equity securities and cash generated from product, service and royalty revenues to provide funding for our operations.
We intend to continue to review our expected cash requirements, make commercially reasonable efforts to collect any
aged receivables, and take appropriate cost reduction measures to ensure that we have sufficient liquidity. We
periodically review our liquidity position and may seek to raise additional fundsfrom a
combination of sources including issuance of equity or debt securities through public or private financings. In the event
additional needs for cash arise, we may also seek to raise these funds externally through other means, such as the sale
of assets. The availability of additional financing will depend on a variety of factors, including among others, market
conditions, the general availability of credit to the financial services industry and our credit ratings. As a consequence,
these financing options may not be available to us on a timely basis, or on terms acceptable to us, and could be dilutive
to our stockholders. Our current liquidity position may result in risks and uncertainties affecting our operations and
financial position, including the following: we may be required to reduce planned expenditures or investments; we may
be unable to compete in our newer or developing markets; we may not be able to obtain and maintain normal terms with
suppliers; suppliers may require standby letters of credit before delivering goods and services, which will result in
additional demands on our cash; customers may delay or discontinue entering into contracts with us; and our ability to
retain management and other key individuals may be negatively affected. Failure to generate sufficient cash flows from
operations, raise additional capital or reduce spending could have a material adverse effect on our ability to achieve our
intended long-term business objectives.

Off-Balance Sheet Arrangements

As of April 3, 2011, we did not have any significant "off-balance sheet"
arrangements, as defined in Item 303 (a)(4)(ii) of Regulation S-K.

Contractual Obligations

Under accounting principles generally accepted in the United States of America,
certain obligations and commitments are not required to be included in our consolidated balance sheets. These
obligations and commitments, while entered into in the normal course of business, may have a material impact on our
liquidity. For further discussion of our contractual obligations, see our 2010 Form 10-K.

Cash Flows from Operating Activities

Net cash provided by operations of $0.1 million for the three months ended April 3,
2011 consisted primarily of a net loss of $6.3 million offset by $3.7 million of non-cash charges and $2.6 million of cash
flow increases reflected in the net change in assets and liabilities.  Non-cash charges consisted primarily of $1.7 million
of depreciation and amortization, $1.2 million of inventory valuation charges, $0.7 million of stock-based compensation
and $0.2 million of allowance for doubtful accounts provision.   Cash flow increases resulting from the net change in
assets and liabilities primarily consisted of a $5.9 million decrease in accounts receivable, a $2.3 million increase in
accrued liabilities, a $1.3 million increase in deferred revenue and a $1.2 million decrease in prepaid expenses and other
current assets, partially offset by a $6.2 million decrease in accounts payable, a $1.6 million increase in advanced
billings and a $0.4 million decrease in income taxes payable, non-current and other liabilities.

Net cash used in operations of $7.5 million for the three months ended March 28, 2010
consisted primarily of net loss of $10.8 million, partially offset by $2.2 million of non-cash charges and $1.1 million of
cash flow increases reflected in the net change in assets and liabilities.  Non-cash charges consisted primarily of $1.9
million of depreciation and amortization, $0.6 million of stock-based compensation and $0.5 million of inventory valuation
charges, partially offset by $0.5 million of credits to the allowance for doubtful accounts resulting from collection of
customer accounts previously provided for and $0.3 million of income tax benefit to increase deferred income tax assets.
Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a $4.2 million increase
in accounts payable, a $3.7 million increase in deferred revenue, a $2.2 million decrease in inventories, a $0.7 million
decrease in other assets and a $0.6 million increase in accrued liabilities, partially offset by a $4.9 million increase in
accounts receivable, a $3.3 million increase in advanced billings, a $1.7 million increase in inventories-delivered
systems and a $0.6 million decrease in income taxes payable, non-current and other liabilities.  The increases in
accounts receivable and accounts payable reflect the increase in revenue volumes during the first quarter of 2010.  The
increases in advance billings, inventory - delivered systems and deferred revenue were due to an increase in systems
shipped during the quarter for which revenue was deferred.

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We expect that cash provided by or used by operating activities may fluctuate in future
periods as a result of a number of factors including fluctuations in our net sales and operating results, amount of revenue
deferred, inventory purchases, collection of accounts receivable and timing of payments.

Cash Flows from Investing Activities

Net cash provided by investing activities of $2.0 million for the three months ended April 3, 2011
consisted primarily of $2.2 million of proceeds from maturities of available-for-sale investments, partially offset by $0.2
million of capital spending.

Net cash provided by investing activities of $0.9 million for the three months ended
March 28, 2010 consisted primarily of $1.0 million of proceeds in excess of purchases of available-for-sale investments,
partially offset by $0.1 million of capital spending.

Cash Flows from Financing Activities

Cash flows related to financing activities for the both the three months ended April 3, 2011
and March 28, 2010 were not material.

Recent Accounting Pronouncements and Accounting Changes

In October 2009, the Financial Accounting Standards Board issued an
amendment to its previously released guidance related to revenue recognition for sales arrangements with multiple
deliverables.  The amended guidance requires an entity at the inception of an arrangement to allocate the arrangement's
consideration to all of its deliverables using the relative selling price method, which allows for management's best
estimate of a deliverable's selling price when vendor-specific or other third-party evidence of fair value are not available.
The residual method of allocating consideration, required under previous guidance, is no longer permitted.
We adopted this guidance on January 1, 2011 for revenue arrangements entered into or materially modified
on or after that date.  The adoption of this guidance did not have a material impact on our condensed consolidated
financial statements.

This guidance did not change the units of accounting for our revenue transactions. We
typically recognize revenue

There are no other recent accounting pronouncements or changes in accounting
pronouncements during the three months ended April 3, 2011 that are of significance or potential significance to the
Company, in addition to the recent accounting pronouncements described in our 2010 Form 10-K.

Item 3.   	Quantitative and Qualitative
Disclosures About Market Risk

Interest Rate Risk

As of April 3, 2011, our $6.1 million investment portfolio consisted entirely of highly liquid
money market funds with original maturities of 90 days or less, which we classify as cash equivalents.  Based on the
size of our investment portfolio and the short-term nature of cash equivalents, we believe we currently have only nominal
risk of fluctuations in interest rates.  Historically, we have also invested in marketable securities with maturity dates
within one year from date of purchase, which have a greater exposure to potential losses arising from changes in
interest rates.

