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

---

FORM 10-Q

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

For the quarterly period ended June 28, 2009

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

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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 Jul 24, 2009: 49,869,293.
Note:PDF provided as a courtesy
MATTSON TECHNOLOGY, INC.TABLE OF CONTENTS


PagePART I. FINANCIAL INFORMATIONItem 1.
Financial Statements (unaudited):Condensed Consolidated Balance Sheets at June 28, 2009 and
December 31, 2008
3Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 28, 2009 and June 29, 2008
4Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 28, 2009 and June 29, 2008
5Notes to Condensed Consolidated Financial Statements
6Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
19Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
28Item 4.
Controls and Procedures
29PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
30Item 1A.
Risk Factors
30Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
30Item 4.
Submission of Matters to a Vote of Security Holders
31Item 6.
Exhibits
32Signature
332PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value)June 28,

December 31,2009

2008ASSETSCurrent assets:Cash and cash equivalents

$            56,155

$            77,107Short-term investments

21,664

26,280Restricted cash

2,000

-Accounts receivable, net of allowance for doubtful accounts of $3,841
            on June 28, 2009 and $4,606 on December 31, 2008

3,055

14,477Advance billings

100

140Inventories

35,175

48,410Inventories - delivered systems

-

956Prepaid expenses and other current assets

5,319

5,765Total current assets

123,468

173,135Property and equipment, net

25,357

27,144Other assets

7,454

7,932Total assets

$          156,279

$          208,211LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$              6,148

$              7,205Accrued liabilities

16,725

21,241Deferred revenue

2,255

4,198Total current liabilities

25,128

32,644Income taxes payable, noncurrent

13,591

13,467Other liabilities

5,719

5,264Total liabilities

44,438

51,375Commitments and contingencies (Note 6)Stockholders' equity:Preferred stock, 2,000 shares authorized; none issued and outstanding

—

—Common stock, par value $0.001, 120,000 authorized shares;54,050 shares issued and 49,869 shares outstanding in 2009;53,874 shares issued and 49,693 shares outstanding in 2008

54

54Additional paid-in capital

630,533

628,632Accumulated other comprehensive income

20,482

20,255Treasury stock, 4,181 shares in 2009 and 2008, at cost

(37,986)

(37,986)Accumulated deficit

(501,242)

(454,119)Total stockholders' equity

111,841

156,836Total liabilities and stockholders' equity

$          156,279

$          208,211The accompanying notes are an integral part of these condensed consolidated financial statements.3MATTSON TECHNOLOGY, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008Sales:Products

$             7,532

$      40,443

$           12,231

$           87,135Services

536

1,347

1,409

3,310Net sales

8,068

41,790

13,640

90,445Cost of sales:Products

9,576

22,735

22,706

49,846Services

101

610

458

1,320Total cost of sales

9,677

23,345

23,164

51,166Gross margin

(1,609)

18,445

(9,524)

39,279Operating expenses:Research, development and engineering

6,810

9,215

13,460

17,061Selling, general and administrative

11,505

15,592

24,359

32,367Amortization of intangibles

-

128

-

256Restructuring charges

(100)

748

818

748Total operating expenses

18,215

25,683

38,637

50,432Loss from operations

(19,824)

(7,238)

(48,161)

(11,153)Interest income

154

837

433

2,062Interest expense

(23)

(76)

(56)

(76)Other income (expense), net

51

145

1,077

(1,247)Loss before income taxes

(19,642)

(6,332)

(46,707)

(10,414)Provision for income taxes

254

422

416

556Net loss

$         (19,896)

$      (6,754)

$          (47,123)

$         (10,970)Net loss per share:Basic and diluted

$             (0.40)

$        (0.14)

$              (0.95)

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

49,772

49,419

49,749

49,391The accompanying notes are an integral part of these condensed consolidated financial statements.4MATTSON TECHNOLOGY, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)Six Months EndedJune 28,

June 29,2009

2008Cash flows from operating activities:Net loss

$           (47,123)

$           (10,970)Adjustments to reconcile net loss to net cashprovided by (used in) operating activities:Allowance for doubtful accounts

(767)

(252)Amortization of intangibles



256Depreciation

4,405

3,849Inventory valuation and vendor commitment charges

13,119

1,421Stock-based compensation

1,700

2,371Other non-cash items

205

58Changes in assets and liabilities:Accounts receivable

12,194

8,130Advance billings

40

(6,599)Inventories

2,672

(9,728)Inventories - delivered systems

956

(4,178)Prepaid expenses and other current assets

501

2,995Other assets

568

(64)Accounts payable

(1,080)

(2,270)Accrued liabilities

(6,143)

(4,518)Deferred revenue

(2,067)

4,741Income taxes payable, noncurrent and other liabilities

(43)

792Net cash used in operating activities

(20,863)

(13,966)Cash flows from investing activities:Purchases of available-for-sale investments

(17,181)

(21,707)Purchases of certificates of deposit

(2,000)

-Sales and maturities of available-for-sale investments

21,500

14,450Purchases of property and equipment

(2,534)

(4,645)Sales of property and equipment

-

691Net cash used in investing activities

(215)

(11,211)Cash flows from financing activities:Proceeds from stock plans, net of shares withheld     
                   for employee taxes

202

375Purchases of treasury stock

-

(2,613)Net cash provided by (used in) financing activities

202

(2,238)Effect of exchange rate changes on cash and cash equivalents

(76)

3,293Net decrease in cash and cash equivalents

(20,952)

(24,122)Cash and cash equivalents, beginning of period

77,107

125,533Cash and cash equivalents, end of period

$            56,155

$          101,411The accompanying notes are an integral part of these condensed consolidated financial statements.5MATTSON TECHNOLOGY, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
                  JUNE 28, 2009  (unaudited)

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) for the year ended December 31, 2008, which are included in the Company's Annual Report on Form 10-K.

The Company's current year will end December 31, 2009 and include 52 weeks. The Company closes its
fiscal quarters on the Sunday closest to March 31, June 30, and September 30, and on December 31. The latest fiscal quarter ended on June
28, 2009. The results of operations for the six months ended June 28, 2009 are not necessarily indicative of results that may be expected for
future quarters or for the entire year ending December 31, 2009.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Management EstimatesThe 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 PlansFor the six months ended June 28, 2009, the Company incurred a net loss of $47.1 million. Historically,
the Company has relied on a combination of fundraising from the sale and issuance of equity securities and cash generated from product and
service revenues to provide funding for its operations.
At June 28, 2009, the Company had cash, cash equivalents, short-term investments and restricted cash
of $79.8 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. If the Company does not realize its forecasted financial performance, it may require additional cash to fund
its operations beyond twelve months.

In the event that the Company requires additional funding, it would attempt to raise the required capital through
either debt or equity arrangements. The Company cannot provide any assurance that the required funds would be available on acceptable
terms, if at all, or that any financing activity would not be dilutive to its current stockholders. If adequate funds are not available, or not
available on acceptable terms, the Company's ability to take advantage of unanticipated opportunities or respond to competitive pressures
could be limited.
Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes
in accounting pronouncements during the six months ended June 28, 2009, 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, 2008, that are of significance, or
potential significance, to the Company.

6In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position
("FSP") No. 157-2, Effective Date of FASB Statement No. 157. FSP No. 157-2 delays the effective date of Statements of
Financial Accounting Standards ("SFAS") No. 157 for all non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), and is effective for financial
statements issued for fiscal years beginning after November 15, 2008. The Company's adoption of  SFAS No. 157 did not have a material
impact on its financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities. EITF 03-6-1 addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings
per share ("EPS") under the two-class method described in SFAS No. 128, Earnings per Share. This pronouncement is
effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company's adoption of FSP No. EITF 03-6-1
did not have any impact on its calculation of EPS.

