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

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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 29, 2008

OR

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

For the transition period from ________to _________

Commission file number 000-24838

Mattson Technology, Inc.(Exact name of Registrant as Specified in its Charter)



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

47131 Bayside Parkway
Fremont, California      94538

(510) 657-5900

---

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

Indicate by check mark whether the registrant 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 July 25, 2008: 49,467,106.
Note:PDF provided as a courtesy
MATTSON TECHNOLOGY, INC.TABLE OF CONTENTS


PART I. FINANCIAL INFORMATIONItem 1.
Financial Statements (unaudited):
PageCondensed Consolidated Balance Sheets — at
June 29, 2008 and December 31, 2007
3Condensed Consolidated Statements of
Operations — for the Three Months and Six Months Ended
June 29, 2008 and July 1, 2007
4Condensed Consolidated Statements of Cash
Flows — for the Six Months Ended
June 29, 2008 and July 1, 2007
5Notes to Condensed Consolidated Financial
Statements
6Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
20Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
27Item 4.
Controls and Procedures
28PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
28Item 1A.
Risk Factors
29Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
29Item 4.
Submission of Matters to a Vote of Security Holder
30Item 6.
Exhibits
31Signatures
312Part I -- FINANCIAL INFORMATION

Item 1.  Financial Statements

MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value)June 29,

December 31,2008

2007ASSETSCurrent assets:Cash and cash equivalents

$          101,411

$          125,533Short-term investments

34,328

27,034Accounts receivable, net

28,304

36,011Advance billings

9,175

2,576Inventories

57,546

51,073Inventories - delivered systems

4,178

—Prepaid expenses and other current assets

8,181

10,996Total current assets

243,123

253,223Property and equipment, net

32,500

28,600Goodwill

18,076

18,076Intangibles, net

6,824

7,080Other assets

10,774

10,791Total assets

$          311,297

$          317,770LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$            16,240

$            18,097Accrued liabilities

22,845

26,900Deferred revenue

12,198

7,207Total current liabilities

51,283

52,204Income taxes payable, noncurrent

15,153

14,147Other liabilities

5,827

6,136Total liabilities

72,263

72,487Commitments 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;53,650 shares issued and 49,469 shares outstanding in 2008;53,517 shares issued and 49,655 shares outstanding in 2007

54

54Additional paid-in capital

626,273

623,527Accumulated other comprehensive income

23,620

19,032Treasury stock, 4,181 shares in 2008 and 3,852 shares in 2007, at cost

(37,987)

(35,374)Accumulated deficit

(372,926)

(361,956)Total stockholders' equity

239,034

245,283Total liabilities and stockholders' equity

$          311,297

$          317,770The 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 29,

July 1,

June 29,

July 1,2008

2007

2008

2007Net sales

$      41,790

$      86,544

$      90,445

$    156,485Cost of sales

23,345

44,909

51,166

83,622Gross profit

18,445

41,635

39,279

72,863Operating expenses:Research, development and engineering

9,215

8,893

17,061

18,004Selling, general and administrative

15,592

17,090

32,367

33,069Amortization of intangibles

128

128

256

255Restructuring charges

748

-

748

-Total operating expenses

25,683

26,111

50,432

51,328Income (loss) from operations

(7,238)

15,524

(11,153)

21,535Interest income

837

1,775

2,062

3,370Interest expense

(76)

—

(76)

(44)Other income (expense), net

145

248

(1,247)

1,299Income (loss) before income taxes

(6,332)

17,547

(10,414)

26,160Provision for income taxes

422

6,000

556

6,962Net income (loss)

$      (6,754)

$      11,547

$    (10,970)

$      19,198Net income (loss) per share:Basic

$        (0.14)

$          0.22

$        (0.22)

$          0.37Diluted

$        (0.14)

$          0.22

$        (0.22)

$          0.36Shares used in computing net income (loss) per share:Basic

49,419

52,531

49,391

52,546Diluted

49,419

53,627

49,391

53,573The 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 29,

July 1,2008

2007Cash flows from operating activities:Net income (loss)

$           (10,970)

$            19,198Adjustments to reconcile net income (loss) to net cashprovided by (used in) operating activities:Allowance for doubtful accounts

(252)

(1,204)Amortization of intangibles

256

255Depreciation

3,849

3,067Inventory valuation charge

1,421

552Stock-based compensation

2,371

1,972Other non-cash items

58

431Changes in assets and liabilities:Accounts receivable

8,130

634Advance billings

(6,599)

3,580Inventories

(9,728)

5,114Inventories - delivered systems

(4,178)

1,879Prepaid expenses and other current assets

2,995

(8,106)Other assets

(64)

(733)Accounts payable

(2,270)

3,006Accrued liabilities

(4,518)

(2,267)Deferred revenue

4,741

(7,496)Income taxes payable, noncurrent and other liabilities

792

4,588Net cash provided by (used in) operating activities

(13,966)

24,470Cash flows from investing activities:Purchases of available-for-sale investments

(21,707)

(24,001)Sales and maturities of available-for-sale investments

14,450

36,138Purchases of property and equipment

(4,645)

(3,211)Sales of property and equipment

691

474Net cash provided by (used in) investing activities

(11,211)

9,400Cash flows from financing activities:Proceeds from stock plans, net of shares withheld
                   for employee taxes

375

1,436Purchases of treasury stock

(2,613)

(10,000)Net cash used in financing activities

(2,238)

(8,564)Effect of exchange rate changes on cash and cash equivalents

3,293

1,007Net increase (decrease) in cash and cash equivalents

(24,122)

26,313Cash and cash equivalents, beginning of period

125,533

91,416Cash and cash equivalents, end of period

$          101,411

$          117,729The accompanying notes are an integral part of these condensed consolidated financial statements.5MATTSON TECHNOLOGY, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
                  June 29, 2008  (unaudited)

Note 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, 2007, which are included in the Company's Annual Report on Form 10-K.

The Company's current year will end December 31, 2008 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 June
29, 2008.  The results of operations for the three and six months ended June 29, 2008 are not necessarily indicative of results that may be
expected for future quarters or for the entire year ending December 31, 2008.

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 at the date of the condensed consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.

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 29, 2008, as compared to the recent accounting pronouncements
described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, that are of significance, or potential
significance, to us.

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 141R, Business Combinations. This standard establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling
interest in the acquiree and the goodwill acquired in a business combination. This standard also establishes disclosure requirements that will
enable users to evaluate the nature and financial effects of a business combination. SFAS No. 141R is effective for the Company for
acquisitions made after December 31, 2008. The Company does not anticipate that the adoption of this pronouncement will have a significant
impact on its financial statements, however, the implementation of SFAS No. 141R may have a material impact on financial statements
for businesses acquired by the company post-adoption.