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Our investment objective is to achieve the maximum return compatible with capital
preservation and our liquidity requirements. Our strategy is to invest our cash in a manner that preserves capital,
maintains sufficient liquidity to meet our cash requirements and maximizes yields consistent with approved credit risks.
We place our investments with high credit quality issuers and, by policy, limit the amount of our credit exposure to any
one issuer. Our portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio
liquidity. We consider investments in instruments purchased with an original maturity of 90 days or less to be
cash equivalents and we classify our short-term investments as available-for-sale.

Our cash equivalents and short-term investment portfolios strategy is to invest primarily in
money market funds, commercial paper, corporate debt securities, and U.S. government and government-
sponsored debt securities. Our short-term investments are reported at fair value with unrealized gains and losses, net of
tax, included in accumulated other comprehensive income within stockholders' equity in the condensed consolidated
balance sheets. The amortization of premiums and discounts on the investments, realized gains and losses, and
declines in value judged to be other-than-temporary on available-for-sale securities are included in other income
(expense), net in the condensed consolidated statements of operations.

Foreign Currency Risk

The functional currency of our foreign subsidiaries is their local currencies. Accordingly, all
assets and liabilities of these foreign operations are translated using exchange rates in effect at the end of the period,
and revenues and costs are translated using average exchange rates for the period. Gains or losses from translation of
foreign operations where the local currencies are the functional currency are included as a component of accumulated
other comprehensive income. Foreign currency transaction gains and losses are recognized in the condensed
consolidated statements of operations as they are incurred. Because much of our revenues and capital spending are
transacted in U.S. dollars, we are subject to fluctuations in foreign currency exchange rates that could have a material
adverse affect on our overall financial position, results of operations or cash flows, depending on the strength of the U.S.
dollar relative to the currencies of other countries in which we operate. Exchange rate fluctuations of greater than ten
percent, primarily for the U.S. dollar relative to the Euro or the Canadian dollar, could have a material impact on our
financial statements.

The U.S dollar weakened 8 percent against the Euro during the three months ended April 3,
2011.  Realized and unrealized foreign currency exchange losses of $1.1 million for the three months ended April 3,
2011, included in the condensed consolidated statements of operations, were primarily related to liabilities denominated
in Euros at our U.S. operations during the period.  Cumulative translation adjustment gains of $1.8 million, included in
comprehensive loss for the three months ended April 3, 2011, were primarily due to assets denominated in Euros at our
foreign operations, which resulted in an increase in cumulative translation adjustments to $22.1 million as of April 3,
2011, compared to $20.3 million as of December 31, 2010.

Item 4.   	Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of
the quarterly period covered by this report. Our disclosure controls and procedures are intended to ensure that the
information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is
(i) recorded, processed, summarized and reported within the time periods specified in the SEC's
rules and forms and (ii) accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow
timely decisions regarding required disclosures. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period
covered by this report.

It should be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the
design of any control system is based in part upon certain assumptions about the likelihood of future events.

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Quarterly Evaluation of Changes in Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change
occurred during the first quarter of 2011 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting. Based on that evaluation, our management concluded that there was no such
change during that quarter.

PART II.  OTHER INFORMATION

Item 1.  	Legal Proceedings

In the ordinary course of business, we are subject to claims and litigation, including claims
that we infringe third party patents, trademarks and other intellectual property rights. Although we believe that it is
unlikely that any current claims or actions will have a material adverse impact on our operating results or our financial
position, given the uncertainty of litigation, we cannot be certain. Moreover, the defense of claims or actions against us,
even if not meritorious, could result in the expenditure of significant financial and managerial resources.

Our involvement in any patent dispute, other intellectual property dispute or action to protect
trade secrets and know-how could result in a material adverse effect on our business. Adverse determinations in current
litigation or any other litigation in which we may become involved could subject us to significant liabilities to third parties,
require us to grant licenses to or seek licenses from third parties and prevent us from manufacturing and selling our
products. Any of these situations could have a material adverse effect on our business.

Item 1A.     Risk Factors

Because of the following factors, as well as other variables affecting our operating
results, cash flows and financial condition, past financial performance may not be a reliable indicator of future
performance, and historical trends should not be used to anticipate results or trends in the future periods.  Other events
that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations, cash
flows and financial condition. The risk factors set forth below include any material changes to, and supersede the
description of, the risk factors disclosed in Item 1A. of our 2010 Form 10-K.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

We are dependent on our revenue and the success of our cost reduction measures to
ensure adequate liquidity and capital resources during the next twelve months.

As of April 3, 2011, we had an accumulated deficit of $560.8 million.  We have incurred
operating losses and generated negative cash flows for each of the last three years.  As of April 3, 2011, we had cash,
cash equivalents and restricted cash of $24.4 million and working capital of $48.5 million.  Our operations require careful
management of our cash and working capital balances. Our liquidity is affected by many factors including, among
others, fluctuations in our revenue, gross profits and operating expenses, as well as changes in our operating assets
and liabilities. The cyclicality of the semiconductor industry makes it difficult for us to predict our future liquidity needs
with certainty. Any upturn in the semiconductor industry would result in short-term uses of our cash to fund inventory
purchases and accounts receivable. Alternatively, any renewed softening in the demand for our products or
ineffectiveness of our cost reduction efforts may cause us to incur additional losses in the future and lower our cash
balances.

We may need additional funds to support our working capital requirements, operating expenses
or for other requirements. Historically, we have relied on a combination of fundraising from the sale and issuance of
equity securities and cash generated from product, service and royalty revenues to provide funding for our operations.
We periodically review our liquidity position and may seek to raise additional funds from a combination of sources
including issuance of equity or debt securities through public or private financings.  In the event additional needs for
cash arise, we may also seek to raise these funds externally through other means, such as the sale of assets. The
availability of additional financing will depend on a variety of factors, including among others, market conditions, the
general availability of credit to the financial services industry and our credit ratings. As a consequence, these financing
options may not be available to us on a timely basis, or on terms acceptable to us, and could be dilutive to

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our stockholders. Our current liquidity position may result in risks and uncertainties affecting our operations and financial
position, including the following:

- we may be required to reduce planned expenditures or
investments;

- we may be unable to compete in our newer or developing markets;

- we may not be able to obtain and maintain normal terms with suppliers;

- suppliers may require standby letters of credit before delivering
goods and services, which will result in additional demands on our cash;

- customers may delay or discontinue entering into contracts with
us; and

- our ability to retain management and other key individuals may be negatively affected.