In April 2009, the FASB issued three related Staff Positions: (i) FSP No. 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not
Orderly, (ii) FSP No. 115-2 and FSP No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, and
(iii) FSP No. 107-1 and Accounting Principles Board ("APB") Opinion No. 28-1, Interim Disclosures about Fair Value of
Financial Instruments, which will be effective for interim and annual periods ending after June 15, 2009. FSP No. 157-4 provides
guidance on how to determine the fair value of assets and liabilities under SFAS No. 157 in the current economic environment and
reemphasizes that the objective of a fair value measurement remains an exit price. If the Company were to conclude that there has been a
significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may
not be representative of fair value and the Company may conclude that a change in valuation technique or the use of multiple valuation
techniques may be appropriate. FSP No. 115-2 and FSP No. 124-2 modify the requirements for recognizing other-than-temporarily impaired
debt securities and revise the existing impairment model for such securities, by modifying the current intent and ability indicator in determining
whether a debt security is other-than-temporarily impaired. FSP No. 107 and APB No. 28-1 enhance the disclosure of instruments under the
scope of SFAS No. 157 for both interim and annual periods. The adoption of these staff positions did not have any impact on the financial
statements of the Company. See Note 3 for information and related disclosures regarding the Company's fair value
measurements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No.
165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. This statement sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial
statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its
financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
SFAS No. 165 is effective for financial statements issued for interim or annual financial periods ending after June 15, 2009. See Note 12 for
disclosures related to subsequent events.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and The
Hierarchy of Generally Accepted Accounting Principles, to be effective for the financial statements issued for the interim and annual
periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted
Accounting Principles ("GAAP"), SFAS No. 168 is not supposed to change GAAP, but is intended to make it easier to find and
research GAAP applicable to particular transactions or specific accounting issues. SFAS No. 168 is a new structure which takes accounting
pronouncements and organizes them by approximately ninety topics. Once approved, SFAS No. 168 will be considered authoritative at that
time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard. Once SFAS No. 168 becomes
effective, all non-grandfathered, non-SEC accounting literature not included in SFAS No. 168 will become non-authoritative. The Company is
currently evaluating the impact of SFAS No. 168 on its financial statements.


72.	Balance Sheet Details


June 28,

December 31,2009

2008(thousands)Cash and cash equivalents:Cash in bank
$        31,034
$          22,889Money market funds

23,622

42,222Commercial paper

1,499

11,996$        56,155

$          77,107Short-term investments:United States agency securities

$            3,573

$              3,587United States corporate bonds

18,091

22,693$        21,664

$          26,280Restricted cash:Certificates of Deposit

$            2,000

$                        -$            2,000

$                        -The Company's cash and cash equivalents and short-term investments are carried at fair market value. All short-
term investments at June 28, 2009 and December 31, 2008 are marked to market with unrealized gains and losses recorded as components
of other comprehensive income (loss). See Note 11. The maturities of short-term investments at June 28, 2009 and December 31,
2008 are shown below:

June 28,

December 31,2009

2008(thousands)Due within one year

$        21,664

$          24,695Due in one to two years

-

1,585$        21,664

$          26,280At June 28, 2009, the Company had restricted cash of $2.0 million, which primarily secures standby letters of
credit provided to landlords. The Company had no such amount at December 31, 2008.

June 28,

December 31,2009

2008(thousands)Inventories, net:Purchased parts and raw materials

$        16,371

$          24,708Work-in-process

9,311

9,977Finished goods

9,493

13,725$        35,175

$          48,410At June 28, 2009 and December 31, 2008, the allowance for excess and obsolete inventories was $20.1 million
and $10.1 million, respectively. The inventory reserves represented 43 percent and 24 percent of the gross inventory balances at June
28, 2009 and December 31, 2008, respectively. During the three months ended June 28, 2009, the Company increased its inventory reserves
for excess and obsolete inventory by $3.8 million. During the six months ended June 28, 2009, the Company increased its inventory reserves
for excess and obsolete inventory by $10.7 million, offset by adjustments of $0.7 million, per the inventory valuation policy.

Excess and obsolete reserve adjustments inherently involve judgments as to assumptions about expected future
demand and the impact of market conditions on those assumptions. Although the Company believes that the assumptions it used in
estimating excess and obsolete inventory reserves are reasonable, significant changes in any one of the assumptions in the future could
produce a significantly different result. There can be no assurances that8future events and changing market conditions will not result in
significant increases in the Company's excess and obsolete inventory reserve requirements.

June 28,

December 31,2009

2008(thousands)Property and equipment, net:Machinery and equipment

$           57,257

$          54,952Furniture and fixtures

11,675

11,863Leasehold improvements

17,956

17,79786,888

84,612Less: accumulated depreciation

(61,531)

(57,468)$        25,357

$          27,144Accrued liabilities:Warranty

$          2,730

$            4,381Accrued compensation and benefits

5,911

7,103Restructuring

796

3,872Vendor Commitments

2,409

-Other

4,879

5,885$        16,725

$          21,241Other liabilities:Deferred revenue, noncurrent

$          3,625

$            3,875Other

2,094

1,389$          5,719

$            5,264At June 28, 2009, the Company reserved $2.4 million for existing vendor commitments representing inventory not
yet received and in excess of its production requirements. The Company had no such reserve at December 31, 2008.

3.	Fair Value

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a
basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in
measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted
prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market
data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when
available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain
financial assets and liabilities at fair value, including marketable securities and equity instruments offsetting deferred compensation.

The Company's cash equivalents and investment instruments are classified within Level 1 or Level 2
of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with
reasonable levels of price transparency and transaction value. The types of instruments valued based on quoted market prices in active
markets include most U.S. government and agency securities, money market securities and equity instruments offsetting deferred
compensation, which are included in other assets in the condensed consolidated balance sheets. Such instruments are generally classified
within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include investment-grade
corporate bonds, mortgage-backed and asset-backed products, state, municipal and provincial obligations. Such instruments are generally
classified within Level 2 of the fair value hierarchy.

9Assets Measured at Fair Value on a Recurring Basis
Assets 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 at June 28, 2009 and December 31, 2008:

Fair Value Measurements atReporting Date Using June 28, 2009Quoted Prices

Significantin Active

OtherMarkets for

ObservableIdentical Assets

Inputs

Total(Level 1)

(Level 2)

Balance(thousands)Cash and cash equivalents:(1)Money market funds


$        23,622

$                     -

$        23,622Certificate of Deposit


2,000



2,000Commercial paper




1,499

1,499Short-term investments:United States agency securities


3,573

-

3,573United States corporate bonds


-

18,091

18,091Other assets:Equity instruments offsettingdeferred compensation liability


645

-

645Total assets measured at fair value


$        29,840

$        19,590

$        49,430(1) Excludes Cash in bank of $31.0 million at June 28, 2009.4.	Restructuring Charges2008 Restructuring PlansFor the year ended December 31, 2008, the Company recorded restructuring charges of $6.0 million,
consisting of employee severance benefits and lease contract termination costs, in accordance with SFAS No.146 Accounting for Costs
Associated with Exit or Disposal Activities. During the year ended December 31, 2008, the Company paid $2.1 million against
restructuring reserves and recorded adjustments of $0.2 million that decreased the reserves. At December 31, 2008, the Company had $3.9
million in its restructuring reserves, consisting of severance costs of $3.5 million and lease termination costs of $0.4 million.

During the three months ended June 28, 2009, the Company recorded additional restructuring accruals of $0.2 million,
primarily consisting of severance costs. The Company paid $1.2 million against the restructuring reserves and recorded adjustments of $0.3
million, which decreased the reserves.

During the six months ended June 28, 2009, the Company recorded additional restructuring accruals consisting
of $1.1 million in additional severance costs and $0.1 million in additional lease termination costs. The Company paid $3.9 million against the
severance reserves and recorded adjustments of $0.4 million, which decreased the reserves. At June 28, 2009, the Company had a
restructuring reserves balance of $0.8 million, comprised of severance costs of $0.3 million and lease termination costs of $0.5 million.

The Company expects to record additional reserves of approximately $0.1 million during the remainder of 2009,
consisting of severance expenses for employees who have not yet been notified. The Company anticipates that all severance payments
against the reserves will be substantially completed by the end of the 2009 fiscal year. The payment of the lease termination expense is
dependent on the timing of a final agreement with the landlord, which is anticipated to occur by the end of the 2009 fiscal year.