In the first quarter of 2008, the Company adopted SFAS No. 157, Fair Value Measurements for all
financial assets and financial liabilities and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring
fair value, and enhances fair value measurement disclosure. The adoption of SFAS No. 157 did not have a significant impact on the
Company's financial statements, and the resulting fair values6calculated under SFAS No. 157 after adoption were not significantly
different than the fair values that would have been calculated under previous guidance. See Note 3 for further details on fair value
measurements.

In February 2008, the 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 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), until the beginning of the first quarter of fiscal 2009. The Company is currently evaluating the impact that SFAS No. 157 will
have on its consolidated financial statements when it is applied to non-financial assets and non-financial liabilities that are not measured at
fair value on a recurring basis beginning in the first quarter of 2009. The major categories of non-financial assets and non-financial liabilities
that are measured at fair value, for which the company has not yet applied the provisions of SFAS No. 157 are goodwill and intangible
assets.

In the first quarter of 2008, the Company adopted SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities, which permits entities to elect to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at fair value. This election is irrevocable. The adoption of SFAS
No. 159 did not have a significant impact on the Company's financial statements. Currently, the Company has not expanded its eligible
items subject to the fair value option under SFAS No. 159.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible
Assets. FSP 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in
estimating the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. This
standard is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the
period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and other Generally Accepted
Accounting Principles (GAAP). FSP No.142-3 is effective for financial statements issued for fiscal years beginning after December 15,
2008. The measurement provisions of this standard will apply only to intangible assets of the Company acquired after January 1, 2009.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS
No. 162 supersedes the existing hierarchy contained in the U.S. auditing standards. The existing hierarchy was carried over to SFAS
No. 162 essentially unchanged. The Statement becomes effective 60 days following the Securities and Exchange Commission's
approval of the Public Company Accounting Oversight Board amendments to the auditing literature. The new hierarchy is not expected to
change current accounting practice in any area.
Note 2.	Balance Sheet Details

June 29,

December 31,2008

2007(thousands)Cash and cash equivalents:Cash in bank

$        18,267

$          40,685Money market funds

54,827

55,939Commercial paper

28,317

28,909$      101,411

$        125,533Short-term investments:United States agency securities

$          3,565

$            4,451United States corporate bonds

30,763

22,583$        34,328

$          27,0347All short-term investments are marked to market with unrealized gains (losses) recorded under other
comprehensive income. See Note 14. The maturities of short-term investments as of June 29, 2008 and December 31, 2007 are
shown below:

June 29,

December 31,2008

2007(thousands)Due within one year

$        26,564

$          14,419Due in one to two years

7,764

12,615$        34,328

$          27,034

June 29,

December 31,2008

2007(thousands)Inventories, net:Purchased parts and raw materials

$        32,986

$          27,727Work-in-process

10,465

10,934Finished goods

14,095

12,412$        57,546

$          51,073As of June 29, 2008 and December 31, 2007, the reserve for excess and obsolete inventories was $7.4 million
and $7.3 million, respectively.

The Company's policy is to assess the valuation of all inventories, including manufacturing raw materials,
work-in-process, finished goods and spare parts, in each reporting period. Although the Company attempts to forecast future inventory demand, given
the competitive pressures and cyclically of the semiconductor industry, there may be significant unanticipated changes in demand or
technological developments that could have a significant impact on the value of the Company's inventories and reported operating
results.

June 29,

December 31,2008

2007(thousands)Property and equipment, net:Machinery and equipment

$        59,286

$          52,328Furniture and fixtures

12,419

11,842Leasehold improvements

15,411

14,75787,116

78,927Less: accumulated depreciation

(54,616)

(50,327)$        32,500

$          28,600Accrued liabilities:Warranty

$          6,162

$            9,174Accrued compensation and benefits

8,776

8,193Other

7,907

9,533$        22,845

$          26,900Other liabilities:Deferred revenue, noncurrent

$          4,125

$            4,375Other

1,702

1,761$          5,827

$            6,1368Note 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. 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.
Assets 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 29, 2008:

Fair Value Measurements atReporting Date UsingQuoted Prices

Significantin Active

OtherMarkets for

ObservableIdentical Assets

Inputs

Total(Level 1)

(Level 2)

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

$        54,827

$                        -

$        54,827Commercial paper

-

28,317

28,317Short-term investments:United States agency securities

3,565

-

3,565United States corporate bonds

-

30,763

30,763Other assets:Equity instruments offsettingdeferred compensation liability

988

-

988Total assets measured at fair value

$        59,380

$        59,080

$      118,460(1) Excludes Cash in bank of $18.3 million, at June 29, 2008.9Note 4.	Restructuring Charges

On June 26, 2008, in response to the continuing downturn in the wafer fabrication industry, the Company
announced a reduction in force in selected organizations. The Company eliminated approximately 25 positions, or about 5% of its global
workforce. The Company recorded $0.7 million as restructuring charges in connection with the reorganization. These charges are comprised
of severance expenses. As of June 29, 2008, no payments had been made against this accrued restructuring reserve. The Company
anticipates that all severance payments against this reserve will be completed by the second quarter of 2009.
Note 5. 	Guarantees

The warranty offered by the Company on its system sales is 12 months for most systems sales, except where
previous customer agreements stated 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 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 three and six months ended
June 29, 2008 and July 1, 2007:

Three Months Ended

Six Months EndedJune 29,

July 1,

June 29,

July 1,2008

2007

2008

2007(thousands)

(thousands)Balance at beginning of period

$         7,878

$       14,304

$      9,174

$ 15,113Accrual for warranties issued during the period

1,028

2,341

2,228

3,631Changes in liability related to pre-existing warranties

145

(36)

(461)

1,419Settlements made during the period

(2,889)

(3,059)

(4,779)

(6,613)Balance at end of period

$         6,162

$       13,550

$      6,162

$ 13,550During 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 maximum potential amount that the Company could be required to
pay is $1.6 million, representing standby letters of credit outstanding as of June 29, 2008. 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 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. 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.

10Note 6.	Commitments and Contingencies

In 2005, the Company entered into a new lease agreement for its existing corporate headquarters building in
Fremont, California. The lease is for a period of 10 years, 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%. 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.