Failure to generate sufficient cash flows from operations, raise additional capital or reduce
spending could have a material adverse effect on our ability to achieve our intended long-term business objectives.

We are dependent on a highly concentrated customer base, and any cancellation, reduction
or delay of purchases by these customers could harm our business. Additionally, we may not achieve anticipated
revenue levels if we are not selected as "vendor of choice" for new or expanded customer fabrication
facilities.

We derive most of our revenues from the sale of systems to a relatively small number of
customers, which makes our relationship with each customer critical to our business. For example, in the years ended
December 31, 2010, 2009 and 2008, our three largest customers accounted for 59 percent, 55
percent and 39 percent of our revenues, respectively. We currently depend on one customer for a significant
portion of our revenues, and the loss of, or a significant reduction in, orders from this customer would significantly
reduce our revenue and adversely impact our operating results. Because semiconductor manufacturers must make a
substantial investment to install and integrate capital equipment into a semiconductor fabrication facility, these
manufacturers will tend to choose semiconductor equipment manufacturers based on established relationships, product
compatibility and proven performance. Customer order cancellations could result in the loss of anticipated sales without
allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the
timing of orders from customers could expose us to the risks of inventory shortages or excess inventory.  This in turn
could cause our operating results to fluctuate. If customer relationships are disrupted for inability to deliver sufficient
products or for any other reason, it could have a significant negative impact on our business.

A large percentage of our sales are concentrated among customers in the memory market,
representing 60 percent and 54 percent of systems sales in the years ended December 31, 2010 and 2009, respectively.
As a result, a downturn or an upturn in memory spending could impact us more than it would impact competitors who
are more diversified with logic and foundry customers.

Once a semiconductor manufacturer selects a particular vendor's capital equipment, the
manufacturer generally relies upon equipment from this "vendor of choice" ("VOC") for the
specific production line application. In addition, the semiconductor manufacturer frequently will attempt to consolidate
other capital equipment requirements with the same vendors. Accordingly, we may face narrow windows of opportunity
to be selected as the VOC by significant new customers. It may be difficult for us to sell to a particular customer for a
significant period of time once that customer selects a competitor's product. If we are unable to achieve broader market
acceptance of our systems and technology, we may be unable to maintain and grow our business and our operating
results and financial condition will be adversely affected.

Although we maintain a backlog of customer orders with expected shipment dates within the
next 12 months, customers may request cancellations or delivery delays. Customers in some regions place orders a few
weeks before the shipment. As a result, our backlog may not be a reliable indication of future revenues. If shipments of
orders in backlog are cancelled or delayed, revenues could fall below our expectations and the expectations of market
analysts and investors.

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We may not be able to continue to successfully compete in the highly competitive semiconductor
equipment industry.

The semiconductor equipment industry is both highly competitive and subject to rapid
technological change. Significant competitive factors include the following:

- system performance;

- cost of ownership;

- size of the installed base;

- breadth of product line;

- delivery speed; and

- customer support.

Competitive pressure has been increasing in several areas. In addition to increased price
competition, customers are waiting to make purchase commitments based on their end-user demand, which are then
placed with requests for rapid delivery dates and increased product support. Some of our major competitors are larger
than we are, have greater capital resources and may have a competitive advantage over us by virtue of having:

- broader product lines;

- longer operating history;

- greater experience with high-volume
manufacturing;

- substantially larger customer bases;

- the ability to reduce price through product bundling;
and

- substantially greater customer support, financial, technical and marketing resources.

Growth in the semiconductor equipment industry is increasingly concentrated in the largest
companies, resulting in increasing industry consolidation. Semiconductor companies are consolidating their vendor base
and prefer to purchase from vendors with a strong, worldwide support infrastructure.

In addition, to expand our sales we must often displace the systems of our
competitors or sell new systems to customers of our competitors. Our competitors may develop new or enhanced
competitive products that offer price or performance features that are superior to our systems. Our competitors may also
be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote
greater resources to the development, promotion, sale and on-site customer support of their product lines. We may not
be able to maintain or expand our sales if competition increases and we are unable to respond effectively.

The recent natural disaster in Japan could disrupt our customers' and suppliers' operations and
adversely affect our results of operations.

Certain of our customers and suppliers have headquarters and/or manufacturing
facilities in Japan that have closed or limited operations resulting from the recent earthquake and tsunami in Japan.  In
addition, our customers' and suppliers' supply chains and customer-base may be affected by the consequences of the
natural disaster that has affected Japan, which have included rolling blackouts, decreased access to raw materials,
limited ability to ship inventory and the risk of nuclear contamination.  As a result, our customers in Japan, as well as our
customers who depend on their customer-base and suppliers in Japan, may defer, delay, cancel or otherwise not place
orders with us, and our suppliers may defer, delay, cancel or otherwise not deliver components or subassemblies to us,
each of which would cause our revenues to decline in the second and third quarters of 2011 and negatively impact our
results of operations.

The cyclical nature of the semiconductor industry has caused us to experience losses and
reduced liquidity, and it may continue to negatively impact our financial performance.

The semiconductor equipment industry is highly cyclical and periodically has severe and
prolonged downturns, which causes our operating results to fluctuate significantly. We are exposed to the risks
associated with industry overcapacity, including decreased demand for our products and increased price competition.