10The following is a summary of the restructuring plans announced during 2008 and the estimated liabilities at June
28, 2009:

Three Months Ended June 28, 2009Employee

ContractSeverance

TerminationBenefits

Cost

Total2008 Restructuring Plan

(thousands)Balance at beginning of period

$            1,561

$               526

$            2,087Restructuring and other charges

214

9

223Severance payments

(1,191)

-

(1,191)Reserve adjustments

(323)

-

(323)Balance at end of period

$                 261

$               535

$                 796Six Months Ended June 28, 2009Employee

ContractSeverance

TerminationBenefits

Cost

Total(thousands)Balance at beginning of period

$            3,496

$               376

$            3,872Restructuring and other charges

1,075

159

1,234Severance payments

(3,894)

-

(3,894)Reserve adjustments

(416)

-

(416)Balance at end of period

$                  261

$               535

$                 7965. 	Guarantees

The warranty offered by the Company on its system sales is generally 12 months, except where previous
customer agreements state otherwise, and excludes certain consumable maintenance items. A provision for the estimated cost of warranty,
based on historical costs, is recorded as cost of sales when the revenue is recognized. The Company's warranty obligations require it to
repair or replace defective products or parts, generally at a customer's site, during the warranty period at no cost to the customer. The actual
system performance and/or field warranty expense profiles may differ from historical experience, and in those cases, the Company adjusts its
warranty accruals accordingly.

The following table summarizes changes in the product warranty accrual for the six months ended June 28, 2009
and June 29, 2008:

Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008(thousands)

(thousands)Balance at beginning of period

$         3,091

$         7,878

$      4,381

$   9,174Accrual for warranties issued during the period

594

1,028

655

2,228Changes in liability related to pre-existing warranties

(141)

145

(870)

(461)Settlements made during the period

(814)

(2,889)

(1,436)

(4,779)Balance at end of period

$         2,730

$         6,162

$      2,730

$   6,162During 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 Company has not recorded any liability in connection with these
guarantee arrangements beyond that 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 these guarantee arrangements. The maximum potential amount that the Company could be required to pay is approximately $1.6
million, representing standby letters of credit outstanding as of June 28, 2009. These letters of credit are secured by restricted cash of $2.0
million at June 28, 2009, which is maintained as certificates of deposit.

11The Company is a party to a variety of agreements, pursuant to which it may be obligated to indemnify the other
party with respect to certain matters. Typically, these obligations arise in the context of contracts under which the Company may agree to
hold the other party 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 or 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 the Company's financial position or results of operations.
6.	Commitments and Contingencies

The Company holds various operating leases related to its facilities and equipment worldwide and a sublease in
respect to its facility located in Exton, Pennsylvania.

In 2005, the Company entered into a lease agreement for its existing corporate headquarters building in Fremont,
California. The lease is for a period of 10 years, which commenced on May 31, 2007, and has an initial annual base rent cost of
approximately $1.4 million, with annual base rent increases of approximately 3.5 percent. The Company has one five-year option to extend
the lease at market lease rates in effect on the expiration date. Additionally, insurance, real property taxes and operating expenses are to be
paid by the Company. The Company is responsible for an additional minimum lease payment at the end of the lease term of approximately
$1.5 million, subject to adjustment, which is being accounted for in accordance with SFAS No. 13, Accounting for Leases, and will be
accrued on a straight-line basis over the lease term. The Company has provided the landlord a letter of credit for $1.5 million to secure this
obligation. The letter of credit amount may be increased to reflect any adjustments made to a restoration cost obligation provision included in
the lease. This letter of credit is secured with restricted cash, which totaled  $2.0 million at June 28, 2009.

The Company continues to lease one building previously used to house its administrative functions related to wet
surface preparation products in Exton, Pennsylvania. The lease for the administrative building will expire March 31, 2019, with a
current rental cost of approximately $0.9 million annually. The Company expects to make payments related to the administrative building
lease over the next ten years, less any sublet amounts. The lease agreement for the administrative building allows for subleasing the
premises without the approval of the landlord. In January 2008, the administrative building was sublet for a period of approximately three
years, until December 2010, with an option for the subtenant to extend for an additional three years. In determining the facilities lease
loss, various other assumptions were made, including the time period over which the buildings will be vacant, expected sublease terms and
expected sublease rates. Total future expected lease payments of approximately $8.9 million were assumed in determining the facilities lease
loss on the administrative building, offset by the expected sub lease income. At both  June 28, 2009 and December 31, 2008, the Company
had an accrual balance of $0.7 million related to these leases. Adjustments to this accrual will be made in future periods, if evidence of any
adjustment can be reasonably estimated as future events and circumstances become known.

In connection with the acquisition of Vortek Industries, Ltd (Vortek) in 2004, the Company became party to an
agreement between Vortek and the Canadian Minister of Industry (the Minister) relating to an investment in Vortek by Technology
Partnerships Canada. Under that agreement, as amended, the Company or Vortek (renamed Mattson Technology, Canada, Inc. or
"MTC") agreed to various covenants, including (a) payment by the Company of a royalty to the Minister of 1.4 percent of revenues
from Flash RTP products, up to a total of CAD 14,269,290 (approximately $12.4 million at June 28, 2009), (b) MTC maintaining a specified
average workforce of employees in Canada through October 27, 2009, (c) investment of a certain amount by October 27, 2009 and certain
other covenants concerning protection of intellectual property rights and manufacturing obligations. If the Company, or MTC, does not
materially satisfy its obligations, the Minister may demand payment of liquidated damages in the amount of CAD 14,269,290 (approximately
$12.4 million at June 28, 2009) less any royalties paid by MTC or the Company to the Minister. The Company has been providing annual
reports to the Canadian Government on the status of the entity and believes it is materially in compliance with these covenants.


12In 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.

From time to time, the Company is party to legal proceedings and claims, either asserted or unasserted, which
arise in the ordinary course of business. While the outcome of these matters is not presently determinable and cannot be predicted with
certainty, management does not believe that the outcome of any of these matters or any of the above mentioned legal claims will have a
material adverse effect on the Company's financial position, results of operations or cash flows.
7.	Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of SFAS No. 123R,
Share-Based Payment. SFAS No. 123R establishes accounting for stock-based awards exchanged for employee services.
Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense
over the requisite service period for the employee.

The stock-based compensation expense for the six months ended June 28, 2009 and June 29, 2008 was as follows:

Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008(thousands)Stock-based compensation by type of award:Stock options

$          623

$            836

$       1,251

$       1,935Restricted stock units

220

271

431

395Employee stock purchase plan

5

25

18

41Total stock-based compensation

$          848

$       1,132

$       1,700

$       2,371Stock-based compensation by category of expense:Cost of sales

$             26

$               39

$               64

$               56Research, development and engineering

101

126

225

238Selling, general and administrative

721

967

1,411

2,077Total stock-based compensation

$          848

$       1,132

$       1,700

$       2,371The Company did not capitalize any stock-based compensation as inventory at June 28, 2009 and June 29, 2008 as
such amounts were inconsequential. Compensation expense for the six months ended June 29, 2008 included an additional $350,000 related
to a stock option modification that occurred in 2006, and an adjustment was made to increase selling, general and administrative expense
and additional paid-in capital for this amount in the first quarter of 2008.

13Valuation AssumptionsThe Company estimates the fair value of stock options using a Black-Scholes valuation model, consistent
with the provisions of SFAS No. 123R. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes
option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008Expected dividend yield

—

—

—

—Expected stock price volatility

71%

53%

67%

55%Risk-free interest rate

2.4%

3.3%

1.9%

2.9%Expected life of options

5 years

5 years

5 years

5 yearsOption-pricing models require the input of highly subjective assumptions, including the option's expected
life and the price volatility of the underlying stock. The expected life of each option was determined by analyzing historical exercise and
post-vest forfeiture patterns. The risk-free interest rate was determined using the rates for United States Treasury notes for similar terms. The
expected stock price volatility assumption was determined using the historical volatility of the Company's common stock.