The Company was leasing two buildings previously used to house its manufacturing and administrative functions
related to wet surface preparation products in Exton, Pennsylvania. The Company ended the lease for the manufacturing building as of June
5, 2008. The Company received approximately $0.2 million, net of legal fees, as part of the lease termination agreement. 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 eleven 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 $10.5 million were assumed in determining the facilities lease loss on the administrative building.  As of June 29, 2008 and
December 31, 2007, the Company had an accrual balance of $0.8 million and $1.0 million, respectively, related to these leases. Adjustments
to the accrual for the administrative building lease will be made in future periods, if necessary, as soon as 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% of revenues
from Flash RTP products, up to a total of CAD 14,269,290 (approximately $14.1 million at June 29, 2008), and (b) MTC
maintaining a specified average workforce of employees in Canada through October 27, 2009. If the Company, or MTC, does not
satisfy its obligations, the Minister may demand payment of liquidated damages in the amount of CAD 14,269,290 less any royalties paid by
MTC or the Company to the Minister.

In 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. Moreover, 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.


Note 7.	Common Stock Repurchase Program

In March 2007, the Company's Board of Directors authorized the repurchase of up to $20 million of the
Company's shares of common stock through open-market purchases or private transactions. In October 2007, the Company's Board of
Directors authorized the repurchase of up to an additional $30 million of the Company's shares11of common stock. As of June 29, 2008, a
total of 3.8 million shares had been repurchased under this program at a weighted-average purchase price of $9.20. As of June 29, 2008, the
Company had $15.0 million available for future repurchases of the Company's common stock under these authorizations.


Note 8.	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 effects of recording stock-based compensation for the three and six months ended June 29, 2008 and July 1, 2007 were as
follows:

Three Months Ended

Six Months EndedJune 29,

July 1,

June 29,

July 1,2008

2007

2008

2007(thousands, except per share amounts)Stock-based compensation by type of award:Stock options

$          836

$          824

$       1,935

$       1,635Restricted stock units

271

153

395

313Employee stock purchase plan

25

16

41

24Total stock-based compensation

1,132

993

2,371

1,972Tax effect on stock-based compensation

—

—

—

—Effect on net income (loss)

$       1,132

$          993

$       2,371

$       1,972Stock-based compensation by category of expense:Cost of sales

$            39

$            37

$            56

$            65Research, development and engineering

126

125

238

235Selling, general and administrative

967

831

2,077

1,672Effect on net income (loss)

$       1,132

$          993

$       2,371

$       1,972The Company has not capitalized any stock-based compensation as inventory or
deferred system profit at June 29, 2008 and December 31, 2007 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. Since the error is
not material to prior periods and is not considered material to the current period, 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.
Valuation 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:


12Three Months Ended

Six Months EndedJune 29,

July 1,

June 29,

July 1,2008

2007

2008

2007Expected dividend yield

—

—

—

—Expected stock price volatility

53%

72%

55%

75%Risk-free interest rate

3.3%

5.0%

2.9%

4.7%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 29, 2008, the unrecorded deferred stock-based compensation balance related to stock options was
$6.9 million after estimated forfeitures and will be recognized over an estimated weighted-average amortization period of 2.8 years. As of
December 31, 2007, the Company had an unrecorded deferred stock-based compensation balance related to stock options of $7.4 million
after estimated forfeitures.  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 29, 2008 and July 1, 2007, the Company's Board of
Directors approved the grant of approximately 236,000 and 85,000 stock options, respectively, with an estimated total grant-date fair value of
$0.5 million and $0.5 million, respectively, after estimated forfeitures. In the six months ended June 29, 2008 and July 1, 2007, the
Company's Board of Directors approved the grant of approximately 747,000 and 789,000 stock options, respectively, with an estimated total
grant-date fair value of $1.9 million and $4.0 million, respectively, after estimated forfeitures.
Restricted Stock UnitsAs of June 29, 2008, the unrecorded deferred stock-based compensation balance related to non-vested
restricted stock units with time-based vesting was $1.9 million after estimated forfeitures and will be recognized over an estimated
weighted-average amortization period of 2.9 years. As of December 31, 2007, the Company had an unrecorded deferred stock-based compensation
balance related to non-vested restricted stock units with time-based vesting of $1.5 million after estimated forfeitures.  During the three
months ended June 29, 2008 and July 1, 2007, the Company's Board of Directors approved the grant of approximately 13,000 and 21,000
restricted stock units with time-based vesting, respectively, with an estimated total grant-date fair value of $0.1 million and  $0.2 million,
respectively, after estimated forfeitures.  During the six months ended June 29, 2008 and July 1, 2007, the Company's Board of Directors
approved the grant of approximately 135,000 and 93,000 restricted stock units with time-based vesting, respectively, with an estimated total
grant-date fair value of $0.7 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 six months ended June 29, 2008, the Company's Board of Directors approved the grant of 635,000
performance-based restricted stock units to certain executives, officers and senior-level management. During the second quarter of 2008,
111,000 of these restricted stock units were cancelled, leaving 524,000 units outstanding at June 29, 2008. 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 met. 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.

As of June 29, 2008, the Company has determined that the first two revenue targets and the operating profit
margin target are probable of being achieved, while the final two revenue targets are not probable of being achieved because they require
significant growth in revenue and market share. Accordingly, the Company is recognizing the compensation cost associated with the first two
tranches over the longer of the derived service period of the stock13price target and the estimated service period of the performance targets.
For the final two tranches, 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.

The fair value of the 635,000 performance-based restricted stock units with market conditions was determined using a
Monte Carlo valuation methodology 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.


The following table summarizes the combined activity under all of the Company's equity incentive plans for the
indicated periods, including 10,000 shares outstanding under the Company's CFM Technologies, Inc. plans as of June 29, 2008:

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, 2007

3,288

6,118

$          9.39

172

$        10.69Stock options:Granted

(747)

747

5.77

—

—Exercised

-

(21)

2.69

—

—Cancelled or forfeited

428

(428)

9.10

—

—Restricted stock units:Granted

(1,348)

—

—

770

3.92
(1)Exercised

31

—

—

(42)

9.41Cancelled or forfeited

289

—

—

(165)

4.50
(1)Balances at June 29, 2008

1,941

6,416

$          9.01

735

$          4.01____________

(1)
The weighted-average grant date fair value for restricted stock units granted in the six months ended June 29,
2008 excludes 317,500 shares with a weighted average grant date fair value of $3.35 related to the final two tranches of performance-based
restricted stock units, as the Company's management has determined that achievement of the performance conditions related to these two
tranches is not deemed probable as of June 29, 2008. The weighted-average grant date fair value for restricted stock units canceled in the six
months ended June 29, 2008 excludes 55,000 shares with a weighted average grant date fair value of $3.32 which also related to the final
two tranches of performance-based restricted stock units.Restricted stock units granted through 2007 generally vest
1/4 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 1/4 of the units granted on each anniversary of the date of grant. 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.