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The semiconductor industry has historically experienced periodic downturns due to
general economic changes or due to capacity growth temporarily exceeding growth in demand for semiconductor
devices. Our business depends, in significant part, upon capital expenditures by manufacturers of semiconductor
devices, including manufacturers that open new or expand existing facilities. Periods of overcapacity and reductions in
capital expenditures by our customers cause decreases in demand for our products. This could result in significant
under utilization in our factories. If existing customer fabrication facilities are not expanded and new facilities are not
built, we may be unable to generate significant new orders and sales for our systems. During periods of declining
demand for semiconductor manufacturing equipment, our customers typically reduce purchases, delay delivery of
ordered products and/or cancel orders, resulting in reduced revenues and backlog, delays in revenue recognition and
excess inventory for us. Increased price competition may also result as we compete for the smaller demand in the
market, causing pressure on our gross margin and net income.

The weakness in the global economy during 2008 and 2009 and the relatively modest
recovery exhibited during 2010 may continue to negatively impact our financial performance.

The recessionary conditions of 2008 and 2009 in the global economy and the slowdown in
the semiconductor industry impacted customer demand for our products and correspondingly, negatively impacted our
financial performance. While the global economy has seen a modest recovery during 2010, there remains high
unemployment in developed countries, concerns regarding the availability of credit and uncertainty about a sustained
economic recovery. We cannot ensure that any of the economic improvements during 2010 will be sustainable or
sufficient to extend to our specific operations or markets.

Demand for semiconductor equipment depends on consumer spending. Continued
economic uncertainty may lead to a decrease in consumer spending and may cause certain of our customers to cancel
or delay orders. In addition, if our customers have difficulties in obtaining capital or financing, this could result in lower
sales. Customers with liquidity issues could lead to charges to our bad debt expense if we are unable to collect accounts
receivables. These conditions could also affect our key suppliers, which could affect their ability to supply parts to us,
and result in delays of the completion of our systems and the shipment of these systems to our customers.



Because of the economic downturn and the uncertainty of a full recovery, we may have to
take further actions to reduce costs, which could reduce our ability to invest in research and development at levels we
believe are desirable. If we are unable to effectively align our cost structure with prevailing market conditions, we will
experience additional losses and additional reductions in our cash and cash equivalents. If we are not able to suitably
adapt to these economic conditions in a timely manner or at all, our performance, cash flows, results of operations and
ability to access capital could be materially and adversely impacted.

We must continually anticipate technology trends, improve our existing products and develop
new products in order to be competitive. The development of new or enhanced products involves significant risks,
additional costs and delays in revenue recognition. Technical and manufacturing difficulties experienced in the
introduction of new products could be costly and could adversely affect our customer relationships.

The markets in which our customers and we compete are characterized by rapidly
changing technology, evolving industry standards and continuous improvements in products and services.
Consequently, our success depends upon our ability to anticipate future technology trends and customer needs, to
develop new systems and processes that meet industry standards and customer requirements and that compete
effectively on the basis of price and performance.

Our development of new products involves significant risk, since the products are very
complex and the development cycle is long and expensive. The success of any new system we develop and introduce is
dependent on a number of factors, including our ability to correctly predict customer requirements for new processes, to
assess and select the potential technologies for research and development and to timely complete new system designs
that are acceptable to the market. We may make substantial investments in new technologies before we can know
whether they are technically or commercially feasible or advantageous, and without any assurance that revenue from
future products or product enhancements will be sufficient to recover the associated development costs. Not all
development activities result in commercially viable products. We may not be able to improve our existing systems or
develop new technologies or systems in a timely manner. We may exceed the budgeted cost of reaching our research,
development and engineering objectives, and planned product development schedules may require extension. Any
delays or additional development costs could have a material adverse effect on our business and results of operations.

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Our products are complex, and we may experience technical or manufacturing
inefficiencies, delays or difficulties in the prototype introduction of new systems and enhancements, or in achieving
volume production of new systems or enhancements that meet customer requirements. Our inability, or the inability of
our outsourced partners, to overcome such difficulties, to meet the technical specifications of any new systems or
enhancements or to manufacture and ship these systems or enhancements in volume and in a timely manner would
materially adversely affect our business and results of operations, as well as our customer relationships.

Our revenue recognition policies require that during the initial evaluation phase of a new
product, customer acceptance needs to be obtained before we can recognize revenue on the product. Customer
acceptances may not be completed in a timely manner for a variety of reasons, whether or not related to the quality and
performance of our products. Any delays in customer acceptance may result in revenue recognition delays and have an
adverse impact on our results of operations.

We may from time to time incur unanticipated costs to ensure the functionality and reliability
of our products early in their life cycles, and such costs can be substantial. If we encounter reliability or quality problems
with our new products or enhancements, we could face a number of difficulties, including reduced orders, higher
manufacturing costs, delays in collection of accounts receivable and additional service and warranty expenses, all of
which could materially adversely affect our business and results of operations. The costs associated with our warranties
may be significant, and in the event our projections and estimates of these costs are inaccurate, our financial
performance could be seriously harmed. In addition, if we experience product failures at an unexpectedly high level, our
reputation in the marketplace could be damaged, and our business would suffer.

Significant fluctuations in our operating results are difficult to predict due to our lengthy sales
cycle, and our results may fall short of anticipated levels, which could cause our stock price to decline.

Sales of our systems depend upon the decision of a prospective customer to increase
or replace manufacturing capacity, typically involving a significant capital commitment. Accordingly, the decision to
purchase our systems requires time-consuming internal procedures associated with the evaluation, testing,
implementation and introduction of new technologies into our customers' manufacturing facilities. Even after the
customer determines that our systems meet their qualification criteria, we may experience delays finalizing system sales
while the customer obtains approval for the purchase, constructs new facilities or expands its existing facilities.
Consequently, the time between our first contact with a customer regarding a specific potential purchase and the
customer's placing its first order may last from nine to twelve months or longer. We may incur significant sales and
marketing expenses during this evaluation period. In addition, the length of this period makes it difficult to accurately
forecast future sales. Also, any unexpected delays in orders could impact our revenue and operating results. If sales
forecasted from a specific customer are not realized, we may experience an unplanned shortfall in revenues, and our
quarterly and annual revenue and operating results may fluctuate significantly from period to period.