Stock OptionsAs of June 28, 2009 the unrecorded deferred stock-based compensation balance related to stock options was $3.5
million after estimated forfeitures and will be recognized over an estimated weighted-average amortization period of 2.4 years.  SFAS No.
123R requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from
those estimates. In the three months ended June 28, 2009 and June 29, 2008, the Company's Board of Directors approved the grant of
approximately 165,000 and 236,000 stock options, respectively, with an estimated total grant-date fair value of $0.1 million and $0.5 million,
respectively, after estimated forfeitures. In the six months ended June 28, 2009 and June 29, 2008, the Company's Board of Directors
approved the grant of approximately 1,485,000 and 747,000 stock options, respectively, with an estimated total grant-date fair value of $0.7
million and $1.9 million, respectively, after estimated forfeitures.
Restricted Stock UnitsAs of June 28, 2009, the unrecorded deferred stock-based compensation balance related to non-vested
restricted stock units with time-based vesting was $0.8 million after estimated forfeitures and will be recognized over an estimated
weighted-average amortization period of 1.4 years.  During the six months ended June 28, 2009, the Company's Board of Directors did not approve
any restricted stock units.  During the three months and six months ended June 29, 2008, the Company's Board of Directors approved the
grant of 13,000 and 135,000 restricted stock units, respectively, with an estimated total grant-date fair value of $0.1 million and $0.7 million,
respectively, after estimated forfeitures. The grant-date fair value of these restricted stock units was based on the closing market price of the
Company's common stock on the date of award.
Performance-Based Restricted Stock UnitsDuring the year ended December 31, 2008, the Company's Board of Directors approved the grant of 683,000
performance-based restricted stock units to certain executives, officers and senior-level management. During the year ended December 31,
2008, 175,000 of these restricted stock units were cancelled, leaving 508,000 units outstanding at December 31, 2008. During the six months
ended June 28, 2009, 127,000 of these units were cancelled, leaving 381,000 units outstanding at June 28, 2009.

These restricted stock units vest in four equal tranches upon the achievement of four sequentially increasing
revenue performance targets. Vesting is also contingent upon certain operating profit margin and stock price thresholds being achieved. If
any of the conditions have not been met by the close of the Company's 2011 fiscal year, then the corresponding units will be forfeited. In
accordance with SFAS No. 123R, the stock price threshold condition was incorporated into the measurement of fair value on the grant date.
The fair value of the 683,000 performance-based restricted stock units with market conditions was determined using a Monte Carlo valuation14methodology with the following weighted-average assumptions: volatility of the Company's common stock of 50 percent; dividend yield of 0
percent, and risk-free interest rate of 2.3 percent. The fair value of the performance-related component of the performance shares was
equivalent to the grant-date fair value of the Company's common stock.

As of March 30, 2008, the Company had determined that the first two revenue targets and the operating profit
margin target were probable of being achieved, while the final two revenue targets were not probable of being achieved because they would
require significant growth in revenue and market share. Accordingly, the Company began recognizing the compensation cost associated with
the first two tranches over the longer of the derived service period of the stock price target and the estimated service period of the
performance targets. With the change in market conditions during the fourth quarter of 2008, it was determined that it was not probable that
the first two revenue targets and the operating profit target would be met by the specified dates. As a result, all stock compensation expense
related to performance-based restricted stock units was reversed during the fourth quarter of 2008. During the six months ended June 28,
2009, the Company did not record any stock compensation expense for these units. During the six months ended June 29, 2008, the
Company recorded $43,000 as stock compensation expense for these units. If and when the Company determines that the related targets
are probable of being achieved, the Company will begin recognizing compensation cost in the period that such assessment is made in
accordance with SFAS No. 123R.

At June 28, 2009, the Company had 1.9 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 six
months ended June 28, 2009:

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, 2008

2,452

5,772

$          8.85

768

$          5.12Stock options:Granted

(1,485)

1,485

0.81

-

-Exercised

-

-

-

-

-Cancelled or forfeited

731

(731)

9.90

-

-Restricted stock units:Granted



-

-

-

-Released

(17)

-

-

(37)

8.23Cancelled or forfeited

268

-

-

(153)

4.13Balances at June 28, 2009

1,949

6,526

$          6.91

578

$          5.18Options and stock purchase rights granted under the 2005
Plan are for periods not to exceed seven years. Generally, incentive stock option and non-statutory stock option grants under the 2005 Plan
must be at exercise prices that are at least 100 percent of the fair market value of the stock on the date of grant. Generally, 25 percent of the
options vest on the first anniversary of the date of the grants, and the remaining options vest 1/36 per month for the next 36 months
thereafter. During the first quarter of 2009, in addition to the annual employee stock option grants, the Company granted stock options with a
two-year vesting period in lieu of the annual performance bonus.

Restricted stock units granted through 2007 generally vest 25 percent of the units granted on the first anniversary
of the date of grant, and 1/16 of the initial units granted per quarter thereafter. Beginning in 2008, restricted stock units with time-based
vesting generally vest 25 percent of the units granted on each anniversary of the date of grant. On occasion, the Company grants restricted
stock units for varying purposes with different vesting schedules. 2005 Plan awards of restricted stock units 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. The value of the
restricted stock units was based on the closing market price of the Company's common stock on the date of award.

15Supplemental disclosure information about the Company's stock options and restricted stock units with
time-based vesting is as follows:

Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008Stock options:

(thousands, except weighted-average fair values)Weighted-average grant date fair value

$            0.75

$            2.63

$            0.46

$            2.89Intrinsic value of options exercised

$                   -

$              42

$                   -

$                 58Cash received from options exercised

$                   -

$                 36

$                   -

$                 56Restricted stock units with time based vesting:Weighted-average grant date fair value

$                   -

$            4.99

$                   -

$            5.77Supplemental disclosure information about the Company's stock options outstanding at June 28, 2009 is as
follows:

Weighted-Weighted-

AverageAverage

Remaining

AggregateExercise

Contractual

IntrinsicShares

Price

Life

Value(thousands)



(in years)

(thousands)Options exercisable at June 28, 2009

3,945

$            9.20

3.6

$                  -Options expected to vest at June 28, 2009

2,581

$            3.41

6.1

$             463Options outstanding at June 28, 2009

6,526

$            6.91

4.6

$             463The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the
Company's closing stock price of $1.11 at June 28, 2009, which would have been received by the option holders had all option holders
exercised their options at that date. There were no shares of common stock subject to in-the-money options, which were exercisable at June
28, 2009. The Company settles employee stock option exercises with newly issued common shares.
8.	Reportable Segments

The Chief Executive Officer of the Company is the Company's chief decision maker. As the Company's business
is completely focused on one industry segment, the design, manufacturing and marketing of advanced fabrication equipment for the
semiconductor manufacturing industry, management believes that the Company has one reportable segment. The Company's revenues and
profits are generated through the sales of products and services for this one segment.

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

Three Months Ended

Six Months EndedJune 28, 2009

June 29, 2008

June 28, 2009

June 29, 2008(thousands)

%

(thousands)

%

(thousands)

%

(thousands)

%United States

$           839

10

$       3,033

7

$       1,776

13

$       8,538

9Taiwan

1,046

13

9,447

23

1,630

12

28,217

31Korea

3,669

45

4,169

10

3,816

28

10,900

12Japan

288

4

15,014

36

598

5

23,957

26Other Asia

1,574

20

7,507

18

3,847

28

12,907

14Europe and others

652

8

2,620

6

1,973

14

5,926

8$      8,068

100

$    41,790

100

$    13,640

100

$    90,445

10016In the three months ended June 28, 2009, two customers accounted for 45 percent and 13 percent of net sales,
respectively. In the three months ended June 29, 2008, three customers accounted for 20 percent, 12 percent and 11 percent of net sales,
respectively. In the six months ended June 28, 2009, two customers accounted for 27 percent and 17 percent of net sales respectively. In the
six months ended June 29, 2008, three customers accounted for 19 percent, 12 percent and 11 percent of net sales respectively. At June 28,
2009, three customers accounted for 25 percent, 15 percent and 13 percent of the Company's accounts receivable balance. At December 31,
2008, four customers accounted for 27 percent, 14 percent, 13 percent and 10 percent of the Company's accounts receivable balance.

Geographical information relating to the Company's property and equipment, net, at June 28 2009 and December
31, 2008 is as follows:

June 28, 2009

December 31, 2008(thousands)

%

(thousands)

%United States

$        18,132

72

$       18,778

69Germany

5,389

21

6,637

25Canada

1,545

6

1,337

5Others

291

1

392

1$        25,357

100

$       27,144

1009.	Income Taxes

The provision for income taxes for the six months ended June 28, 2009 primarily consisted of $0.4 million
provision for foreign taxes.  The provision for income taxes for the six months ended June 29, 2008 primarily consisted of a $1.1 million
provision for foreign taxes, which was partially reduced by a discrete item resulting in a foreign tax benefit of $0.5 million.   The company
recorded no Federal or states tax provision for the first and second quarter of 2008.  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 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.