14Supplemental disclosure information about the Company's stock options and restricted stock units with
time-based vesting is as follows (in thousands, except weighted-average values):

Three Months Ended

Six Months EndedJune 29,

July 1,

June 29,

July 1,2008

2007

2008

2007Stock options:

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

$            2.63

$            6.21

$            2.89

$            5.73Intrinsic value of options exercised

$               42

$             836

$               58

$          1,010Cash received from options exercised

$               36

$          1,136

$               56

$          1,226Restricted stock units with time based vesting:Weighted-average grant date fair value

$            4.99

$          10.03

$            5.77

$            9.08Supplemental disclosure information about the Company's stock options outstanding as of June 29, 2008 is as
follows:

Weighted-Weighted-

AverageAverage

Remaining

AggregateExercise

Contractual

IntrinsicShares

Price

Life

Value(thousands)



(in years)

(thousands)Options exercisable at June 29, 2008

4,764

$            9.36

3.8

$          1,260Options expected to vest at June 29, 2008

1,652

$            8.02

5.9

$                 5Options outstanding at June 29, 2008

6,416

$            9.01

4.4

$          1,265The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the
Company's closing stock price of $4.98 as of June 29, 2008, which would have been received by the option holders had all option holders
exercised their options as of that date. The total number of shares of common stock subject to in-the-money options which were exercisable
as of June 29, 2008 was 0.5 million. The Company settles employee stock option exercises with newly issued common shares.


Note 9.	Reportable Segments

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes
standards for reporting information about operating segments, geographic areas and major customers in financial statements. Operating
segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in assessing performance. 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.


15The 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 29, 2008

July 1, 2007

June 29, 2008

July 1, 2007(thousands)

%

(thousands)

%

(thousands)

%

(thousands)

%United States

$      3,033

7

$     4,539

5

$     8,538

9

$      9,714

6Taiwan

9,447

23

28,415

33

28,217

31

41,252

26Korea

4,169

10

20,480

24

10,900

12

37,107

24Japan

15,014

36

18,718

21

23,957

27

34,134

22Other Asia

7,507

18

7,720

9

12,907

14

16,869

11Europe and others

2,620

6

6,672

8

5,926

7

17,409

11$    41,790

100

$   86,544

100

$   90,445

100

$  156,485

100In the three months ended June 29, 2008, three customers accounted for 20%, 12% and 11% of net sales,
respectively. In the three months ended July 1, 2007, three customers accounted for 18%, 14% and 13% of net sales, respectively.   In the
six months ended June 29, 2008, three customers accounted for 19%, 12% and 11% of net sales, respectively. In the six months ended July
1, 2007, two customers accounted for 17% and 13% of net sales, respectively.   As of June 29, 2008, three customers accounted for 20%,
16% and 13% of net accounts receivable. As of December 31, 2007, three customers accounted for 28%, 12% and 10% of net accounts
receivable.

Geographical information relating to the Company's property and equipment, net, as of June 29, 2008 and
December 31, 2007 is as follows:

June 29, 2008

December 31, 2007(thousands)

%

(thousands)

%United States

$       18,706

58

$       15,118

53Germany

12,078

37

11,122

39Canada

1,421

4

2,050

7Others

295

1

310

1$       32,500

100

$       28,600

100Note 10.	DNS Patent Infringement Suit Settlement

On June 24, 2002, the Company entered into a settlement agreement and a license agreement with
Dainippon Screen Manufacturing Co., Ltd. (DNS), under which DNS agreed to make payments to the Company totaling between
$75 million (minimum) and $105 million (maximum), relating to past damages, partial reimbursement of attorney fees and costs,
and license fees.

In May 2008, DNS paid the Company the last royalty payment under the license agreement of $6.4 million for
royalties due through January 15, 2008. In June 2007, DNS paid the Company a royalty payment of $8.6 million for royalties through March
31, 2007. Royalty payments received by the Company are recorded as royalty revenue and recognized as net sales in the period they are
reported to the Company by DNS, which is generally in the second quarter of each year.

As of June 29, 2008, DNS has made payments aggregating $95.1 million under the terms of the settlement and
license agreements. The Company recognized $6.4 million and $8.6 million of royalty revenue for the three months and six months ended
June 29, 2008 and July 1, 2007, respectively.

16Note 11.	Derivative Instruments and Hedging Activities

The Company has utilized foreign currency forward exchange contracts to hedge against future movements in
foreign exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions. The
Company does not use derivative financial instruments for speculative or trading purposes. With respect to forward foreign currency
exchange contracts, the Company did not have any hedging activities for the three and six months ended June 29, 2008. The Company
recorded a gain of $0.2 million, in other income (expense), net for the six months ended July 2, 2007. As of June 29, 2008, the Company had
no outstanding forward foreign exchange contracts.
Note 12.	Income 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.  The provision for income taxes for the six
months ended July 1, 2007 primarily consisted of a $3.8 million discrete charge recorded in the second quarter related to a ruling in the
second quarter on the applicability of tax law in one of the Company's foreign locations, a $1.6 million provision for Federal and state income
taxes and a $1.6 million provision for foreign taxes. 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, 2007, the Company had $29.6 million of unrecognized tax benefits. Of this total, $11.9 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 29, 2008, there have been no material changes to the amount of unrecognized tax benefits.  Included
in the balance of unrecognized tax benefits at June 29, 2008 is $5.3 million related to tax positions and estimated interest and penalties for
which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.The Company's
practice is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. At December 31, 2007, the
Company had $1.1 million accrued for estimated interest and $0.1 million accrued for estimated penalties. For the six months ended June 29,
2008, recorded income tax expense included estimated interest of $0.3 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 2002. The Company's German income tax returns are currently under examination for the tax
years 2001 to 2004. The final outcome of this examination is not yet known. Management does not anticipate any adjustments, however,
which would result in material changes to the Company's financial position, results of operations, or cash flows.


Note 13.	Net Income Per Share

Net income 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. Basic earnings per share is
computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for
the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding plus the
effect of all dilutive securities representing potential shares of common stock outstanding during the period.


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 29,

July 1,

June 29,

July 1,2008

2007

2008

2007(thousands)

(thousands)Weighted average shares outstanding - Basic

49,419

52,531

49,391

52,546Diluted potential common shares from stockoptions and restricted stock units

-

1,096

-

1,027Weighted average shares outstanding - Diluted

49,419

53,627

49,391

53,573There were no stock options or restricted stock units factored into the computation of diluted shares in 2008 since
the Company has incurred a net loss in the six months ended June 29, 2008. Total stock options outstanding of 3.8 million for the three and
six months ended July 1, 2007, were excluded from the computations in 2007, as their inclusion would be antidilutive.