Our quarterly and annual revenue and operating results have varied significantly in the past
and are likely to vary significantly in the future, which makes it difficult for us to predict our future operating results. We
incurred significant net losses between 2001 and 2003, yet were profitable for each of the years 2004 to 2007.  Again,
we incurred net losses for the years ended December 31, 2008, 2009 and 2010, of $92.2 million, $67.0 million and $33.4
million, respectively, due to declining demand as a result of the weakness in the semiconductor equipment market and
the global economic crisis. In the quarter ended April 3, 2011 we also incurred a net loss of $6.3 million.  We may not
achieve profitability in future years. We will need to generate significant sales to achieve profitability, and we may not be
able to do so. A substantial percentage of our operating expenses are fixed in the short term and we may continue to be
unable to adjust spending to compensate for shortfalls in revenues. As a result, we may continue to incur losses, which
could cause the price of our common stock to decline further or remain at a low level for an extended period of time.

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We are highly dependent on international sales, and face significant international business
risks.

International sales accounted for 95 percent, 92 percent and 91 percent of our net
sales in the years ended December 31, 2010, 2009 and 2008, respectively. We anticipate international sales will
continue to account for the vast majority of our future net sales. Asia has been a particularly important region for our
business, and we anticipate that it will continue to be important going forward. Our sales to customers located in China,
Japan, South Korea, Taiwan and other Asian countries accounted for 90 percent, 82 percent, and 81 percent of our net
sales in the years ended December 31, 2010, 2009 and 2008, respectively. Because of our continuing dependence
upon international sales, we are subject to a number of risks associated with international business activities,
including:

- burdensome governmental controls, laws, regulations, tariffs,
taxes, restrictions, embargoes or export license requirements;

- unexpected changes in laws or regulations prompted by
economic stress, such as protectionism, and other attempts to rectify real or perceived international trade
imbalances;

- exchange rate volatility;

- the need to comply with a wide variety of foreign and U.S.
customs and export laws;

- political and economic instability;

- government-sponsored competition;

- differing labor regulations;

- reduced protection for, and increased misappropriation of,
intellectual property;

- difficulties in accounts receivable collections;

- increased costs for product shipments and potential difficulties
from shipment delays;

- difficulties in managing distributors or representatives;
and

- difficulties in staffing and managing foreign subsidiary operations.

Many of the challenges noted above are applicable in China, which is a developing market
for the semiconductor equipment industry and therefore an area of potential significant growth for our business. The
required export licenses to supply any of our export controlled products to Chinese customers may be denied by U.S.
export control authorities, and as the business volume between China and the rest of the world grows, there is inherent
risk, based on the complex relationships between China, Taiwan, Japan, South Korea and the United States, that
political and diplomatic influences might lead to trade disruptions which would adversely affect our business with China
and/or Taiwan and perhaps the entire Asian region. A significant trade disruption in these areas could have a material
adverse impact on our future revenue and profits.

In addition, we are subject to a number of risks specific to doing business and selling our
products in South Korea, including among other things, substantial competition from local sources, our ability to obtain or
retain the requisite legal permits to continue to sell or continue operations in the country and political instability due to
tension and any conflict among North Korea, South Korea and the United States.  In the event that we become subject
to any of these risks, our business and results of operations could be materially adversely affected.

In the U.S. and Asia, our sales to date have been denominated primarily in U.S. dollars;
however future sales to Asian customers may be denominated in the customer's local currency. Our sales to date in
Europe have been denominated in various currencies, primarily U.S. dollars and the Euro. Our sales in foreign
currencies are subject to risks of currency fluctuation. For U.S. dollar sales in foreign countries, our products may
become less price competitive when the local currency is declining in value compared to the dollar. This could cause us
to lose sales or force us to lower our prices, which would reduce our gross margins.

Because of competition for qualified personnel, we may not be able to recruit or retain
necessary personnel, which could impede development or sales of our products.

Our growth will depend on our ability to attract and retain qualified, experienced
employees. Our ability to attract employees may be harmed by our recent financial losses, which has impacted our
available cash and our ability to provide performance-based annual cash incentives.  Also, part of our total
compensation program includes share-based compensation. Share-based compensation is an important tool in
attracting and retaining employees in our industry. If

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the market price of our common shares declines or remains low, it may adversely affect our ability to attract or retain employees.

During periods of growth in the semiconductor industry, there is substantial competition for
experienced engineering, technical, financial, sales and marketing personnel in our industry. In particular, we must
attract and retain highly skilled design and process engineers. If we are unable to retain existing key personnel, or attract
and retain additional qualified personnel, we may from time to time experience inadequate levels of staffing to develop
and market our products and perform services for our customers. As a result, our growth could be limited, we could fail
to meet our delivery commitments or we could experience deterioration in service levels or decreases in customer
satisfaction.

The price of our common stock has fluctuated in the past and may continue to fluctuate
significantly in the future, which may lead to losses by investors, securities litigation, or hostile or otherwise unfavorable
takeover offers.

The market price of our common stock has been highly volatile in the past, and our stock
price may decline in the future. For example, for the 15 months ended April 3, 2011, the price range for our common
stock was $1.93 to $5.52 per share.

The relatively low stock price makes us attractive to hedge funds and other short-term
investors. This could result in substantial volatility of the stock price and cause fluctuations in trading volumes for our
stock. In addition, in recent years the stock market in general, and the market for shares of high technology stocks in
particular, have experienced extreme price fluctuations. These fluctuations have frequently been unrelated to the
operating performance of the affected companies. In the past, securities class action litigation has often been instituted
against a company following periods of volatility in its stock price. This type of litigation, if filed against us, could result in
substantial costs and divert our management's attention and resources.

Our stock price has been below the five-year peak of $13.50 for several years, and if
revenue does not return to the peak 2007 levels or we do not return to profitability in the near term, we could be an
attractive target for acquisition or be impacted by mergers or acquisition by another company or consolidation in the
industry. An acquisition or merger could be hostile or on terms unfavorable to us, and may result in substantial costs and
potential disruption to our business.

We are subject to significant risks related to our manufacturing operations.

We are increasingly outsourcing manufacturing and logistics activities to third-party
service providers, which decrease our control over the performance of these functions and quality of our products.