At December 31, 2008, the Company had $36.3 million of unrecognized tax benefits exclusive of interest and
penalties described below.  Of this total, $9.2 million represents the amount of unrecognized tax benefits that, if recognized, would favorably
affect the effective income tax rate in any future periods.  For the six months ended June 30, 2009, there have been no material changes to
the amount of unrecognized tax benefits.  It is reasonably possible that $9.1 million of unrecognized tax benefits will decrease within the next
12 months due to the potential closure of a foreign tax audit.  Management cannot quantify any potential changes to the Company's financial
position, results of operations, or cash flows as a result of this audit at this time.

The Company's practice is to recognize interest and/or penalties related to unrecognized tax benefits in income
tax expense. At December 31, 2008, the Company had $1.3 million accrued for estimated interest and $0.1 million accrued for estimated
penalties. For the six months ended June 29, 2009, the recorded income tax expense included estimated interest of $0.2 million.

The Company and its subsidiaries are subject to United States federal income tax as well as to income taxes in
Germany and various other 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 2003. Certain of the Company's foreign income tax returns are currently under examination.
The final outcomes of these examinations are not yet known.

10.	Net Loss Per Share

Net loss per share is calculated in accordance with SFAS No. 128, Earnings Per Share, which
requires dual presentation of basic and diluted net income per share on the face of the income statement.

17The following table summarizes the incremental shares of common stock from these potentially dilutive
securities, calculated using the treasury stock method:

Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008(thousands)

(thousands)Weighted average shares outstanding - Basic

49,772

49,419

49,749

49,391Diluted potential common shares from stockoptions and restricted stock units

-

-

-

-Weighted average shares outstanding - Diluted

49,772

49,419

49,749

49,391For the six months ended June 28, 2009 and June 29, 2008, the Company had 7.1 million and 7.2 million shares,
respectively, associated with equity awards that could potentially dilute basic earnings per share, but were excluded from the computation in
the periods presented, as their effect would have been anti-dilutive.

11.	Other Comprehensive Income

The balance of accumulated comprehensive income is as follows:

June 28,

December 31,2009

2008(thousands)Cumulative translation adjustments

$             20,703

$             20,458Unrealized investment loss

(221)

(203)$             20,482

$             20,255The following are the components of comprehensive income (loss):Three Months Ended

Six Months EndedJune 28,

June 29,

June 28,

June 29,2009

2008

2009

2008(thousands)

(thousands)Net loss

$           (19,896)

$             (6,754)

$          (47,123)

$   (10,970)Cumulative translation adjustments

1,424

(338)

245

4,694Unrealized investment gain (loss)

96

(169)

(18)

(106)Comprehensive loss

$           (18,376)

$             (7,261)

$          (46,896)

$      (6,382)12.	Subsequent Events

In accordance with FAS No. 165, Subsequent Events, the Company evaluated events and transactions that
occurred through July 31, 2009 for potential recognition or disclosure in the financial statements. In July 2009, the Company announced a
restructuring program to reduce its global workforce by approximately 10 percent. The restructuring costs related to this program, which are
estimated at $1.8 million and comprised primarily of severance costs, will be recorded in the third quarter of fiscal 2009. It is expected that
these severance payments will be substantially completed by the end of the third quarter of fiscal 2009.

18Item 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, customer demand, market share, competitiveness, margins, product development
plans and levels of research and development (R&D) activity, outsourcing plans and operating expenses, tax expenses, the expected
effects, cost and timing of restructurings, excess inventory reserves, the level of our vendor commitments as compared to our requirements,
cost-saving initiatives, and consolidation of operations and facilities, economic conditions in general and in our industry, 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 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 events, or for any other reason.
Documents to Review In Connection With Management's Analysis of Financial Condition and Results of
Operations

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, 2008 (our 2008 Form 10-K).
Overview

We are a supplier of semiconductor wafer processing equipment used in the fabrication of integrated circuits
(ICs). Our manufacturing equipment is used for transistor level, or front-end-of-line manufacturing, and also in specialized applications for
processing the interconnect layer, or back-end-of-line processing. Our manufacturing equipment utilizes innovative technology to deliver
advanced processing capabilities and high productivity for the fabrication of current and next-generation ICs.

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.

Beginning in the second half of 2007and through the first half of 2009, we experienced weakness in the overall
semiconductor market combined with the overall weakness in the economy, particularly in the financial sector, and we expect the weakness
to continue through the remainder of 2009 and perhaps into 2010. We are seeing improved business conditions specific to the semiconductor
capital equipment sector, but the industry remains in the early stages of recovery.  Industry utilization rates and semiconductor demand are
on the rise, and customer activity has continued to increase, particularly involving technologies in our new product portfolio.  Meaningful
memory spending and capacity additions for memory applications, however, remain muted, with the timeline for more normal industry
conditions and a sustainable recovery still well in the future.

There continue to be several uncertainties that could impact our financial performance during 2009. Revenue
projections are unclear for the next year, and if revenue remains at the current low levels we may be required to book additional reserves for
excess inventory, and/or vendor commitments that may be in excess of our requirements, and we will also continue to have significant
under-absorption of our factories. These factors will have a major impact on our gross margin percentages for the remainder of 2009.

19During the first half of 2009, end markets have continued to be severely impacted by global financial conditions.
Accordingly, we have continued to focus on cash preservation, cost reduction and protecting the investment in our new products to position
us for success in the future. Since the second quarter of 2008, we have implemented strict cost reduction initiatives including reductions of
our global headcount and salary reductions for all employees. We continue to focus on our objectives to outsource manufacturing in Fremont
and Germany to reduce manufacturing overhead costs. We have optimized our worldwide facilities, reduced variable headcount expenses
through shutdowns and unpaid time-off, and are taking measures to reduce travel, outside service and facility related costs. We continue to
align the organization to maximize operating leverage and efficiency, and further reduce cash loss from operations.  Subsequent to the
second quarter of 2009, we implemented additional cost reduction initiatives through continued management restructurings, reductions-in-
force and extended furloughs in certain manufacturing locations.  We will continue to review our operations and take further cost reduction
measures as necessary, in order to minimize the cash used in operations, and retain sufficient cash reserves for the next twelve months.
However, though we have implemented these cost cutting and operational flexibility measures, we are largely dependent upon increases in
sales in order to improve our profitability.

Going forward, 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, and 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 margins necessary to enable us to make the necessary investments in our business.


20Results of Operations

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

Three Months EndedJune 28, 2009

June 29, 2008

Increase (Decrease)(thousands)


(thousands)


(thousands)

%Sales:Products

$          7,532


$        40,443


$      (32,911)

(81.4)Services

536


1,347


(811)

(60.2)Net sales

8,068


41,790


(33,722)

(80.7)Cost of sales:Products

9,576


22,735


(13,159)

(57.9)Services

101


610


(509)

(83.4)Total cost of sales

9,677


23,345


(13,668)

(58.5)Gross margin

(1,609)


18,445


(20,054)

n/m (1)Operating expenses:Research, development and engineering

6,810


9,215


(2,405)

(26.1)Selling, general and administrative

11,505


15,592


(4,087)

(26.2)Amortization of intangibles

-


128


(128)

n/m (1)Restructuring charges

(100)


748


(848)

n/m (1)Total operating expenses

18,215


25,683


(7,468)

(29.1)Loss from operations

(19,824)


(7,238)


(12,586)

n/m (1)Interest income

154


837


(683)

(81.6)Interest expense

(23)


(76)


53

(69.7)Other income, net

51


145


(94)

(64.8)Loss before income taxes

(19,642)


(6,332)


(13,310)

n/m (1)Provision for income taxes

254


422


(168)

(39.9)Net loss

$      (19,896)


$        (6,754)


$      (13,142)

n/m (1)________________________

(1)    Not meaningful


21Six Months EndedJune 28, 2009

June 29, 2008

Increase (Decrease)(thousands)