Note 14.	Comprehensive Income

The balance of accumulated comprehensive income is as follows:

June 29,

December 31,2008

2007(thousands)Cumulative translation adjustments

$             23,519

$             18,825Unrealized investment gain

101

207$             23,620

$             19,032The following are the components of comprehensive income (loss):

Three Months Ended

Six Months EndedJune 29,

July 1,

June 29,

July 1,2008

2007

2008

2007(thousands)

(thousands)Net income (loss)

$             (6,754)

$             11,547

$   (10,970)

$    19,198Cumulative translation adjustments

(338)

720

4,694

1,597Unrealized investment gain (loss)

(169)

-

(106)

9Comprehensive income (loss)

$             (7,261)

$             12,267

$     (6,382)

$    20,804Note 15.	Goodwill


The Company reviews its goodwill and intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of these assets may not be recoverable, and also reviews
goodwill annually in accordance with SFAS No. 142, Goodwill and Other Intangibles. The values assigned to
goodwill and intangible assets are usually based on estimates and judgments regarding expectations for the
success and life cycle of products and technologies acquired. A severe decline in expectations, given the
competitive pressures and cyclicality of the semiconductor industry, could result in significant impairment
charges, which could have a material adverse effect on the Company's business, financial condition and
results of operations.18One potential indicator of goodwill impairment is whether the Company's fair value, as measured by
its market capitalization, has remained below its net book value for a significant period of time. During the
second quarter of 2008, the lowest closing price for the Company's shares of common stock was $4.58, as
reported by the Nasdaq Global Select Market, which corresponds to a market capitalization of $227 million.
As of June 29, 2008, however, the Company's market capitalization had recovered to approximately $246
million, compared to the Company's June 29, 2008 net book value of $239 million. Based on the
Company's review of the events that occurred during the second quarter of 2008, the Company has
determined that there were no events or changes in circumstances  which would have triggered an impairment
review. Whether the Company's market capitalization triggers an impairment charge in any future period
will depend on the underlying reasons for the decline in stock price, the significance of the decline, and the
length of time the stock price has been depressed.19Item 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, 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 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 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 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, 2007 (our 2007 Form 10-K).
Overview

Mattson Technology, Inc. ( the Company or Mattson) is a leading supplier of semiconductor wafer processing
equipment used in the fabrication of integrated circuits (ICs or chips). Mattson produces dry strip equipment, etch equipment and rapid
thermal processing (RTP) equipment for the wafer chip fabrication industry. Our manufacturing equipment utilizes innovative technology to
deliver advanced processing capabilities and high productivity for the front-end-of-line and back-end-of-line fabrication of current and next-
generation ICs. Our tools, technologies and expertise are enablers in the semiconductor industry's transition to larger 300-millimeter wafers,
sub-65 nanometer design rules and the use of new materials, such as copper, low capacitance dielectrics and barrier metals.

Our business depends upon capital expenditures by manufacturers of semiconductor devices. The level of
capital expenditures by these manufacturers depends upon the current and anticipated market demand for such devices. Because the
demand for semiconductor devices is highly cyclical, the demand for wafer processing equipment is also highly cyclical.  The cyclicality and
uncertainties regarding overall market conditions continue to present significant challenges to us and impair our ability to forecast near-term
revenue. Given that many of our costs are fixed in the short-term, our ability to quickly modify our operations in response to changes in
market conditions is limited. Part of our strategy is to outsource selected non-critical functions in manufacturing, spare parts logistics,
subsystem design and other areas to third parties specializing in these areas. This allows us to concentrate our resources on our core
technologies in strip, etch and RTP, reduce our cost structure and achieve greater flexibility to expand and contract manufacturing capacity
as market conditions require.

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
and (d) maintain a cost structure that will enable us to operate effectively and profitably throughout changing industry cycles.


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 29, 2008

July 1, 2007

Increase (Decrease)(thousands)

%

(thousands)

%

(thousands)

%Net sales

$   41,790

100.0

$       86,544

100.0

$ (44,754)

(51.7)Cost of sales

23,345

55.9

44,909

51.9

(21,564)

(48.0)Gross profit

18,445

44.1

41,635

48.1

(23,190)

(55.7)Operating expenses:Research, development and engineering

9,215

22.0

8,893

10.3

322

3.6Selling, general and administrative

15,592

37.3

17,090

19.8

(1,498)

(8.8)Amortization of intangibles

128

0.3

128

0.1

-

n/m (1)Restructuring charges

748

1.8

-

-

748

n/m (1)Total operating expenses

25,683

61.4

26,111

30.2

(428)

(1.6)Income (loss) from operations

(7,238)

(17.3)

15,524

17.9

(22,762)

n/m (1)Interest income

837

2.0

1,775

2.0

(938)

(52.8)Interest expense

(76)

(0.2)

-

-

(76)

n/m (1)Other income (expense), net

145

0.3

248

0.3

(103)

(41.5)Income (loss) before income taxes

(6,332)

(15.2)

17,547

20.2

(23,879)

n/m (1)Provision for income taxes

422

1.0

6,000

6.9

(5,578)

(93.0)Net income (loss)

$   (6,754)

(16.2)

$       11,547

13.3

$ (18,301)

n/m (1)Six Months EndedJune 29, 2008

July 1, 2007

Increase (Decrease)(thousands)

%

(thousands)

%

(thousands)

%Net sales

$   90,445

100.0

$     156,485

100.0

$ (66,040)

(42.2)Cost of sales

51,166

56.6

83,622

53.4

(32,456)

(38.8)Gross profit

39,279

43.4

72,863

46.6

(33,584)

(46.1)Operating expenses:Research, development and engineering

17,061

18.8

18,004

11.5

(943)

(5.2)Selling, general and administrative

32,367

35.8

33,069

21.1

(702)

(2.1)Amortization of intangibles

256

0.3

255

0.2

1

0.4Restructuring charges

748

0.8

-

-

748

n/m (1)Total operating expenses

50,432

55.7

51,328

32.8

(896)

(1.7)Income (loss) from operations

(11,153)

(12.3)

21,535

13.8

(32,688)

n/m (1)Interest income

2,062

2.3

3,370

2.1

(1,308)

(38.8)Interest expense

(76)

(0.1)

(44)

-

(32)

72.7Other income (expense), net

(1,247)

(1.4)

1,299

0.8

(2,546)

n/m (1)Income (loss) before income taxes

(10,414)

(11.5)

26,160

16.7

(36,574)

n/m (1)Provision for income taxes

556

0.6

6,962

4.4

(6,406)

(92.0)Net income (loss)

$ (10,970)

(12.1)

$       19,198

12.3

$ (30,168)

n/m (1)____________(1) Not meaningful21Net Sales and Deferred RevenueNet Sales of  $41.8 million for the three months ended June 29, 2008 (second quarter of 2008) were down $44.8
million, or 52%, from the same period in 2007.  We received the final royalty payment related to our settlement of the patent infringement
lawsuit with Dainippon Screen Manufacturing Co., Ltd. ("DNS"). Net Sales for the second quarter included DNS royalties of $6.4
million, compared to $8.6 million in the same period of 2007. Net sales for the second quarter of 2008 excluding DNS royalties decreased by
$42.5 million from the same period of 2007, primarily due to a $40.7 million decline in systems sales and a $1.8 million decline in spares
sales. The shortfall in revenue for the three months ended June 29, 2008 was due to the continuing weakness in the memory market, which
caused delays of systems shipments to certain customers' fabrication plants.  In addition, lower production levels at customers' fabrication
plants have also caused spares and service sales to be less than had been anticipated. International sales, predominantly to customers
based in Europe and Asia, including China, Japan, Korea, Singapore and Taiwan, accounted for 93% of net sales in the second quarter of
2008, compared to 95% for the second quarter of 2007. We anticipate that international sales will continue to account for a significant portion
of our net sales.