We have outsourced core product
manufacturing and spare parts logistics functions to third-party service providers, and may outsource more of those
functions in the future. While we expect to achieve operational flexibility and cost savings as a result of this, outsourcing
has a number of risks and reduces our control over the performance of the outsourced functions. We may continue to
outsource more of our products, and there could be a risk of additional production delays during the transition period as
we move such production to our service providers, which could result in delayed revenue recognition. Significant
performance problems by these third-party service providers could result in cost overruns, delayed deliveries, shortages,
quality issues or other problems that could result in significant customer dissatisfaction and could materially and
adversely affect our business, financial condition and results of operations.

If for any reason one or more of these third-party service providers becomes unable or
unwilling to continue to provide services of acceptable quality, at acceptable costs and in a timely manner, our ability to
deliver our products or spare parts to our customers could be severely impaired. Where we have not qualified a second
vendor to manufacture a certain product, we would quickly need to identify and qualify substitute service providers or
increase our internal capacity, which could be expensive and time-consuming, and could result in unforeseen
operational problems and late deliveries to our customers. Substitute service providers might not be available, or, if
available, might be unwilling or unable to offer services on acceptable terms.

Under certain of our agreements with third-party outsourced providers, we are required to
purchase minimum levels of production from such providers and may be liable to purchase inventory of assemblies and
modules that exceed customer demand for such products. Conversely, if customer demand for our products increases,
we may be unable to secure sufficient additional capacity from our current service providers on commercially reasonable terms, if

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at all. Our requirements are expected to represent a small portion of the total capacities of our third-party
service providers, and they may preferentially allocate capacity to other customers, or face part shortages even during
periods of high demand for our products. In addition, such manufacturers could suffer financial difficulties or disruptions
in their operations due to causes beyond our control.

We depend upon a limited number of suppliers for some components and subassemblies,
and supply shortages or the loss of these suppliers could result in increased cost or delays in the manufacture and sale
of our products.

We rely, to a substantial extent, on outside
vendors to provide many of the components and subassemblies of our systems. We obtain some of these components
and subassemblies from a sole source or a limited group of suppliers. We generally acquire these components on a
purchase order basis and not under long-term supply contracts. Because of our anticipated reliance on outside vendors
generally, and on a sole or a limited group of suppliers in particular, we may be unable to obtain an adequate supply of
required components. When demand for semiconductor equipment is strong, our suppliers may have difficulty providing
components on a timely basis.

In addition, during periods of shortages of components, we may have reduced control over
pricing and timely delivery of components. We often quote prices to our customers and accept customer orders for our
products prior to purchasing components and subassemblies from our suppliers. If our suppliers increase the cost of
components or subassemblies, we may not have alternative sources of supply and may no longer be able to increase
the cost of the system being evaluated by our customers to cover all or part of the increased cost of components.

The manufacture of some of these components is an extremely complex process and
requires long lead times. If we are unable to obtain adequate and timely deliveries of our required components, we may
have to seek alternative sources of supply or manufacture such components internally. This could delay our ability to
manufacture or ship our systems in a timely manner, causing us to lose sales, incur additional costs, delay new product
introductions and harm our reputation. Historically, we have not experienced any significant delays in manufacturing due
to an inability to obtain components, and we are not currently aware of any specific problems regarding the availability of
components that might significantly delay the manufacturing of our systems in the future, however, certain suppliers may
be affected by the consequences of the natural disaster that has affected Japan and we are unable to predict the impact,
if any, this will have on our business. Any inability to obtain adequate deliveries, or any other circumstance that would
require us to seek alternative sources of supply or to manufacture such components internally, could delay our ability to
ship our systems and could have a material adverse effect on us.

Our gross margins may be impacted if we do not effectively manage our inventory and
associated inventory reserves.

We need to manage our inventory of component parts, work-in-process and finished goods
effectively to meet customer delivery demands at an acceptable risk and cost. For both the inventories that support
manufacture of our products and our spare parts inventories, if the anticipated customer demand does not materialize in
a timely manner, we will incur increased carrying costs and some inventory could become excess or obsolete, resulting
in write-offs, which would adversely affect our cash position and results of operations. In the past, we have recorded
inventory valuation charges for excess and obsolete inventory of $0.8 million in 2010, $14.2 million in 2009, and $7.1
million in 2008. The sale of this inventory during periods of increasing revenue could temporarily impact our gross
margins favorably due to the adjusted carrying value of this inventory, and could result in future unpredictability in our
gross margin estimates.

Our gross margins for sales of products that we manufacture in Germany and/or South
Korea may fluctuate due to changes in the value of the Euro and South Korean won.

We develop and manufacture a significant portion of our products in Germany, where our costs
for labor and materials are primarily denominated in Euros, and anticipate increased manufacturing activities in South
Korea in 2011, where our costs for labor are primarily denominated in won. Future increases in the strength of the Euro
or won, if any, could increase our development costs, our costs to manufacture systems, and our costs to purchase
spare parts for products from our suppliers, which would make it more difficult to for us to compete and could adversely
affect our results of operations.

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We manufacture many of our products at two primary manufacturing facilities and are thus
subject to risk of disruption.

Although we outsource the manufacturing for certain of our products to third parties, we
continue to produce our latest generation products at our two principal manufacturing plants in Fremont, California and
Dornstadt, Germany.  We have limited ability to interchangeably produce our products at either facility, and in the event
of a disruption of operations at one facility, our other facility would not be able to make up the capacity loss. Our
operations are subject to disruption for a variety of reasons, including, but not limited to, natural disasters, including
earthquakes in California, work stoppages, operational facility constraints and terrorism. Such disruption could cause
delays in shipments of products to our customers, result in cancellation of orders or loss of customers and seriously
harm our business.

We self-insure certain risks including earthquake risk. If one or more of the uninsured
events occurs, we could suffer major financial losses.

We purchase insurance to help mitigate the economic impact of certain insurable risks;
however, certain other risks are uninsurable or are insurable only at significant cost or cannot be mitigated with
insurance. An earthquake could significantly disrupt our principal manufacturing operations in Fremont, California, an
area highly susceptible to earthquakes. It could also significantly delay our research and development efforts on new
products, a significant portion of which is conducted in California. While we take steps intended to minimize the damage
that would be caused by an earthquake, there is no certainty that our efforts will prove successful in the event of an
earthquake. We self-insure earthquake risks because we believe this is a prudent financial decision based on the high
cost and limited coverage available in the earthquake insurance market. If a major earthquake occurs, we could suffer a
major financial loss and face significant disruption in our business.