(thousands)


(thousands)

%Sales:Products

$        12,231


$        87,135


$      (74,904)

(86.0)Services

1,409


3,310


(1,901)

(57.4)Net sales

13,640


90,445


(76,805)

(84.9)Cost of sales:Products

22,706


49,846


(27,140)

(54.4)Services

458


1,320


(862)

(65.3)Total cost of sales

23,164


51,166


(28,002)

(54.7)Gross margin

(9,524)


39,279


(48,803)

n/m (1)Operating expenses:Research, development and engineering

13,460


17,061


(3,601)

(21.1)Selling, general and administrative

24,359


32,367


(8,008)

(24.7)Amortization of intangibles

-


256


(256)

n/m (1)Restructuring charges

818


748


70

9.4Total operating expenses

38,637


50,432


(11,795)

(23.4)Loss from operations

(48,161)


(11,153)


(37,008)

n/m (1)Interest income

433


2,062


(1,629)

(79.0)Interest expense

(56)


(76)


20

(26.3)Other income (expense), net

1,077


(1,247)


2,324

n/m (1)Loss before income taxes

(46,707)


(10,414)


(36,293)

n/m (1)Provision for income taxes

416


556


(140)

(25.3)Net loss

$      (47,123)


$      (10,970)


$      (36,152)

n/m (1)________________________

(1)    Not meaningful

Net SalesNet Sales decreased 81 percent to $8.1 million for the three months ended June 28, 2009 compared to $41.8
million for the same period in 2008. The decrease in net sales was primarily due to a $32.9 million decline in product sales and a $0.8 million
decline in service sales. The decline in net sales is primarily due to the severity of the continued downturn in the overall wafer fabrication
equipment market and the industry's reduced capital spending, compounded by the global economic and credit crisis. Although utilization
rates are improving, our customers are still exercising extreme caution in their capital investments, which is adversely impacting our
shipments of new tools, sales of spare parts as well as services.

Net Sales decreased 85 percent to $13.6 million for the six months ended June 28, 2009 compared to $90.5
million for the same period in 2008. Again, the decrease in net sales was primarily due to a $74.9 million decline in product sales and a $1.9
million decline in service sales. The decline in net sales is primarily due to the downturn in the wafer fabrication equipment market. Demand
for semiconductors is low, and memory prices, though improving are not yet near their prior peak, resulting in low utilization at the customer
production fabs. Consequently demand for semiconductor equipment has been limited to primarily new technology purchases during the first
half of 2009.

22Gross MarginGross margin was a negative $1.6 million for the three months ended June 28, 2009, a decrease of $20.1 million
when compared to $18.5 million for the same period in 2008. The decrease was primarily attributable to an 81 percent decline in net sales for
the second quarter of 2009 when compared to the same period in 2008, and an increase in our reserves for excess inventory and vendor
commitments of $3.8 million in the second quarter of 2009 compared to $0.6 million for the same period in 2008.

Gross margin was a negative $9.5 million for the six months ended June 28, 2009, a decrease of $48.8 million
when compared to $39.3 million for the same period in 2008. For the six months ended June 28, 2009, the decrease in gross margin was
primarily attributable to an 85 percent decline in net sales when compared to the same period in 2008, manufacturing under absorption of
$3.7 million in 2009 when compared to $2.7 million for the same period in 2008, and an increase in reserves for excess inventory and vendor
commitments of $13.1 million in 2009 compared to $1.4 million for the same period in 2008. During the six months ended June 28, 2009, we
booked an additional $10.7 million for excess inventory reserves due to lower forecasted revenue volumes and $2.4 million of potential
excess inventory resulting from vendor commitments, totaling $13.1 million. The weakness in the overall semiconductor equipment market
resulted in lower revenue levels and the corresponding under absorption of fixed manufacturing overhead costs in our factories.

Research, Development and EngineeringResearch, development and engineering
("RD&E") expenses were $6.8 million for the three months ended June 28, 2009, a decrease of $2.4 million or 26 percent
when compared to $9.2 million for the same period in 2008. The decrease in RD&E expenses was primarily due to restructuring
activities implemented in fiscal 2008 and planned shutdowns in fiscal 2009, resulting in a $1.6 million reduction in salary related expenses, a
$0.5 million reduction in travel, outside service and other expenses, and a $0.3 million reduction in project material expenditures.

RD&E expenses were $13.5
million for the six months ended June 28, 2009, a decrease of $3.6 million or 21 percent when compared to $17.1 million for the same period
in 2008. Again, the decrease in RD&E expenses was primarily due to restructuring activities implemented in fiscal 2008 and planned
shutdowns in fiscal 2009, resulting in a $2.8 million reduction in salary related expenses, a $0.7 million reduction in travel and outside service
expenses, a $0.3 million reduction in project material expenditures, and a $0.2 million reduction in facilities related costs.  These expense
reductions were partially offset by additional lab tool depreciation of approximately $0.4 million.

Selling, General and AdministrativeSelling, General and Administrative ("SG&A") expenses were $11.5 million for the three months
ended June 28, 2009, a decrease of $4.1 million or 26 percent when compared to $15.6 million for the same period in 2008. The decrease in
SG&A expenses was primarily due to restructuring activities implemented in fiscal 2008 and planned shutdowns in fiscal 2009, resulting
in a $2.1 million reduction in employee related costs. The decrease in SG&A expenses is also attributed to the overall decline in our
sales activities, resulting in a $1.7 million reduction of travel and outside service expense and a $0.7 million reduction in freight costs. In
addition, we realized $0.7 million of bad debt reserves upon payment from customers. These expenses reductions were partially offset by an
increase of $1.1 million in amortization expenses for evaluation tools.

SG&A expenses were $24.4 million for the six months ended June 28, 2009, a decrease of $8.0 million or
25 percent when compared to $32.4 million for the same period in 2008. The decrease in SG&A expenses was primarily due to
restructuring initiatives implemented in fiscal 2008 and planned shutdowns in fiscal 2009, resulting in a $4.0 million reduction in employee
related costs. The decrease in SG&A expenses is also attributed to the overall decline in our sales activities, resulting in a $2.0 million
reduction of outside service expenses, a $1.6 million reduction in travel expenses and a $1.3 million reduction in freight costs. In addition, we
realized $1.3 million of bad debt reserves and savings in other expenses. These expenses reductions were partially offset by an increase of
$2.2 million in amortization expenses for evaluation tools.

23Restructuring ExpensesDuring the year ended December 31, 2008, we implemented several restructuring programs, beginning
in the second quarter of 2008 in response to the weakness in the overall semiconductor industry. As a result of our restructuring activities, we
reduced headcount by 35 percent, represented by approximately 200 employees, and optimized operations at our facilities worldwide over
the course of 2008. The estimated annual savings from these restructuring activities are approximately $19.0 million. A percentage of the
savings will be re-invested in our new product development activities and the remainder will help us reduce our cash loss from operations. As
of December 31, 2008, we had $3.9 million in our restructuring reserves comprised of $3.5 million in severance reserves and $0.4 million for
lease termination expenses.

During the three months ended June 28, 2009, we recorded additional restructuring accruals of $0.2 million,
primarily consisting of severance costs. We paid $1.2 million against the restructuring reserves and recorded adjustments of $0.3 million,
which decreased the reserves. During the six months ended June 28, 2009, we recorded additional restructuring accruals consisting of $1.1
million in additional severance costs and $0.1 in additional lease termination costs. We paid $3.9 million against the severance reserves and
recorded adjustments of $0.4 million, which decreased the reserves. At June 28, 2009, we had a restructuring reserves balance of $0.8
million, comprised of severance costs of $0.3 million and lease termination costs of $0.5 million.

We expect to book additional severance reserves of approximately $0.1 million during the remainder of 2009
related to the 2008 restructuring plans. We anticipate that all severance payments against the reserves will be substantially completed by
the end of the 2009 fiscal year. The payment of the lease termination expense is dependent on the timing of a final agreement with the
landlord, which is anticipated to occur by the end of the 2009 fiscal year.