Net Sales of $90.4 million for the six months ended June 29, 2008, were down $66 million or 42% from the same
period in 2007. Net Sales included DNS royalties of $6.4 million, compared to $8.6 million received for the same period in 2007. Systems
sales were down $65.0 million during the same period.  International sales predominantly to customers based in Europe and Asia, including
China, Japan, Korea, Singapore and Taiwan, accounted for 91% of net sales in the six months ended June 29, 2008, compared to 94% for
the same period in 2007.

Deferred revenue at June 29, 2008 increased to $12.2 million from $7.2 million at December 31, 2007,
primarily due to a $6.4 million net increase in deferred revenue for system shipments which were fully deferred in accordance with our
revenue recognition policy and a $1.4 million net decrease in deferred revenue for the recognition of a portion of system shipments in
accordance with our policy.
Gross Profit and Gross Profit MarginIn the second quarter of 2008, gross profit of $18.4 million, decreased by $23.2 million when compared to the
second quarter of 2007.  The main reasons for the decline were $20.3 million of lower systems revenue, $2.2 million of lower DNS royalty
revenue,  $1.2 million of lower spares revenue, $0.7 million due to unabsorbed manufacturing costs and $0.6 million due to higher direct
manufacturing costs.  These unfavorable impacts were partially offset by $1.0 million in higher net deferral revenue and $0.7 million in
favorable installation spending as a result of lower system shipments. The decline in revenue, due to the continuing weakness in the memory
market resulted in lower systems margins, and the under absorption in manufacturing costs. Higher direct manufacturing costs were the
result of recording of additional inventory reserves when compared to the second quarter of 2007.

Gross profit margin in the second quarter of 2008 decreased by 4 percentage points compared to the second
quarter of 2007. Excluding DNS Royalties, gross profit margin decreased by 8.3 percentage points, primarily due to lower gross profit margin
of 3.0 percentage points from system and spares sales, 0.9 percentage points from manufacturing under absorption and 0.8 percentage
points from manufacturing direct costs. These unfavorable margin impacts were partially offset by 1.3 percentage points from the net deferral
of systems revenue and 0.9 percentage points from favorable installation spending.

Gross profit of $39.3 million in the six months ended June 29, 2008 decreased by $33.6 million compared to the
same period in 2007, primarily due to $31.0 million on systems sales, $2.1 million on higher manufacturing direct costs, $1.4 million on higher
manufacturing under absorption, $2.2 million on lower DNS royalty revenue, and $1.5 million on the net deferral of systems revenue in
accordance with our revenue recognition policy. These unfavorable impacts were offset by $1.9 million higher margins on favorable warranty
reserve releases, $1.6 million on spares sales and $0.7 million in favorable installation spending as a result of lower system shipments. As
stated above, the weakness in the memory market resulted in lower systems margins and the under absorption of manufacturing costs. The
higher direct manufacturing cost was primarily due to the recording of additional inventory reserves when compared to the same period in
2007.

Gross profit margin in the six months ended June 29, 2008 decreased by 3.2 percentage points compared to
the same period of 2007. Excluding DNS Royalties, gross profit margin decreased by 4.3 percentage points, primarily due to lower gross
profit margin of 2.7 percentage points from manufacturing direct costs mainly from additional inventory reserves, 2.3 percentage points from
manufacturing under absorption, and 0.5 percentage points from the22net deferral of systems revenue. These unfavorable impacts were
partially offset by 1.6 percentage points from favorable warranty reserve releases primarily as a result of lower trends in labor and material
spending as the installed base increases for our core products.

The wafer fabrication industry is currently experiencing lower revenues especially in the memory segment which
historically represents our largest segment.  The weakness in the market has also been exacerbated by the weak macro economic
conditions.

Due to intense competition, we continue to face pricing pressure that can affect our gross profit margin. Our
gross profit margin has varied over the years and will continue to be affected by many factors, including competitive pressures, product mix,
economies of scale, material and other costs, overhead absorption levels and our revenue recognition requirements.
Research, Development and EngineeringResearch, development and engineering
(RD&E) expenses increased by $0.3 million for the second quarter of 2008 compared to the same period of 2007, primarily due to $1.0
million higher depreciation on new lab tools, $0.2 million higher salary expenses due to additional headcount and $0.2 million in one-time
property tax benefits in the second quarter of 2007 offset by a favorable impact of $1.3 million from lower material expenses as some
products have been beta released and moved into later stages of product development.

RD&E expenses decreased by $0.9 million for the six months ended June 29, 2008 compared to the same
period of 2007, primarily due to lower material expenses of $2.1 million as some of our new products transitioned into later stages of product
development, partially offset by higher depreciation on new lab tools of $0.8 million, higher salary expense of $0.1 million due to additional
headcount, and other one-time benefits in the prior period.

Selling, General and Administrative

Selling, General and Administrative (SG&A) expenses for the second quarter of 2008 decreased by $1.5
million when compared to the same period in 2007, primarily due to $1.5 million of lower salary expenses, as a result of attrition, $0.6 million
of reduced contract field engineer expense and consulting services, and $0.4 million of lower commissions to our sales representatives.
These reductions were partially offset by  bad debt reserve releases in the second quarter of 2007 of $1.1 million, and expenses related to a
severance agreement with the previous chief financial officer of $0.2 million. As the wafer fabrication industry is in a severe downturn, the
company is consciously reducing discretionary expenses in selected office support organizations while continuing to invest in new product
research and development activities, and placing more evaluation tools in the field.

SG&A expenses for the six months ended June 29, 2008 decreased by $0.7 million when compared to the
same period in 2007. SG&A expenses in the first quarter of 2007 included a $1.6 million benefit which related to the release of amounts
previously accrued as we completed all remaining obligations under a foreign government-funded capital development project. SG&A
expenses other than this benefit decreased by $2.3 million for the six months ended June 29, 2008 compared to the same period of 2007,
primarily as the result of a $1.7 million decrease in employee compensation related expenses and a $0.8 million decrease in outside services,
partially offset by a $0.4 million increase related to stock-based compensation as determined in accordance with SFAS No. 123(R).