We are exposed to various risks relating to compliance with the regulatory environment in
the countries in which we operate. We are subject to export control laws and noncompliance could result in fines,
adverse publicity and restrictions on our ability to export our products. We are exposed to several material contracts,
non-performance of which could result in liquidated damages.

We are subject to various risks related to (1) disagreements and disputes between national
and regional regulatory agencies related to international trade; (2) new, inconsistent and conflicting rules by regulatory
agencies in the countries in which we operate; and (3) interpretation and application of different laws and regulations. If
we are found by a court or regulatory agency to not be in compliance with the laws and regulations, our business,
financial condition and results of operations could be adversely affected.

As an exporter, we must comply with various laws and regulations relating to the export of
products and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S. these laws
include the International Traffic in Arms Regulations ("ITAR"), the Export Administration Regulations
("EAR") administered by the Bureau of Industry and Security ("BIS"), and trade sanctions against
embargoed countries and destinations administered by the U.S. Department of Treasury, Office of Foreign Assets
Control ("OFAC"). These laws govern products, parts, technology and software which present military or
weapons proliferation concerns, so-called "dual use" items. Prior to shipping certain items, we must obtain an
export license or verify that license exemptions are available.  In addition, we must comply with certain requirements
related to documentation, record keeping, plant visits and hiring of foreign nationals. In 2008, we self-disclosed to BIS
certain inadvertent EAR violations and this matter is pending with BIS.  Any failures to comply with these laws and
regulations could result in fines, adverse publicity and restrictions on our ability to export our products, and repeat
failures could carry more significant penalties.

We are a party to several governmental and private-party contracts that provide for liquidated
damages in the event that we fail to comply with the covenants or requirements under any of these contracts.  These
liquidated damage payments could be significant and we could incur significant legal fees if we were to renegotiate
these contracts.  Any such damage amounts or legal expenses may adversely impact our financial condition or results of
operations.

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If we are unable to protect our intellectual property, we may lose valuable assets and experience
reduced market share. Efforts to protect our intellectual property may be costly to resolve, require additional costly
litigation and could divert management attention. Our obligation to indemnify customers increases during a
downturn.

We rely on a combination of patents, copyrights, trademark and trade secret laws, non-disclosure
agreements, and other intellectual property protection methods to protect our proprietary technology. Despite
our efforts to protect our intellectual property, we may from time to time be subject to claims of infringement of other
parties' patents or other proprietary rights. If this occurs, we may not be able to prevent the use of such technology. Our
means of protecting our proprietary rights may not be adequate and our patents may not be sufficiently broad to protect
our technology. Any patents owned by us could be challenged, invalidated or circumvented and any rights granted under
any patent may not provide adequate protection to us.

Furthermore, we may not have sufficient resources to protect our rights. As we outsource
more of our activities, we are less able to protect our intellectual property ourselves, and rely more on our service
providers to do so. Our service providers may not always be able to assure that their employees or former employees do
not use our intellectual property for their own account to compete with us.  Our competitors may independently develop
similar technology, or design around patents that may be issued to us. In addition, the laws of some foreign countries
may not protect our proprietary rights to as great an extent as do the laws of the United States and it may be more
difficult to monitor the use of our products in such foreign countries. As a result of these threats to our proprietary
technology, we may have to resort to costly litigation to enforce our intellectual property rights.

On occasion we receive notification from customers who believe that we are required to
indemnify them or we have other financial obligations to them because of claims of intellectual property infringement
made against them by third parties. Our involvement in any patent dispute or other intellectual property dispute or action
to protect trade secrets, even if the claims are without merit, could be very expensive to defend and could divert the
attention of our management. Adverse determinations in any litigation could subject us to significant liabilities to third
parties, require us to seek costly licenses from third parties and prevent us from manufacturing and selling our products.
Royalty or license agreements, if required, may not be available on terms acceptable to us, or at all. Any of these
situations could have a material adverse effect on our business and operating results in one or more countries.

Our commercial relationships with customers become more risky when market
conditions give each customer greater leverage in negotiating with us. In the normal course of business, we indemnify
customers with respect to certain matters, for example if our tool infringes the intellectual property rights of any third
party or if we breach any promise in our contract with the customer. During downturns in general or industry specific
economic conditions, our customers may require that the extent and scope of our obligation to indemnify them be
expanded. In the future, we may be compelled to enter into or accrue for settlements under such indemnification
provisions. We may be compelled in the future to enter into or accrue for settlements of alleged indemnification
obligations. Our financial performance could be materially adversely affected if we expend significant amounts in
defending or settling any purported claims.

Our failure to comply with environmental or safety regulations could result in substantial
liability.

We are subject to a variety of federal, state, local and foreign laws, rules, and
regulations relating to environmental protection and workplace safety. These laws, rules and regulations govern the use,
storage, discharge and disposal of hazardous chemicals during manufacturing, research and development and sales
demonstrations, as well as governmental standards for workplace safety. If we fail to comply with present or future
regulations, especially in our manufacturing facilities in the United States, Germany, Canada and South Korea, we could
be subject to substantial liability for cleanup efforts, personal injury, fines or suspension or cessation of our operations.
We may be subject to liability if our acquired companies have past violations. Restrictions on our ability to expand or
continue to operate our present locations could be imposed upon us, we could be required to acquire costly remediation
equipment or incur other significant expenses.

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Any future business acquisitions or divestitures may disrupt our business, diminish stockholder
value or distract management attention.

As part of our ongoing business strategy, we may consider acquisitions of, or
significant investments in, businesses that offer products, services and technologies complementary to our own. Such
acquisitions could materially adversely affect our operating results and/or the price of our common stock. Acquisitions
also entail numerous risks, including:

- difficulty of assimilating the operations, products and personnel of
the acquired businesses and possible impairments caused by this;

- potential disruption of our ongoing business;

- unanticipated costs associated with the
acquisition;

- inability of management to manage the financial and strategic
position of acquired or developed products, services and technologies;

- inability to maintain uniform standards, controls, policies and
procedures; and

- impairment of relationships with employees and customers that
may occur as a result of integration of the acquired business.