In July 2009, we announced an additional restructuring program to reduce our global workforce by approximately
ten percent. We anticipate annualized cost savings of approximately $7.0 million from this program. The restructuring costs related to this
program, which are estimated at $1.8 million and comprised primarily of severance costs, will be recorded in the third quarter of fiscal 2009. It
is expected that these severance payments will be substantially completed by the end of the third quarter of fiscal 2009.

In the aggregate, the restructuring initiatives implemented in fiscal 2008 and 2009 have resulted in a
headcount reduction of approximately 45 percent and an expected annualized cost-savings of approximately $26 million.

Interest and Other Income (Expense), Net


Interest income was $0.1 million for the three months ended June 28, 2009, a decrease of $0.7 million when
compared to $0.8 million for the same period in 2008. The decrease was primarily due to lower cash investment balances and lower average
interest rate yields, which decreased by 1.6 percent during the same period.

Interest income was $0.4 million for the six months ended June 28, 2009, a decrease of $1.6 million when
compared to $2.0 million for the same period in 2008. The decrease was primarily due to lower cash investment balances and lower average
interest rate yields. Interest rate yield decreased by 2.1 percent during the same period.

Other income, net for the three months ended June 28, 2009 and June 29, 2008 was immaterial. Other income,
net for the six months ended June 28, 2009 was $1.1 million, an increase of $2.3 million when compared to an expense of $1.2 million for the
same period in 2008. The increase is primarily due to foreign currency exchange gain of $0.9 million compared to a loss of $0.9 million for the
same period in 2008, which is attributed to the significant fluctuation of the US dollar against the local currencies of certain of the countries in
which we operate.

Provision for Income Taxes

The provision for income taxes for the six months ended June 28, 2009 primarily consisted of a $0.4
million provision for foreign taxes. We did not record Federal or states tax provision for the six months ended June 28, 2009 primarily due to
projected losses incurred in the United States.

The provision for income taxes for the six months ended June 29, 2008 primarily consisted of a $1.1 million
provision for foreign taxes, which was partially reduced by a discrete item resulting in a foreign tax benefit of $0.5 million. We recorded no
Federal or states tax provision for the first and second quarter of 2008 primarily due to projected losses incurred in the United States.

24On a quarterly basis, we evaluate our expected income tax expense or benefit based on our year to date
operations, and record an adjustment in the current quarter. The net tax provision is the result of the mix of profits earned in tax jurisdictions
with a broad range of income tax rates.

Our valuation allowance at June 28, 2009 was primarily attributable to Federal and state deferred tax assets, as
well as certain foreign deferred tax assets. We believe that sufficient uncertainty exists with regard to the realizability of these tax assets such
that a valuation allowance is necessary. Factors considered in providing a valuation allowance include the lack of a significant history of
consistent profits and a lack of carry-back capacity resulting in the inability to realize these assets. Based on the absence of objective
evidence, we are unable to assert that it is more likely than not that we will generate sufficient taxable income to realize these remaining net
deferred tax assets.

Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our
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 management 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, management evaluates its 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 judgment 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 2008 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







There have been no material changes from the methodology applied by management for critical accounting
estimates previously disclosed in our 2008 Form 10-K.

Liquidity and Capital Resources

Our cash, cash equivalents, short-term investments and restricted cash were $79.8 million at June 28, 2009, a
decrease of $23.6 million from $103.4 million at December 31, 2008. The restricted cash of $2.0 million secures letters of credit
provided to landlords. Stockholders' equity at June 28, 2009 was $111.8 million compared to $156.8 million at December 31, 2008. Working
capital at June 28, 2009 was $98.3 million compared to $140.5 million at December 31, 2008.

25

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Credit Arrangements

In June 2009, our $10 million revolving line of credit expired.  Borrowings under this credit line bore interest at a
per annum rate equal to either the bank's prime rate minus 50 basis points or the London Interbank Offered Rate (LIBOR) plus 200 basis
points, at our option. The line of credit was collateralized by a blanket lien on all of our domestic assets excluding intellectual property. We did
not borrow or have outstanding borrowings on this line of credit at any time during its term. We used this credit line solely to secure letters of
credit provided primarily to landlords, totaling approximately $1.6 million. As a replacement for the security that was provided by the expired
line of credit, these letters of credit are now secured by cash of $2.0 million, which is classified as restricted cash on our balance sheet at
June 28, 2009.

Off-Balance-Sheet Arrangements

At June 28, 2009, 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 2008
Form 10-K.

Cash Flows from Operating Activities

Net cash used in operations of $20.9 million during the six months ended June 28, 2009, was primarily
due to a net loss of $47.1 million, offset by non-cash charges of $18.6 million, and a $7.6 million increase in cash flow from changes in assets
and liabilities. The decrease in assets and liabilities of $7.6 million primarily represented a $12.2 million reduction in accounts receivable and
advance billings, a $3.6 million reduction in inventories and inventories - delivered systems, which were partially offset by a $7.2 million
decrease in accounts payable and accrued liabilities and a $2.1 million decrease in deferred revenue. Non-cash charges of $18.7 million
primarily consisted of $13.1 million in charges related to reserves for excess inventory and for vendor commitments, $4.4 million in
depreciation charges, and $1.7 million in stock-based compensation. The $12.2 million reduction in accounts receivable balance was
primarily due to our collection efforts compounded by a sharp decline in net sales. The reduction in inventory is due to our efforts to utilize
available inventory wherever feasible, thereby minimizing cash outlays on new inventory. The additional reserves of $13.1 million booked for
excess inventory and vendor commitments was due to excess inventory resulting from the declining demand for our products and for excess
inventory resulting from our existing vendor commitments. The decrease in accounts payable, accrued liabilities, deferred revenue and other
liabilities was indicative of our lower net sales.

Net cash used in operations during the six months ended June 29, 2008 was $14.0 million, primarily due to a net
loss of $11.0 million, a decrease from changes in assets and liabilities of $10.7 million, offset by non-cash charges of $7.7 million.  The
increase in assets and liabilities of $10.7 million primarily represents a $9.7 million increase in net inventories, a $4.2 million increase in
inventories - delivered systems and a $6.8 million decrease in accrued liabilities and accounts payable, which were partially offset by a $4.7
million increase in deferred revenue, a $3.0 million decrease in prepaid expenses and other current assets, and a $1.5 million decrease in
accounts receivable net of advanced billings. Non-cash expenses of $7.7 million primarily consisted of $3.8 million in depreciation, $2.4
million in stock compensation expenses and $1.4 million in charges related to excess inventory. The increase in inventory was mostly due to
finished goods inventory for the tools pushed out of the quarter, evaluation inventory shipped to customers and increases in spares inventory
for customer satisfaction purposes. The increases in inventories - delivered systems and deferred revenue were due to an increase in
systems shipped during the quarter where revenue was deferred in accordance with our revenue recognition policies. The decrease in
prepaid expenses of $3.0 million was primarily due to decreases in our prepaid value added tax balances as we received tax refunds. The
decrease in accrued liabilities was primarily due to a decrease in our value added tax liabilities of $2.4 million due to refunds received and
decrease in warranty reserves of $3.0 million as a result of lower net sales.

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.

26

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Cash Flows from Investing Activities

Net cash used in investing activities during the six months ended June 28, 2009 was $0.2 million,
primarily due to purchases of $17.2 million of available-for-sale investments, purchases of $2.0 million of certificates of deposit and capital
spending of $2.5 million, offset by proceeds of $21.5 million from sales and maturities of available-for-sale investments. The $2.0 million of
certificates of deposit purchased were classified as restricted cash at June 28, 2009. Our capital spending in the first half of 2009 was
primarily for tools and equipment used in our manufacturing activities.

Net cash used in investing activities during the six months ended June 29, 2008 was $11.2 million, due to
purchases of $21.7 million of available-for-sale investments and capital spending of $4.6 million, partially offset by proceeds of $14.5 million
from sales and maturities of available-for-sale investments.

Cash Flows from Financing Activities

Net cash provided by financing activities during the six months ended June 29, 2009 was $0.2 million, comprised
of proceeds from stock plans.

Net cash used in financing activities during the six months ended June 29, 2008 was $2.2 million, comprised of
treasury stock purchases of $2.6 million as part of our common stock repurchase program, which was partially offset by net proceeds of $0.4
million from stock plans.