Restructuring Expenses

In response to the continuing downturn in the wafer fabrication industry, we announced a reduction in
force in selected organizations on June 26, 2008. The purpose of this workforce reduction was to reduce the cost structure in selected areas
while allowing the company to continue critical investments in new products and strategic initiatives. We eliminated approximately 25
positions, or about 5% of the global workforce. We recorded $0.7 million in severance expenses. We anticipate that we will disburse all of the
severance payments to employees by the second quarter of 2009. The estimated annual savings from the restructuring efforts are expected
to be $1.9 million, which will be re-invested in our new product development activities.

Interest and Other Income (Expense), Net

Interest income decreased by $0.9 million in the second quarter of 2008 compared with the same period of 2007,
primarily due to lower average interest rates earned in 2008. Other expense, net for the second quarter of 2008 included

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realized foreign
currency exchange gains of $0.2 million, offset by other miscellaneous expense of $0.1 million. Other income, net for the second quarter of
2007 included realized foreign currency exchange gains of $0.4 million primarily from the settlement of a foreign exchange contract, partially
offset by miscellaneous other expenses of $0.2 million.

Interest income decreased by $1.3 million for the six months ended June 29, 2008 compared with the same
period of 2007, primarily due to the lowering of the interest rates by the Federal Reserve. Other expense, net for the six months ended June
29, 2008, included realized foreign currency exchange losses of $0.9 million primarily due to the weakening dollar, and miscellaneous other
expense of $0.3 million. Other income, net for the same period in 2007, included realized foreign currency exchange gains of $0.7 million,
certain payments and legal settlements related to two previous lines of business of $1.0 million and miscellaneous other expenses of $0.4
million.

Provision for Income 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. 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.
jurisdiction.  The provision for income taxes for the six months ended July 1, 2007 primarily consisted of a $3.8 million discrete charge
recorded in the second quarter of 2007 related to a ruling in the second quarter on the applicability of tax law in one of our foreign locations, a
$1.6 million provision for Federal and state income taxes and a $1.6 million provision for foreign taxes.  On 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 by the Company and its subsidiaries in tax jurisdictions with a broad range of income tax
rates.

Our valuation allowance at June 29, 2008 is 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 the lack of carry-back capacity 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 2007 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:

- Inventories and Inventory Valuation
- Goodwill and Other Intangible Assets
- Impairment of Long-Lived Assets
- Warranty
- Stock-based Compensation
- Income Taxes

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- Revenue Recognition

There have been no material changes from the methodology applied by management for critical accounting
estimates previously disclosed in our 2007 Form 10-K.

Liquidity and Capital Resources

Our cash, cash equivalents and short-term investments were $135.7 million at June 29, 2008, a decrease of
$16.8 million from $152.5 million at December 31, 2007. We believe that these balances, including interest to be earned
thereon, and anticipated cash flows from operating activities will be sufficient to fund our working and other capital requirements over the
course of the next twelve months. In the normal course of business, we evaluate the merits of acquiring technology or businesses, or
establishing strategic relationships with or investing in these businesses. We may use available cash, cash equivalents and marketable
security investments to fund such activities in the future. 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.

Cash Flows from Operating Activities

Net cash used in operations during the six months ended June 29, 2008 was $14.0 million, primarily due
to an $11.0 million net loss, 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, $3.8
million in depreciation, a $3.0 million decrease in prepaid expenses and other current assets, $2.4 million in stock compensation expenses
and a $1.5 million decrease in accounts receivable net of advanced billings.  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. Approximately 15% of our inventory balances relate to evaluation tools already placed in the field in customer
fabrication plants.  Another 13% of inventory balances relate to new products that are currently being built for shipment to the field. 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 revenue volumes.

Net cash provided by operations during the six months ended July 1, 2007 was $24.5 million, primarily due to net
income of $19.2 million, decreases in accounts receivable and advanced billings of $4.2 million due to increased collection efforts compared
to the previous quarter, decreases in inventories and inventories - delivered systems of $7.0 million, a $3.0 million increase in accounts
payable, depreciation of $3.1 million and stock-based compensation of $2.0 million, partially offset by an $8.1 million increase in prepaid
expenses and other current assets, a $7.5 million decrease in deferred revenue, a $2.3 million decrease in accrued liabilities and a reduction
in allowance for doubtful accounts of $1.2 million.

We expect that cash provided 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, collection of accounts receivable and timing
of payments.

Cash Flows from Investing Activities

Net cash used in investing activities during the six months ended June 29, 2008 of 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.

Net cash provided by investing activities during the six months ended July 1, 2007 was $9.4 million, due to
proceeds of $36.1 million from sales and maturities of available-for-sale investments and proceeds of $0.5 million from sales of property and
equipment, partially offset by purchases of available-for-sale investments of $24.0 million and capital spending of $3.2 million on lab tools for
our new products.

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Cash Flows from Financing Activities

Net cash used in financing activities during the six months ended June 29, 2008 was $2.2 million,
attributable to purchases of treasury stock 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.

Net cash used in financing activities during the six months ended July 1, 2007 was $8.6 million, attributable to
purchases of treasury stock of $10.0 million, which was partially offset by net proceeds of $1.4 million from stock plans.

During the six months ended June 29, 2008, the net effect of the exchange rate on cash and cash equivalents,
primarily on cash balances maintained in Euro was $3.3 million.

Off-Balance-Sheet Arrangements

As of June 29, 2008, 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 2007
Form 10-K.

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 three months ended June 29, 2008, as compared to the recent accounting pronouncements
described in our 2007 Form 10-K, that are of significance, or potential significance, to us.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This standard
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired in a business combination. This
standard also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of a business
combination. SFAS No. 141R is effective for acquisitions made after December 31, 2008. We do not anticipate that the adoption of this
pronouncement will have a significant impact on our financial statements, however, the implementation of SFAS No. 141R may have a
material impact on our financial statements for businesses we acquire post-adoption.

In the first quarter of 2008, we adopted SFAS No. 157, Fair Value Measurements for all financial
assets and financial liabilities and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for measuring fair value,
and enhances fair value measurement disclosure. The adoption of SFAS No. 157 did not have a significant impact on our consolidated
financial statements, and the resulting fair values calculated under SFAS No. 157 after adoption were not significantly different than the
fair values that would have been calculated under previous guidance. See Note 3 to the accompanying condensed consolidated financial
statements for further details on our fair value measurements.