To the extent that shares of our stock or other rights to purchase stock are issued in
connection with any future acquisitions, dilution to our existing stockholders will result, and our earnings per share may
suffer. Any future acquisitions may not generate additional revenue or provide any benefit to our business, and we may
not achieve a satisfactory return on our investment in any acquired businesses.

We may also seek to divest of certain assets or businesses from time to time, especially if
we need additional liquidity or capital resources. When we make a decision to sell assets or a business, we may
encounter difficulty completing the transaction as a result of a range of possible factors such as new or changed
demands from the buyer. These circumstances may cause us to incur additional time or expense or to accept less
favorable terms, which may adversely affect the overall benefits of the transaction.

Acquisitions, divestitures, and other transactions are inherently risky, and we cannot provide
any assurance that our previous or future transactions will be successful. The inability to effectively manage the risks
associated with these transactions could materially and adversely affect our business, financial condition or results of
operations.

Changes in tax rates or tax liabilities could affect results.

We are subject to taxation in the United States and various other countries. Significant judgment
is required to determine and estimate worldwide tax liabilities. Our future annual and quarterly tax rates could be
affected by numerous factors, including changes in the applicable tax laws, composition of earnings in countries with
differing tax rates or our valuation and utilization of deferred tax assets and liabilities. In addition, we are subject to
regular examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly
assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the
adequacy of our provision for income taxes. Although we believe our tax estimates are reasonable, there can be no
assurance that any final determination will not be materially different from the treatment reflected in our historical income
tax provisions and accruals, which could materially and adversely affect our results of operations.

We may be required to record additional impairment charges that will adversely impact our
results of operations.

We review our goodwill and intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be recoverable, and also review goodwill
balances annually. For example, during the year ended December 31, 2008, we recorded impairment charges of $18.1
million and $6.6 million related to the write-off of goodwill and certain intangible assets, respectively.  The write-offs were
triggered by the significant decline in our revenue and cash flows. The resulting assessment indicated a material decline
in our market valuation and projected revenues, causing a decrease in the anticipated future cash flows attributable to
these assets relative to the cash flow expectations when the assets were acquired. In the event that we determine in a
future period that impairment of our intangible assets exists for any reason, we would record additional impairment
charges in the period such determination is made, which would adversely impact our financial position and results of
operations.

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Our restated certificate of incorporation and restated bylaws, our stockholder rights plan and
Delaware law contain provisions that could discourage transactions resulting in a change in control, which may
negatively affect the market price of our common stock.

Our restated certificate of incorporation, our restated bylaws, our stockholder rights plan and
Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control.
In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our
common stock. Pursuant to such provisions:

- our board of directors is authorized, without prior stockholder
approval, to create and issue preferred stock, commonly referred to as "blank check" preferred stock, with
rights senior to those of common stock;

- our board of directors is staggered into three classes, only one of
which is elected at each annual meeting;

- stockholder action by written consent is prohibited;

- nominations for election to our board of directors and the
submission of matters to be acted upon by stockholders at a meeting are subject to advance notice
requirements;

- certain provisions in our bylaws and certificate of incorporation
such as notice to stockholders, the ability to call a stockholder meeting, advance notice requirements and action of
stockholders by written consent may only be amended with the approval of stockholders holding 66 2/3 percent of our
outstanding voting stock;

- the ability of our stockholders to call special meetings of
stockholders is prohibited; and

- subject to certain exceptions requiring stockholder approval, our
board of directors is expressly authorized to make, alter or repeal our bylaws.

In addition, the provisions in our stockholder rights plan could make it more difficult for a
potential acquiror to consummate an acquisition of our company. We are also subject to Section 203 of the Delaware
General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15 percent or
more of our outstanding voting stock, the person is an "interested stockholder" and may not engage in any
"business combination" with us for a period of three years from the time the person acquired 15 percent or
more of our outstanding voting stock.

Item 2.  	Unregistered Sales of Equity Securities
and Use of Proceeds

Issuer Repurchases of Equity Securities

In March 2007, our Board of Directors approved a common stock repurchase plan (our
"Repurchase Plan") that authorized the repurchase of up to $20 million of our outstanding shares of
common stock through open-market purchases or private transactions pursuant to a plan in conformity with Rule 10b5-1.
We have completed all repurchases under this initial authorization, at a weighted-average cost of $9.97 per share.

In October 2007, our Board of Directors expanded our Repurchase Plan, authorizing the
repurchase of up to an additional $30 million of shares of our common stock through open-market purchases or private
transactions. As of April 3, 2011, a total of 3.8 million shares have been repurchased against the original and expanded
Repurchase Plan, at a weighted-average purchase price of $9.20 for a total purchase price of approximately $35 million.
Our last repurchase of common stock under this plan was in the first quarter of 2008. In May 2011, we terminated the
Repurchase Plan.

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Item 6.  	Exhibits



|Exhibit
                                  Number | Description                                                                                    
|------------------------------------------------ | -----------------------------------------------------------------------------------------------
|3.1(1)                                           | Amended and Restated Certificate of Incorporation of the Company.                              
|3.2(2)                                           | Third Amended and Restated Bylaws of the Company.                                              
|31.1                                             | Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
    PDF
|31.2                                             | Certification of Chief Financial Officer Pursuant to Sarbanes-Oxley Act Section 302(a).
    PDF
|32.1                                             | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
    PDF           
|32.2                                             | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
    PDF           

_________________

(1)  Incorporated by reference from Mattson Technology, Inc. Current Report on Form 8-K filed on January 30, 2001.
                   (2)  Incorporated by reference from Mattson Technology, Inc. Quarterly Report on Form 10-Q filed on August 14, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

| |                                     
| | ------------------------------------
| | MATTSON TECHNOLOGY, INC.(Registrant)

Dated: May 6, 2011

| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | By: /s/ DAVID DUTTON
               David DuttonPresident and Chief Executive Officer
                  (Principal Executive Officer)

Dated: May 6, 2011

| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | By: /s/ ANDY MORINGAndy MoringChief Financial Officer and Executive Vice President — Finance 
                  (Principal Financial and Accounting Officer)

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