Liquidity and Capital Resource Outlook

At June 28, 2009, we had cash, cash equivalents, short-term investments and restricted cash of $79.8 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. We will continue to review our expected cash requirements, increase all efforts to collect any aged receivables, and plan to take
appropriate cost reduction measures to ensure that we have at least six quarters of available cash at any time. In the event additional needs
for cash arise, we may raise additional funds from a combination of sources including the potential issuance of debt or equity securities.
Additional financing may not be available on terms favorable to us, or at all. Any additional financing activity could be dilutive to our current
shareholders. 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.

Recent Accounting Pronouncements and Accounting Changes

With the exception of those discussed below, there have been no recent accounting pronouncements or changes
in accounting pronouncements during the six months ended June 28, 2009, as compared to the recent accounting pronouncements
described in our 2008 Form 10-K, that are of significance, or potential significance, to us.

In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position
("FSP") No. 157-2, Effective Date of FASB Statement No. 157. FSP No. 157-2 delays the effective date of Statements of
Financial Accounting Standards ("SFAS") No. 157 for all non-financial assets and non-financial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), and is effective for financial
statements issued for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 157 did not have a material impact on our
financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-
Based Payment Transactions Are Participating Securities. EITF 03-6-1 addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings
per share (EPS) under the two-class method described in SFAS No. 128, Earnings per Share. This pronouncement is effective for
financial statements issued for fiscal years beginning after December 15, 2008. The adoption of FSP No. EITF 03-6-1 did not impact  our
calculation of EPS.

In April 2009, the FASB issued three related Staff Positions: (i) FSP No. 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not
Orderly, (ii) FSP No. 115-2 and FSP No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, and
(iii) FSP No. 107-1 and APB No. 28-1, Interim Disclosures about Fair Value of

27

---



Financial Instruments, which will be effective for
interim and annual periods ending after June 15, 2009. FSP No. 157-4 provides guidance on how to determine the fair value of assets
and liabilities under SFAS No. 157 in the current economic environment and reemphasizes that the objective of a fair value measurement
remains an exit price. If we were to conclude that there has been a significant decrease in the volume and level of activity of the asset or
liability in relation to normal market activities, quoted market values may not be representative of fair value and we may conclude that a
change in valuation technique or the use of multiple valuation techniques may be appropriate. FSP No. 115-2 and FSP No. 124-2 modify the
requirements for recognizing other-than-temporarily impaired debt securities and revise the existing impairment model for such securities, by
modifying the current intent and ability indicator in determining whether a debt security is other-than-temporarily impaired. FSP No. 107 and
APB No. 28-1 enhance the disclosure of instruments under the scope of SFAS No. 157 for both interim and annual periods. We have
determined that the adoption of these staff positions did not materially impact the financial statements of the Company. See Note 3 for
information and related disclosures regarding the Company's fair value measurements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No.
165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. This statement sets forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial
statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its
financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009. We adopted SFAS No. 165 for the quarter ended
June 28, 2009.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and
The Hierarchy of Generally Accepted Accounting Principles, to be effective for the financial statements issued for the interim and annual
periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted
Accounting Principles ("GAAP"), SFAS No. 168 is not supposed to change GAAP, but is intended to make it easier to find and
research GAAP applicable to particular transactions or specific accounting issues. SFAS No. 168 is a new structure which takes accounting
pronouncements and organizes them by approximately ninety topics. Once approved, SFAS No. 168 will be considered authoritative at that
time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard. Once SFAS No. 168 becomes
effective, all non-grandfathered, non-SEC accounting literature not included in SFAS No. 168 will become non-authoritative. We are currently
evaluating the impact of SFAS No. 168 on our financial statements.

Item 3.   	Quantitativeand Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest
rates. Historically, much of our revenues and capital spending has been transacted in U.S. dollars.

Our exposure to market risk for changes in interest rates relates to our investment portfolio of cash, cash
equivalents, and short-term investments. We do not currently use derivative financial instruments in our investment portfolio or hedge for
these interest rate exposures. 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.

Our interest rate risk relates primarily to our investment portfolio, which consisted of $56.2 million in cash
equivalents, $21.7 million in short-term investments and $2.0 million in restricted cash at June 28, 2009.

An immediate increase or decrease in interest rates of 100 basis points would not have a material adverse affect
on the fair value of our investment portfolio. Conversely, because of the short-term nature of our portfolio, an immediate decline of 100 basis
points in interest rates could harm interest earnings of our investment portfolio in the future as securities mature. By policy, we limit our
exposure to longer-term investments. At June 28, 2009, 100 percent of our short-term investments  will mature in less than one year.

28

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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 consolidated income statements 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 materially adversely affect 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, when compared to other currencies, primarily the Euro and the
Canadian dollar, fluctuated significantly in the first half of 2009 due to continued uncertainties in the financial markets. For the six months
ended June 28, 2009 realized and unrealized foreign currency exchange gains were $0.9 million, compared to realized and unrealized foreign
currency exchange losses of $0.9 million for same period in 2008.

Cumulative translation adjustments included in comprehensive income for the six months ended June 28, 2009
were $0.2 million primarily due to the strengthening of the U.S. dollar in the first half of 2009, which unfavorably impacted the net assets used
in our foreign operations and held in local currencies, resulting in a increase in cumulative translation adjustments to $20.7 million at June 28,
2009, compared to $20.5 million at December 31, 2008.

We did not have any hedging activities during the six months ended June 28, 2009 and during the six months
ended June 29, 2008. We had no forward foreign exchange contracts outstanding at June 28, 2009.

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 Securities and
Exchange Commission'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 final 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.

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 second quarter of 2009 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.

29

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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 of
this. 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

Other Items in this Quarterly Report on Form 10-Q describe risks and uncertainties associated with our
business, including risks and uncertainties that could cause actual results to differ materially from the results expressed or implied by
forward-looking statements contained in this Quarterly Report on Form 10-Q and in other statements we make publicly. A more complete description
of a number of primary risk factors associated with our business, and which could cause our results to differ materially from the results
expressed or implied by our forward-looking statements contained in this Quarterly Report on Form 10-Q or elsewhere, is set forth in our
2008 Form 10-K.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors
previously disclosed under Item 1A, "Risk Factors" contained in our 2008 Form 10-K.

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

Issuer Repurchases of Equity Securities

In April 2007, our Board of Directors approved a common stock repurchase plan (Repurchase Plan) that authorized
the repurchase of up to $20.0 million of our outstanding shares of common stock through open-market purchases or private
transactions pursuant to a plan in conformity with Rule 10(b) 5-1. At December 31, 2007, 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 the Company's shares of common stock through open-market purchases or private transactions. As of June 28,
2009, 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 $35 million. The last of the repurchases of common stock under this plan was completed
in the first quarter of 2008.

The Company has the authorization to repurchase up to an additional $15 million of the Company's
shares of common stock under the Repurchase Plan.

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Item 4.	Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders was held on June 2, 2009. Of the 49,709,288 shares of
Common Stock (as of the record date of April 6, 2009) entitled to vote at the meeting, 46,831,629 shares were present in person or by proxy.

At the meeting, our stockholders elected Dr. Jochen Melchior and Shigeru Nakayama as Class II directors to hold
office for a three-year term and until their successors are elected and qualified. The nominees received the following votes:

|Nominee             |  | For        |  | Withheld  
|------------------- |  | ---------- |  | ----------
|                    |  |            |  |           
|Dr. Jochen Melchior |  | 34,937,428 |  | 11,894,201
|Shigeru Nakayama    |  | 35,008,267 |  | 11,823,362

Other directors whose term continued after the 2009 Annual Meeting of Stockholders were Kenneth Kannappan, John
C. Bolger, Dr. Hans-Georg Betz, David L. Dutton and Kenneth G. Smith.

At the meeting, our stockholders approved a proposal to ratify the appointment of PricewaterhouseCoopers LLP
as the Company's independent registered public accountants for the year ending December 31, 2009. The proposal received the following
votes:

|For        |  | Against |  | Abstain |  | Broker Non-Vote
|---------- |  | ------- |  | ------- |  | ---------------
|           |  |         |  |         |  |                
|46,717,598 |  | 102,387 |  | 11,644  |  | -              

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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: July 31, 2009

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

Dated: July 31, 2009

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

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