In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of
FASB Statement No. 157. FSP 157-2 delays the effective date of 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),
until the beginning of the first quarter of fiscal 2009. We are currently evaluating the impact that SFAS No. 157 will have on our
consolidated financial statements when it is applied to non-financial assets and non-financial liabilities that are not measured at fair value on a
recurring basis beginning in the first quarter of 2009. The major categories of non-financial assets and non-financial liabilities that are
measured at fair value, for which the company has not yet applied the provisions of SFAS No. 157 are goodwill and intangible assets.

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In the first quarter of 2008, we adopted SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, which permits entities to elect to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value. This election is irrevocable. The adoption of SFAS No. 159 did
not have a significant impact on our financial statements. Currently, we have not expanded our eligible items subject to the fair value option
under SFAS No. 159.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible
Assets. FSP No. 142-3 amends the factors that should be considered in developing assumptions about renewal or extension used in
estimating the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. This
standard is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the
period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R and other Generally Accepted
Accounting Principles (GAAP). FSP No. 142-3 is effective for financial statements issued for fiscal years beginning after December 15,
2008. The measurement provisions of this standard will apply only to intangible assets acquired after January 1,2009.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS No. 162 supersedes the existing hierarchy contained in the U.S. auditing standards. The existing hierarchy was
carried over to SFAS No. 162 essentially unchanged. The Statement becomes effective 60 days following the Securities and Exchange
Commission's approval of the Public Company Accounting Oversight Board amendments to the auditing literature. The new hierarchy is not
expected to change current accounting practice in any area.

Item 3.   	Quantitative and 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. 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 credit exposure to any one issuer. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio liquidity. By policy, we limit our exposure related to longer-term
investments.

Our interest rate risk relates primarily to our investment portfolio, which consisted of $83.1 million in cash
equivalents and $34.3 million in short-term marketable securities as of June 29, 2008. An immediate sharp increase in interest rates could
have a material adverse affect on the fair value of our investment portfolio. Conversely, an immediate sharp decline in interest rates could
seriously harm interest earnings of our investment portfolio. For example, due to the sharp reduction in average interest rates in the United
States in the first six months of 2008 compared to the same period of 2007, our average yield on our investment portfolio declined by
approximately 1.5% in the first six months of 2008, which primarily caused a $1.3 million reduction in interest income.

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. The U.S. dollar when compared to other currencies primarily the Euro has strengthened in the second quarter of 2008, resulting
in realized foreign currency exchange gains of $0.2 million, when compared to gains of $0.4 million for the same period in 2007.  Other
expense, net for the six months ended June 29, 2008 included realized foreign currency exchange losses of $0.9 million, which was primarily
due to the effect of a weaker U.S. dollar

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on transactions with our foreign operations, compared to realized foreign currency exchange gains of
$0.7 million for same period of 2007.

Cumulative translation adjustments included in comprehensive income for the six months ended June 29, 2008
were $4.7 million primarily due to the weakening of the U.S. dollar in the first quarter of 2008, which favorably impacted the net assets used in
our foreign operations and held in local currencies, resulting in an increase in cumulative translation adjustments to $23.5 million at June 29,
2008, compared to $18.8 million at December 31, 2007.

We did not have any hedging activities for the six months ended June 29, 2008. During January 2007, we settled
one forward foreign exchange contract outstanding as of December 31, 2006 for the purchase in total of US$23.7 million in exchange
for 2.8 billion Japanese Yen (weighted average contract rate of 118 Yen to US$1.00) upon maturity and realized a total foreign exchange gain
of $0.6 million, which was recorded in the first quarter of 2007 under other income, net. There were no forward foreign exchange
contracts outstanding as of June 29, 2008.

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 2008 that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  Based on that evaluation, our
management concluded that there was no such change during that quarter.

PART II.  OTHER INFORMATION

Item 1.  	Legal Proceedings

In the ordinary course of business, we are subject to claims and litigation, including claims that we infringe third
party patents, trademarks and other intellectual property rights. Although we believe that it is unlikely that any current claims or actions will
have a material adverse impact on our operating results or our financial position, given the uncertainty of litigation, we cannot be certain 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.

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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 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 Annual Report on Form
10-K for the year ended December 31, 2007, filed with the SEC on February 25, 2008. In addition to the risk factors described in the 10-K, the
following risk factor applies.

We May Record Impairment Charges Which Would Adversely Impact Our Results of Operations

We review our goodwill, intangible assets and long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amounts of these assets may not be recoverable, and also review goodwill annually in accordance
with SFAS No. 142, Goodwill and Other Intangibles.  During the year ended December 31, 2006, we recorded an impairment charge of $2.6
million to write down the remaining net book value of the Radiant technology acquired from Vortek Industries Ltd. in October of 2004.

One potential indicator of goodwill impairment is whether the Company's fair value, as measured by its market
capitalization, has remained below its net book value for a significant period of time.  As of July 29, 2008, the Company's market
capitalization was approximately $228 million, which was below the Company's June 29, 2008 net book value of $239 million.  Whether the
Company's market capitalization triggers an impairment charge will depend on the underlying reasons for the decline in stock price, the
significance of the decline, and the length of time the stock price has been depressed.

In the event that we determine in a future period that an impairment exists for any reason, we would record an
impairment charge in the period such determination is made, which would adversely impact our financial position and results of operations.

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

Issuer Repurchases of Equity Securities

In March 2007, our Board of Directors approved a common stock repurchase plan (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. As of 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. The size and timing
of future repurchases will depend on the Company's share price. As of June 29, 2008, 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 the three months ended June 29, 2008, there were no repurchases of the Company's shares of common stock
but 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 3, 2008. Out of 49,351,385 shares of
Common Stock (as of the record date of April 9, 2008) entitled to vote at the meeting, 45,233,868 shares were present in person or by proxy.

At the meeting, our stockholders elected Dr. Hans-Georg Betz, David L. Dutton and Kenneth G. Smith 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. Hans-Georg Betz |  | 44,866,395 |  | 367,473  
|David L. Dutton     |  | 44,049,067 |  | 1,184,801
|Kenneth G. Smith    |  | 44,049,066 |  | 1,184,802

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, 2008. The proposal received the following
votes:

|For        |  | Against |  | Abstain |  | Broker Non-Vote
|---------- |  | ------- |  | ------- |  | ---------------
|           |  |         |  |         |  |                
|45,196,692 |  | 32,455  |  | 4,721   |  | -              

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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.                                                                         
|4.7                                              | Amendment No. 2 to Rights Agreement between the Company and Mellon Investor Services, LLC, as rights agent.
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|10.1                                             | Form of performance-based Restricted Stock Units Agreement between Mattson Technology, Inc. and certain employees.
    PDF
|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.

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: August 1, 2008

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

Dated: August 1, 2008

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

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